Fareed is on fire

capitalby bobistraveling

TIME: Fareed Zakaria
[Via FareedZacaria]

In narrow economic terms, the debt deal is actually not a big deal, neither as good as its advocates claim nor as terrifying as its opponents fear. The actual cut to the 2012 budget, the only budget over which this Congress has control, is $21 billion out of total expenditures of $3.7 trillion—a pittance. Everything else can and will be changed by future Congresses. What the deal does is kick tough choices down the road, this time to a congressional super­commission that will have to come up with a larger plan to reduce debt. And it does nothing to spur growth, without which the debt will expand well above projections. That’s why the usually circumspect Mohamed El- Erian, head of Pimco, the world’s largest bond fund, grades the deal somewhere between an incomplete and a fail. “Other than eliminating default risk emanating from a self-manufactured crisis,” he writes, “there is nothing good about America’s debt ceiling debacle.”


I like reading Fareed for, while I sometimes disagree with him,it is hard to argue persuasively against much of what he writes. Here he accurately, in my opinion, nails the problems facing us.

He discusses how in a working political system the $4 trillion in budget cuts might have been accepted, how Congress used to work in making grand bargains such as Social Security reform or closing military bases, how a small minority representing 10% of the population in the US can prevent 80% of the legislation passed, how our Federal taxes are less today than they were when Reagan left office, how we have Executive branch departments with no leadership due to that 10% now having to respond to extreme crises.

In many ways our system is broken. Based on the 2010 voting record, the Senate and House are more divided then every before. Every Senate Democrat had a voting record more liberal than every Senate Republican. Every Senate Republican had a voting record more conservative than every Senate Democrat. The House was similarly divided.

And that was before the Republicans took control of the House. The divisions are even greater today.

in a political system based on compromise, we no longer have any politicians who can span the divide of ideology while, at the same time, we have ideology driving almost all politics.

This produces stasis, something that does not work well in a rapidly changing world.

I fear this will not end well. As Fareed says:

The world once looked at America with awe as we built the interstate highway system, created the best public education in the world, put a man on the moon and invested in the frontiers of knowledge. That is not how the world sees America today. People watched what happened over the past month and could not comprehend it. We have taken something that the world never doubted—the credibility of the U.S.—and put it into question. From now on, every time the debt ceiling has to be debated, the world will wonder, Will America honor its commitments? Will it keep its word? Will the system break down? We have taken our most precious resource, the trust of the world, and gambled with it. If, as a result of these congressional antics, interest rates on America’s debt rise by 1% —in other words, if the world asks for just a little bit more interest to lend us money—the budget deficit will rise by $1.3 trillion over 10 years. That would more than wipe out the entire 10 years of cuts proposed in the debt deal. That’s the American system at work these days.