It's About Politics And It's Not Looking Good

I'm not reporting anything new--shouldn't, at least--but even though the current crises in Europe and the U.S. continue to be referred to as "financial" or "economic" or "debt," they're really crises of politics. In Europe, plans that appear to have the best chance at stabilizing the common currency situation require greater political integration (a kind of European government), but no leader interested in his or her survival in power is going to put this to the electorate. Some appear to think that the old European muddling-through approach can get us to the same place without explicit voter approval, but I think they're deluding themselves. The alternative is letting countries like Greece fail as members of the Euro (it may be closer than we think), but that would cost banks and others in wealthier Euro countries money (and it could also trigger another economic downturn), and so we don't want to countenance that either. So what do we, what do Europeans want? Europeans don't want to good times to be over, don't want to make the downward adjustment after collectively living beyond their means for a decade or so. The Greeks don't want to do it, but the Germans don't want to either, and there do not appear to be leaders who can persuade them otherwise. It's not very different in the U.S., as we were able to see during the debt-ceiling farce this past summer. The national debt is a problem, but from what I read, it's especially a problem over the longer term and could be brought under control by some sensible policies for that longer term envisioning both tax and entitlement reform. But either kind of reform would inflict pain, and there's been a lot of it in the U.S. in the past years (though not divided evenly, just like wealth has not been divided evenly--less so than ever in the past 20-30 years), and so there's great resistance to it. This being America, the greatest clamor has been for budget cuts and entitlement reform, but in a time when the division of wealth is skewed so much in favor of the top 5%, and government revenue as a proportion of GDP is as low as it has been in 30 or so years, it's just not politically feasible to try to find all the money there while not doing something about tax loopholes and revenue increases. But a grand compromise appears very remote, maybe impossible before next year's presidential election. I think that the nitty-gritty of political compromise in both cases is so difficult because psychologically neither Europeans nor Americans have truly left the pre-crisis days behind. Many have been forced to do so, of course, but collectively we seem to believe that it just can't be that the 1990s, and even the early 2000s, really are history and that we'll have to adjust to a lower standard of living for the foreseeable future. It's easy to speak of a crisis of leadership, but what leader is going to go to the electorate with this message? It really does look like it has to get worse before it can get better; it may be that we need the collapse we avoided in 2008-2009 for enough people to realize that we're in a different era--a bit like the 1930s. (And maybe then there will be leaders who can force through the reforms needed to repair things). I'm not looking forward to it, and it's not inevitable, but given the problems and the way they fester, I think we may as well brace ourselves. That would be the ultimate irony, though: incapable of reaching for the compromises available to avoid disaster, we'd be preparing instead for the disaster. It would be (at least could be seen as) the bankruptcy of liberal democracy.