It’s Politics, Stupid

Patricio Navia

Buenos Aires Herald, July 19, 2011

 

Though the main world concern with the U.S. is its economy, the real problem the most powerful country in the planet has is its dysfunctional political system. Unless the American political leadership rises up to the occasion and finds a compromise to the present impasse, there will be a few years of self-destructive political polarization and ineffective leadership in Washington. Political instability in the United States will only bring about negative consequences for the rest of the world.

 

The negotiations between the White House and Congress over increasing the debt ceiling before the August 2nd deadline have understandably generated concerns in financial markets. If the U.S. Congress fails to raise the debt ceiling, the impact over the national economy will be damaging, making the already sluggish economic recovery more difficult to sustain. The impact over the world economy will be negative as well, further weakening the already embattled U.S. reputation as a responsible world power.  If the world’s most important economy fails to get back on its feet, emerging markets will not be able to keep up their rapid pace of economic growth. For the world to grow sustainably, the U.S. needs to be healthy as well. If the United States fall victim to a chronic disease of stagnation and high unemployment, the entire world will eventually suffer too.

 

Years of fiscal imprudence have created a huge fiscal deficit.  The U.S. needs to make drastic changes to get back on a sound fiscal footing. Spending cuts and revenue increases must be part of any credible set of measures aimed at lowering the deficit now and balancing the budget by the end of the decade. It takes strong political leadership and visionary politicians to reach a compromise that can achieve those objectives without compromising the present slow economic recovery.

 

The inability of American political leaders to reach a compromise has called into question the strength of American political institutions. As the oldest democracy in the world, with a complex political system based on checks and balances, divisions of power, impersonal institutions that are conducive to long term commitments and a bureaucracy that provides stability when the electorate chooses to change the political leadership, the United States rose to prominence as the most powerful nation in the world in the first half of the 20th century. 

 

However, the best days of the United States seemed to have passed. Most Americans think the country is headed in the wrong direction. That perception has remained dominant for over three years. The economy is in crisis. More Americans than ever before now think that they children will have a more difficult life than theirs. The lack of self-confidence is best exemplified by the apparent obsession with the “China rising” stories whose underlying message is that while China moves forward, the U.S. stagnates and even falls backwards. The anti-immigration initiatives that have proliferated also signal an apparent fear of the capitalist world the U.S. was so instrumental in creating. The former champion of capitalism and leading promoter of free trade, the United States appear now afraid to compete and seem frightened by the rise of emerging markets.

 

Not surprisingly, analysts regularly highlight the many strengths of the U.S. economy. Its productivity, its creativity and its sheer energy are still very strong. The so called creative destruction form of capitalism has repeatedly been materialized in inventions and technological innovations by American individuals and companies. The U.S. is and will remain the largest economy and most powerful nation in the world.

 

The strength of American society and its economy contrast dramatically with the sorry state of its political class. Washington has recently failed to live up to the expectations of its citizens. While the majority of Americans are moderate, favor gradualism and want a government that can balance a limited safety net with the ample structure to generate opportunities and reward effort, the polarized political class of Washington seems more concerned with scoring political points or defending special interests. Even worse, those that criticize the capture of Washington by special interests have decided to put ideology and even dogmas ahead of pragmatism and willingness to work out difficult and often less than perfect solutions.  As a result of the political class’ inability to compromise and find negotiated solutions, the U.S. looks much weaker and vulnerable than it should.

 

Fortunately, there is a solution for the America’s current problems. The complex challenges ahead for the U.S. will be successfully tackled if the Democratic and Republican parties learn from past experiences and return to the negotiating and compromising mood that characterized it during most of the 20th century. As a plane with passengers eager to depart, the U.S. is desperately in need to a crew capable and willing to work together to get the nation back on the air and safely headed toward a more prosperous future. Failure to do so will permanently link President Barack Obama, his Democratic Party and the Republican opposition as being collectively responsible for failing to put the country back on the right track.