Lurching from crisis to crisis
What’s missing from the cliff debate: Growth
By Fareed Zakaria, WashPost, Thursday, January 3, 2:01 PM
The deal to avoid the “fiscal cliff” is a small victory for sanity, but what it says about the future is bleak. Washington will lurch from crisis to crisis, kicking problems forward and placing Band-Aids on those that it does address. There are likely to be no large-scale policy initiatives — on tax reform, entitlements, energy policy or even immigration. This is worrying, because beyond the self-inflicted crises of the cliff and the debt ceiling, the United States faces a much deeper challenge.
For more than a decade — and longer, by some measures — U.S. growth rates have slowed, recoveries have been jobless and median wages have declined. Some combination of the information revolution and globalization has placed tough pressures on high-wage countries such as the United States. These new forces are accelerating, and without a strategy to revive growth, all of our problems get worse, especially long-term debt. Washington’s focus has been on taxing and cutting — but it should be on reforming and investing (a theme I expand on in an essay in the current issue of Foreign Affairs).
Historically, when the U.S. government, World Bank or International Monetary Fund have advised troubled countries, they have stressed that achieving fiscal stability is only part of the solution. The key to reviving growth is structural reforms to make an economy more competitive, as well as investments in human and physical capital to ensure the next generation for growth. Yet we have been unable to follow our own prescriptions.
(More here.)
The deal to avoid the “fiscal cliff” is a small victory for sanity, but what it says about the future is bleak. Washington will lurch from crisis to crisis, kicking problems forward and placing Band-Aids on those that it does address. There are likely to be no large-scale policy initiatives — on tax reform, entitlements, energy policy or even immigration. This is worrying, because beyond the self-inflicted crises of the cliff and the debt ceiling, the United States faces a much deeper challenge.
For more than a decade — and longer, by some measures — U.S. growth rates have slowed, recoveries have been jobless and median wages have declined. Some combination of the information revolution and globalization has placed tough pressures on high-wage countries such as the United States. These new forces are accelerating, and without a strategy to revive growth, all of our problems get worse, especially long-term debt. Washington’s focus has been on taxing and cutting — but it should be on reforming and investing (a theme I expand on in an essay in the current issue of Foreign Affairs).
Historically, when the U.S. government, World Bank or International Monetary Fund have advised troubled countries, they have stressed that achieving fiscal stability is only part of the solution. The key to reviving growth is structural reforms to make an economy more competitive, as well as investments in human and physical capital to ensure the next generation for growth. Yet we have been unable to follow our own prescriptions.
(More here.)
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