It's not my first choice, but I'll take it. I have three major concerns about the US economy, two long-term and one short-term.
The short-term concern is this lingering recession. I'm disappointed that President Obama (D-Hyde Park) has made too little effort to explain why the situation is ripe for the Keynesian solution of the federal government spending loads of money right now. If you need to be convinced, just keep reading Paul Krugman columns until it makes sense. But you know what? No other major politician is confronting the Republicans on this issue, either. Why expect the president to go out on a limb until he has to? If you want him to make the case for short-term deficit spending, find a politician to challenge him from the left. Where's our Keynesian hero? If one appears, the President will start moving left.
But the President has made major strides in the two long-term issues that make me worry and they both involve a spending gap where the US spends a greater percentage of GNP than any similarly situated nation. The first is health insurance. It may be counterintuitive, but the fact is that developed economies which cover everyone find it easier to bring health care costs under control. The health care bill the President signed wasn't perfect, but it's likely to save 30,000 lives a year and begin chipping away at health insurance costs. The US can't stay competitive if we continue to spend 16% of our GDP on health care while other nations spend a third less.
My other major worry is the overcommitment of American armed forces. The US spends 42% of the world's military expenditures. That's 4.7% of GDP when most European nations and Japan and mainland China spend closer to 2.5%. The US overwhelms the world with soft power; no other nation has such solid first amendment industries (Hollywood and universities and ministries). Spending on military power led to relying on it to solve too many problems. It's just too easy to send in the troops and oh so difficult to call them home. But these engagements eat away at our soft power and are overwhleming the treasury.
Imagine my surprise to read that the budget cuts in the final deal are half domestic/half defense. I'll take that over half domestic/half revenues. And with the Bush tax cuts expiring at the end of 2012, we have a chance for fiscal sanity. What's happened here is that the Republicans have expensive consituency groups to care for. The defense industry and social security recipients and the wealthy all cost a lot of money per voter to satisfy. They chose to protect two of the three. The rich come across with campaign cash while seniors cast more votes. Defense industries just cost too much per vote. The Democrats' constituencies are less expensive; a little goes a long way with students and Medicaid recipients and food stamp folks.
This deal also puts off a rank unfairness that we still have to watch out for. The Republicans and far too many Democrats still want to cut Social Security and Medicare, which I'm not entirely opposed to. But the deals in the works-- like raising the retirement age again-- swindle future generations while protecting current recipients from this so-called "shared sacrifice". If seniors are going to vote Republican, they should look to them for protection. Democrats should look out for the age cohorts that vote Democratic. But this deal puts off that generational swindle, which is the best we can hope for in the current climate.
The President's team made a major blunder when it mis-calculated the size of this recession and asked for too small a stimulus. But, as often happens, they only had one shot at this and they screwed it up. It may cost him a second term. But on health care and this budget deal, the pundits are missing how much the President walked away with.
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