Tuesday, February 26, 2013

A realistic perspective on US budget sequestration

An editorial in the Sydney Morning Herald brings a welcome breath of fresh air to the verbiage being spouted in this country over this year's budget sequestration.

America has plenty of enemies but they can probably relax. Who among them could do to the US the amount of damage that it is doing to itself?

Terrorists brought down some buildings in New York and punched a hole in the Pentagon. But it was not a terrorist who brought down the US economy at a staggering cost of more than $US20 trillion ($19.4 trillion) in losses in the value of family homes, shares and retirement funds.

It was, of course, poor US policy and weak governance. In other words, it was self-inflicted, man-made and entirely avoidable. The enemies of the US can only dream of inflicting this much damage on the superpower.

Chinese cyber assailants may have caused damage to the US economy valued in the hundreds of billions of dollars, we heard last week. This marks them as serious underachievers compared with the US's legislators, regulators and central bankers.

. . .

Similarly, a terrorist cell or hostile power might conceivably blow up the US Congress or kill a bunch of its political leaders. But who is capable of inflicting an attack so severe that it could force political paralysis and dysfunction on the country so that it cannot make vital decisions? Not just for a day but for years?

To create this much havoc requires the special skills of the US Congress and presidency. This week, for the third time in three years, the US stands on the brink of a fiscal cliff.

. . .

And even if this impasse is resolved, another fiscal crisis looms in March and more will follow every few months about spending cuts, debt ceilings and tax increases.

There's more at the link.

The author is absolutely correct - this problem has been manufactured by our political leaders, none of whom are now seriously making any effort to resolve it.  Instead, they're trying to blame each other, desperate to gain public support for their partisan agendas.  I don't think that'll work.  I think they're all to blame, and the voters know it . . . but with no-one else to vote for, what's the electorate to do?  The two major parties have effectively frozen out of the system any viable third-party candidates for national office, whether in Congress or the Senate, or in the White House.

What's more, the brutal truth is that sequestration is merely a drop in the bucket compared to the spending cuts that should take place.  We need to reduce government expenditure to that which can be paid for out of current income (i.e. tax revenues) if we're to have any sort of sustainable economic future.  That means cutting federal expenditure by between one-third and one-half, right now.  That won't happen, of course - any Representative or Senator voting for it would be tossed out by his or her constituents - but it remains true for all that.  We've spent ourselves into a corner.  Unless and until we stop, we're stuck there, with no way out.

The Looking Spoon offers this infographic that sums up the current sequestration problem in a nutshell.

Says it all, doesn't it?


1 comment:

Sendarius said...

I have one nit to pick with the extract that you quoted.

The author used "weak governance", where I am convinced "poor governance" would have been more accurate.

As I understand it, to a large extent the housing bubble was CAUSED by governmental meddling - hence POOR not WEAK governance.