Shoot the Messenger
Buenos Aires Herald, August 9, 2011
The Washington response to the Standard and Poor’s credit rating downgrade best explains why the entire world has grown increasingly suspicious of the ability of the United States to get its act together and combine sound fiscal policies with a sensible growth-promoting strategy. The world anxiously awaits for a signal from Washington that Republicans and Democrats understand the severity of the situation and are ready to work together to put the country back on the right track. However, the U.S. political parties have fallen deeper into a blame game while the President has responded to the bad news by shooting the messenger.
As many analysts and experts have repeated again and again, the U.S. faces a much deeper political problem than an economic one. The fiscal indiscipline of recent years, worsened by the government stimulus package after the 2008 crisis, poses a serious but not mortal threat to the long term health of the nation’s economy. However, the inability of the Washington political class—with the interminable media appearances by legislators to play the blame game—to reach a deal that can bring the nation’s finances to a sound footing in the foreseeable future does pose a much more serious threat.
There is plenty of blame to be assigned to everyone. Former President Bush acted irresponsibly by going into two wars and cutting taxes at the same time. The Democrats made no effort to safeguard fiscal responsibility during the Bush years. Republicans were even more irresponsible, as they controlled Congress for a good part of the past decade. American public opinion also actively joined the irresponsible behavior of its leadership. After leading an impressive campaign that generated excitement and enthusiasm around the world, President Obama’s performance has been between discrete and disappointing. The Republican Party has been captured by a radical rightwing revolt that has rendered it both unelectable and highly obstructionist. As the Party that opposes tax increases, Republicans have a message, but lack a plan. Democrats have failed to capture the moderate center—where a majority of Americans can be safely found—because it simply lacks the will and courage to make tough decisions in terms of spending cuts. President Obama has simply failed to lead.
The system is broken because of other things as well. Gerrymandering rules bring radicals to Congress. Most Republicans and Democrats in Washington do not adequately reflect the preferences of moderate and common-sense Americans. Special interests have successfully captured the legislative process. The mass media, going through its own profound transformation caused by technological developments, is obsessed with its own survival rather than concerned with fulfilling its central role in protecting a well-functioning democracy. Yet, all those technological and institutional challenges could be overcome if Republicans and Democrats realized what is at stake.
Unfortunately, Washington does not seem to understand the severity of the situation. Since Standard & Poor’s downgraded American debt, the blame game has captured the political debate. Republicans and Democrats are accusing each other with the same sophistication shown by children who just broke a window after being told not to play ball in the backyard. In trying to stand above the fray, President Obama has peculiarly taken on to criticize Standard & Poor’s, claiming that the U.S. is still a triple A country. Granted, the rating agency has a less than stellar record in recent years. In issuing its downgrade of the U.S. debt, it made embarrassing accounting errors. However, there is little dispute over the appropriateness of the Standard & Poor’s decisions. Investors around the world are nervous and concerned over the inability of the American political class to get its act together. Personal ideology will lead some to blame Republicans more than Democrats, but there is consensus round the world that Washington is broken and that America is not living up to the expectations. The U.S. brought this crisis upon itself. After the fire threatens to spread and affect the world economy, the most powerful nation in the world seems incapable of doing anything to put it out.
The American economy is still the world’s largest and has many commendable strengths. American workers are productive. Investments in research and development will continue to make the U.S. the world leading engine of innovation and technological development. Its educational system—particularly its universities—are the world’s finest. Its natural resources are the envy of many other nations. Its population with its strong pool of self-made immigrants provides a formidable source of human capital. However, its ill-functioning politics threatens with rendering all those assets ineffective. Its well-designed political institutions explained its economic success of the past two centuries. Today, its ill-functioning political system accounts for noticeable leadership decline in recent years.
The steep decline in world markets yesterday is not a response to the downgrade of the U.S. sovereign debt made by Standard & Poor’s. Instead, it reflects the anxious and nervous response by the world to the irresponsible reaction of the Washington political class to the much anticipated downgrade.