When Congress went into deadlock on the debt ceiling, it was the culmination of years of bitterness and complacency – and there is worse to come
It’s obvious to me why the United States found itself so deep in debt that only an ugly compromise — rushed through Congress on Tuesday and Wednesday — could save it from failing to pay its bills for the first time in its history. The country is in the middle of a moral crisis. So often have Americans heard the tale of their forebears’ self-reliance and genius for political accommodation that they have grown complacent. If the crisis is new, the danger is of long standing. Describing how the rugged frontiersman degenerated into the flabby couch potato, the late historian Henry Steele Commager wrote a few years ago: ‘From Maine to Oregon he left forests in ruins; instead of cultivating, he mined the soil; he killed off bison and pigeon, polluted streams, wasted coal, oil and gas. His habits of waste he transmitted to a generation that could no longer afford them.’
But no one today seems to see that. I spent last weekend climbing mountains and crossing streams in the woods of northernmost New England, and can report with relief that Americans no longer despoil the wilderness with quite the zeal they used to. But the ‘habits of waste’ that Commager described can take many forms. Even deep in the woods the hikers we met on the trail, Republicans and Democrats alike, were convinced that only the treachery of the other party stood between them and their God-given right to receive $5 in government services for every $3 they pay in taxes.
The legislation meant to address this problem is, as one would expect in such an electorate, a patch and a compromise. Systematic thinkers of all persuasions hate it. It does not bring the budget into balance. It neither restrains government social programmes (which Republicans rightly see as the heart of the budget problem) nor raises taxes (Democrats’ antidote). It authorises the government to borrow a couple of trillion dollars more. It cuts domestic spending by almost a trillion in the next decade — with all the hard decisions postponed to the end of the decade. It calls for a ‘super-committee’ to make a second, even bigger round of cuts, which will come automatically if Congress does not pass a balanced budget amendment to the constitution.
This is the kind of complex machinery that Americans call a ‘Rube Goldberg’, after a cartoonist who, like W. Heath Robinson, made a living drawing bizarre machines and contraptions. Emanuel Cleaver, a Kansas City community organiser who holds Harry Truman’s old seat and chairs the left-wing Congressional Black Caucus, had a more poetic name for the budget deal. He called it ‘a sugar-coated Satan sandwich’.
While some are casting the deal as President Obama’s ruination, it was the best deal he could possibly have got. It buys enough time to get him past the 2012 elections without another embarrassing discussion of the debt ceiling. It diverts hardline Republicans with the empty promise of a vote on a balanced-budget amendment to the constitution. (This is the functional equivalent of David Cameron’s offer of a referendum on electoral reform to induce the Liberal Democrats to enter the UK’s coalition government — it wows the diehards at zero risk of giving them what they want, so irreconcilable is the measure with the country’s interests, and so alien to its traditions.)
The deal also shows Obama’s most grievous failure on a policy level — the trillion-dollar ‘stimulus’ of 2009 — to have been a triumph on the level of political wheeling and dealing. Republicans have had to spend a summer’s worth of negotiating time uprooting the hardy weeds of waste planted two years ago before they grow into vast forests of government largesse.
Republicans believe the country faces a fiscal crisis, and the country, in turn, believes Republicans. The party asks a simple question: under what assumptions can the US, with its crap education system, its increasingly work-shy labour force, its corrupt and sybaritic elites and its unshakable sense of entitlement, conceivably pay down a debt that already stands at $40,000 for every man, woman and child in the country? If you consider this a valid question — and last year’s election results show that the public does — then every conceivable answer favours the Republicans’ plan of cutting programmes before raising taxes. There is long recent history of negotiated political settlements in which tax hikes pass immediately but programme cuts never happen. This, in turn, has led to a distrust of Washington, which increases the value of a dollar in one’s pocket rather than a dollar spent on government programmes.
Democrats are in a desperately weak position. But Mr Obama’s party will not forgive him for being realistic enough to see this. Democrats do not think the US is in a fiscal crisis. They think it is in a political crisis, and that the political crisis consists of the Republican party’s unwillingness to raise taxes. Usually, they do not put it so politely. Republicans, they say, are engaged in ‘extortion’ or ‘hostage-taking’ or ‘economic terrorism’. The blogger Steve Benen wrote in the Washington Monthly, which has traditionally had a reputation as one of the more analytical organs on the left: ‘Indeed, it’s a reminder that of all the qualities Republicans lack — wisdom, humility, shame, integrity — it’s their nonexistent appreciation for limits that’s arguably the scariest.’ The New York Times has bemoaned ‘a political environment laced with lunacy’.
‘Historians,’ wrote the former New Republic editor Peter Beinart last week, ‘will long debate why the financial collapse of 2008 produced a right-wing populist movement and not a left-wing one.’ But that debate hardly requires a historian, or much more than five minutes, to settle. The populus out of which populism springs is a class, not an ideology. The Republicans may be right or wrong, but they are the party of ‘the people’, to the extent that that word describes the working and middle classes. Democrats — who, again, may be right or wrong — are the party of Ivy League elites who occupy the commanding heights of the economy, along with a coalition of minorities.
There is another question that will interest historians more than the one Beinart mentions, particularly if the coming years of budget adjustments end badly. It has been ominous that so many commentators with no prior reputation for radicalism have urged Obama to ‘invoke the 14th Amendment’ to raise the debt limit unilaterally. Even the normally level-headed business writer Joe Nocera did so in the New York Times on Tuesday. The 14th Amendment says that the US must pay its debts, not that the executive can contract new ones on its own say-so. It is not an invitation to govern under a state of emergency, along the lines of Jaruzelski’s Poland or Fujimori’s Peru.
Obama was wise to ignore suggestions that he do so. It is one thing to be known as the first black president or the first Hawaiian president or the first president of the age of globalisation. It would be quite another to be known as the first American president impeached for carrying out a Peruvian-style coup d’état. So a debate that began with Obama’s supporters boasting that he was ‘the adult in the room’ — a strange figure of speech, and one that is likely to occur mostly to people with long experience of being treated like children — ended with the very same people infuriated that he stayed cool.
But Republican s, as it turned out, were cooler. They were able to keep their powder dry not because they were ruthless or heartless but because the political cost of not reaching a deal was lower for them. Such asymmetries occur in all negotiations. Republicans believe that the US debt is approaching levels at which default, along Greek or Argentine lines, becomes inevitable — regardless of where the debt ceiling stands. A ‘compromise’ to raise the debt ceiling, in their view, may do nothing to make default less likely. The hyperbolic economist and columnist Paul Krugman (and others who don’t usually give ‘the market’ credit for omniscience) have countered that the risk of default is low, as measured by interest rates on US debt. But this is drink-till-you-fall-down economics, a suggestion that one should keep imbibing debt as long as one can ‘handle it’.
The party that believes business as usual is going to lead to ruin is going to be in no hurry to come up with a deal to protect business as usual. That continues to be the case. The deal reached this week is inadequate to address the US fiscal crisis; it is adequate only to delay its resolution until after 2012. Americans can resolve their budget problems on Obama’s social democratic terms or the Tea Party’s watchman-state terms. But divided government, popular until now because it has permitted the public to get Obama-style services at Tea Party tax rates, will be the country’s ruin. That is why next year’s election is beginning to look like that of 1860 — a choice about the fundamental direction of the country.
It doesn’t matter so much that the public is saying ‘a pox on both their houses’. The logic of the situation favours the Tea Party, which introduced voters to these fiscal issues on its own terms, and framed the debate. It now looks more likely that Republicans, and not Obama, will be given the lead in unravelling a public-sector system that has become a variant on the old joke about the Soviet private sector: we pretend to pay our taxes, and they pretend to give us benefits.