THE BLOG

Popes and Politicians Alike Need a Hand These Days

03/18/2013 12:09 EDT | Updated 05/18/2013 05:12 EDT
AP
In this photo provided by the Vatican newspaper L'Osservatore Romano, Pope Francis waves the crowd from the central balcony of St. Peter's Basilica at the Vatican, Wednesday, March 13, 2013. Argentine Cardinal Jorge Mario Bergoglio, who chose the name of Pope Francis, is the 266th pontiff of the Roman Catholic Church. (AP Photo/L'Osservatore Romano)

Immediately after Pope Francis became the leader of the world's 1.2-billion Catholics this week, he prayed for guidance.

And it's little wonder. He is the newly elected CEO of the Vatican, a sovereign state, and faces the same crisis as does Washington or Brussels. His bureaucracy is beset by a nasty combination of fiscal constraints due to huge legal settlements, a major banking scandal, brand challenges, declining support, rogue operatives and warring factions.

Some of his followers avow he has an edge over other leaders because he has a pipeline into Divine wisdom. Unfortunately, that hasn't seemed to help most of his predecessors with the result today that the Catholic Church finds itself in the same quagmire as most of the world's nation-states, organizations and movements.

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New Pope Elected

The United States, despite a currency mantra of "In God We Trust," has also been forced to undergo serious soul-searching following its 2008 fiscal catastrophe. Reforms ensued and there is much cacophony and fear about the future.

However, despite the rhetoric, the country's fiscal situation is finally being addressed. But Washington's solution was not due to Divine inspiration, but because its President "belled the cat" in August 2011. That's when the debt ceiling crisis led all sides to agree to sweeping cuts, in defense and social programs equally, unless a deal could be negotiated by the end of 2012.

No grand bargain ensued so on March 1, 18 months later, mandated spending cuts began. This is labelled "sequestration" and, despite bleating and pleading and threats of economic Armageddon, this will be the only way to bypass the gridlocked American political system.

What's interesting is that both sides say they hate it and yet both sides do nothing about it except complain. This is because they secretly love it. Sequestration is the fiscal gift that keeps giving: cuts are mandated which means that the blame is diffused widely across both parties.

The stock market also loves sequestration. So does the U.S. dollar. Captains of industry love it. It's bullish for stocks, jobs and the economy. Sequestration is, in essence, the only grand bargain possible wherever consensus is impossible.

"The ideal policy would be not sequester, but a process by which statesmen aware of government's legitimate functions rationally debate and carefully identify the ways and means of providing for such functions, without violating rights, without imposing prejudicial taxation, without issuing unsound money, and without burdening the economy. Non-essential and improper government functions would be judiciously defunded and dismantled. But today we lack this ideal. A sequester is a second-best method: at least it slows an otherwise reckless and runaway spending rate," wrote Richard Salsman in Forbes Thursday. He is President of advisory firm InterMarket Forecasting Inc.

Mr. Salsman is not an apologist for national profligacy. However, he is opposed to the demonization of what's going on. Half of the cuts will come out of the Pentagon, not difficult because it is unwinding two expensive wars. The other half will not cut sacred cows such as Social Security and Medicare. They are not only exempt, but self-financing through separate payroll taxes. Those reforms will be separate.

"The sequester is none of what most people claim it is: it does not entail actual 'cuts' in spending, it does not affect spending 'across the board,' it is not 'automatic,' and it is not 'arbitrary.' Above all, sequester is not harmful to the economy," he added.

(The real solution for the United States is to prune its defense spending in half. This will be the job of the newly approved Secretary of Defense and the public is being softened up for this. Headlines about cyber security and hacking are setting the stage to replace America's over-sized traditional armed forces with cheaper cyber and intelligence forces.)

Salsman says sequestration is bullish and Washington's dissonance and delusion is also instructive. "The reality is that the fact that sequester has happened at all is positive if only because it exposes the absurdity of the apocalyptic warnings of opponents. Perhaps more people will come to realize that the minor spending-growth restraint entailed in the sequester not only entails no disaster, but is a positive development fully consistent with a steadily rising stock market and more robust job gains. Ideally, in time, they might even come to recognize that the bigger the cuts (in non-essentials), the better."

Clearly, governance, divine or secular, is daunting. The Internet exposes skullduggery and stupidity whether it involves sexual abuse of children by priests or exploitation of people as a result of subprime loansharking by Wall Street.

Even worse, institutions are unresponsive, fossilized and outdated.

The conclave of Catholic cardinals who elected their Pope this week did not announce their choice by email, text, twitter or press conference. They sent out smoke signals as they have done for centuries. Likewise, Congress and Parliaments have not changed much since their 18th century prototypes and remain crippled by paper burden, filibustering and gauntlets of bureaucrats or committees.

Through it all, however, progress inches along. The sequester is one example of doing the right thing cleverly. Another is Brussels' technique with its brinkmanship, overblown rhetoric, poisonous punditry, media spin or even Molotov cocktails. All serve to kick the can down the road and prevent a meltdown.

So, these days, all's well that simply ends. Ending well is not an option. The audiences are so diverse that no one will be happy with the ending. The new Pope faces a flock divided into hardliners and liberals who want decentralization, transparency and a softening of the church's stance on alternative lifestyles.

Both sets of believers are destined for disappointment, just as are the Republicans who believe America will only be great if its welfare state is dismantled or the Democrats who want to increase taxes on the rich and increase spending.

The only unanimity is that everyone wants to go to "Heaven," but they cannot agree on a definition and nobody is willing to die to get there.

This originally appeared in the Financial Post.