Neil Macdonald: Playing chicken with America's future

Democrats and Republicans continue to fail to reach a deal on raising the country's ability to borrow more money. Neil Macdonald says this dangerous game of political chicken has the U.S. moving closer to a potentially disastrous default.

Just finished reading 2030: The Real Story of What Happens to America, a rather clever attempt to imagine what the U.S. will look like 19 years from now if this country follows its current, self-indulgent course.

I downloaded the book because I've always admired the intellect of its author, the quirky actor-comedian Albert Brooks. And, in fact, some of his dystopian predictions have a fearsome ring of truth.

Brooks's future-America features:

  • A national debt so crippling the government can barely make interest payments. There's almost nothing left to provide services. (Not so farfetched, really, given that Washington now borrows about 40 cents of every dollar it spends.)
  • Medical science that has greatly prolonged lifespans, resulting in an angry, debt-saddled younger generation that is forced to support a robust, selfish generation of "olds" who, having largely caused the debt nightmare, use their considerable political clout to squash any attempt at trimming their entitlements. Across America, "resentment gangs" have sprung up, treating the elderly the way skinheads once treated immigrants.
  • A credit rating so abysmal that China, along with everyone else, has stopped lending America money. The U.S. dollar has been replaced as the world's reserve currency by a basket of other currencies, further beggaring the U.S.

This is not a book Sarah Palin and the "shining-city-on-a-hill" bunch would enjoy.

Political chicken

U.S. Republican House Speaker John Boehner, at left, listens as U.S. President Barack Obama speaks during a meeting with Congressional leadership to discuss the debt. Republicans are pushing for a $2-trillion debt reduction package. ((Martinez Monsivais/Associated Press))
Now, I won't give up the ending, other than to say the book's ideas are better than its plot. But it's certainly beach reading appropriate to the times.

As Americans look forward to their 10 days off this summer (the freakishly stingy vacation ethic here still astounds me), their leaders in Washington are playing silly buggers. They are bleating partisan talking points and playing political chicken, in the process shamefully disregarding the national interest.

Fearing vengeful Tea Party crowds back home, the Republicans are insisting the exploding debt can be contained without forcing even the richest members of the lightly-taxed American public to pay a cent more in taxes. Increasing numbers of GOP legislators are signing an absolutist pledge not to vote for anything that increases taxes, period.

Everything can be accomplished by spending cuts, says the GOP. They want to reduce government spending from 25 per cent of GDP to 18 per cent, something that could have near-catastrophic consequences for a flat economy with an official jobless rate of nine per cent and rising.

The GOP wants to cut everything, including even the military and the so-called "entitlement programs" — social security and medicare — whose costs will multiply relentlessly in the not too distant future.

Moreover, Republicans say, they will block any efforts to raise the debt limit, which the government is rapidly reaching, unless the Democrats buy the cut-slash-cut, no-taxes approach. They rule out compromise. Far-right presidential contender Rep. Michele Bachmann says she will never vote to raise the debt limit, period.

This is all unhinged from reality, but with the discourse informed more by ideology than mathematics, it's actually considered a discussable option here.

The fact is, the Republicans know very well that what they propose can't be done. Their own budget proposal, which relies entirely on spending cuts and was passed by the Republican majority in the House of Representatives last spring, would necessitate raising the debt limit and borrowing at least $5 trillion more over the next 10 years.

And yet, as the markets watch nervously, Republicans insist that they will effectively allow the government to default on its debts if that's what it takes to prevent a single new tax. Some Republicans, thinking wishfully, argue that a default wouldn't be a big deal. Just about every expert points out that apart from the global financial havoc default would wreak, the markets would almost certainly react by demanding higher returns on U.S. bonds, immediately adding tens of billions of dollars in interest payments on the national debt.

Now, the Democrats

Barack Obama, who accuses Congress of "kicking the can down the road" instead of living up to its fiscal responsibilities, has been can-kicker-in-chief for the past year.

On the debt, he has postponed, and stalled, and came up with a budget proposal that did so little to reduce debt that even his own party voted against it in Congress.

It's clear that his principal concern, as is always the case with a first-term president, is re-election. Administering pain is never a big vote-getter.

Still, last week, Obama let it be known he'd consider tackling Social Security and Medicare, a move that enraged his own base.

Preserving entitlements is as sacred to the Democratic base as the no-new-taxes mantra is to the Tea Party. Nancy Pelosi, the most powerful Democrat in Congress, lashed out at Obama instantly.

But Obama attached a condition to his concession: Republicans must buy into the plan simultaneously, plus at least allow taxes on rich Americans to rise. Both sides, in other words, would have to endure backblast from their hardliners.

The deal would have reduced the debt by $4 trillion over 10 years. It would have been impressive, reassuring to the markets, and the most responsible fiscal deal in decades. It was big news here for a few days. Bipartisan compromise, something the public here desperately wants, actually seemed possible.

And at the last minute, facing a hardline revolt, the Republican leadership turtled. John Boehner, the same man who'd encouraged Obama to "go big" and reach for a real solution, retreated behind the no-new-taxes wall.

Now, both sides are back to discussing relatively piddling fixes. The disservice to the national interest is astonishing.

The bitter fact, despite all the ideological daydreams, is this:

Washington must cut, and deeply. It cannot keep spending at 25 per cent of GDP while it takes in just 17 per cent of GDP in revenue.

Americans will have to pay higher taxes, unless they want government cuts deep enough to provoke what would almost certainly be a depression. And the entitlement programs enjoyed by the "olds" cannot continue in their current form.

But if America's political leadership continues to scheme about how to play the debt issue so as to pander to their bases and inconvenience their opponents, Albert Brooks may someday be regarded as more of a prophet than a comedian.