ANALYSIS | Neil Macdonald: The super failure of America's deficit busters
Agreeing on a plan to cut U.S. government borrowing would be the adult thing to do — responsible, sensible and a demonstration of real leadership.
So why would anyone have thought there was any chance that the so-called supercommittee of American politicians assigned to the task would actually achieve it?
The fact is, most of the 535 men and women in Congress need their jobs. And, for them, doing the right, or even sensible, thing in this country is like asking to be fired.
So the bipartisan supercommittee, instructed by Congress last summer to recommend a plan for cutting the federal deficit by a relatively modest $1.2 trillion over the next 10 years, was, in a sense, failure foretold.
With a deadline of Nov. 23, it now admits as much.
As things stand, the U.S. government borrows about 42 cents of every dollar it spends. Government spending here is literally out of control in that no one can put the brakes on.
The total national debt (what Washington owes) is about $15 trillion, just about exactly the nation's entire annual economic output, or GDP.
America this year will borrow about $1.5 trillion, which is more than Canada's GDP.
What's more, America's borrowing is increasing exponentially. Long- and even medium-term projections are pretty scary.
What has to be done seems obvious: some mix of tax hikes and spending cuts.
But roughly half this relatively lightly taxed country votes Republican, and just about every Republican in Congress has signed a written pledge never to increase taxes by as much as a penny.
The other half of the electorate votes Democrat, the party that generally oppose any reductions in entitlement programs like Medicare and Social Security, which are underfunded and set to balloon as the baby boomers retire and begin claiming their due.
Actually, that division may be somewhat simplistic. The reality, and politicians know it, is that most voters here, regardless of political stripe, oppose tax hikes AND spending cuts, or at least any that affect them personally.
So, the consequence for any politician inclined to do the responsible thing is dire.
And the consequence of doing the irresponsible thing? Well, probably nothing before the next election, which is as far ahead as most politicians look.
That basically explains the spectacular failing of the supercommittee. Failure to agree is supposed to trigger $1.2 trillion in automatic cuts — roughly half each to government programs treasured by the respective parties.
But these automatic cuts don't kick in until 2013, or, in other words, after the general election next November, which gives Congress ample time to lose its nerve and "de-trigger."
Sure, President Barack Obama and any number of experts warn that the public and the bond markets won't tolerate any more "kicking the can down the road." But the reality is, they probably will.
Last summer, after several Republicans indicated they'd prefer to let the U.S. default on some of its debt rather than raise the debt ceiling, Standard and Poor's downgraded America's debt rating.
Everyone gasped. But the result of the downgrade? Not much. Investors, short of safe havens, kept right on buying U.S. treasury bills.
Today, in fact, the bond market is demanding a piddling 1.9 per cent interest on long-term American debt, despite the fact that France, whose books are actually in slightly better shape, is now forced to pay nearly twice that.
Kick that can
So, for an American politician, the whole issue of deficit cutting is a no-brainer: keep kicking that can.
At this rate, what's happening in Europe is probaby a preview of America's future, and the politicians on the deficit committee (which was created as part the debt-ceiling compromise in August) know it.
That makes their inaction all the more cynical.
The Congressional Budget Office estimates that within a decade (or much sooner if Bush-era tax cuts stand), paying interest on the debt will be the U.S. government's single biggest expenditure.
Not the military, not social programs, but interest, the same plight faced by every poor chump who can't control his credit card addiction.
At that point, cuts will impose themselves and America's streets, like Europe's, will begin to fill. Not with peaceful, relatively benign Occupy Wall Streeters, but with much bigger, much angrier crowds.
Farmers, seniors, homeowners, all of them demanding a return to the kinds of benefits and subsidies they had come to enjoy. Entire communities demanding the return of their military bases, with all the jobs they conferred. And so on.
But the money simply won't be there. The way so much of it isn't there in Europe anymore.
The mainstream media treats this whole economic story as a series of crises, with something new darkening the sky every day. That's nonsense.
This one is driven by the relentless arithmetic of compound interest. It's like the Borg on Star Trek. It never stops and each day of inaction makes things worse.
I saw a news photo the other day from some European protest, a young woman in the street, her fist raised, shouting defiantly.
Fist raised at what, or whom, I wondered? Does she want someone to force investors to lend more money to her already indebted government?
Perhaps she wants the European central bank to print trillions of euros, which might allow repayment, of a sort, but which would also, in the long run, devastate her own savings and income.
Maybe she just wants her government to walk away from its debts, but has no idea how much worse that would make things.
More likely, she just wants her life back, the one her government really couldn't afford to give her in the first place, and she doesn't have a solution, only anger.
That, given the failure of will and leadership here so far, is what America is facing.
But U.S. politicians still have a few years left to procrastinate and can-kick and feather their own nests. Don't think they don't know it.