This country's rapidly greying president, wearing agrey tie and a greyer suit, stood at a White House podium this week andannounced what amounted to a political cave in.
Not once, in the news conference that followed, did he utter any ofhis old slogans about changing the way Washington does business. Thatwould have just sounded foolish given the circumstances and BarackObama is a smart enough fellow to know it.
Asomewhat testy Barack Obama, at a White House press conference onTuesday, Dec. 7, 2010, taking on some of his own party members forcritiquing his tax deal with the Republicans. (Jim Young/Reuters)
Hereis basically what Obama and the Republicans in Congress had just done:With the national debt exploding to historic proportions and with thenation's spending literally out of control, they got together, examinedthe options and decided to borrow hundreds of billions more.
Both parties ended up with what they wanted. The Democrats can nowincrease spending (extending federal unemployment benefits), and theRepublicans secured the now famous Bush tax cuts for rich people.
It was a thoroughly American compromise, in other words. One ideallysuited to a nation that seems to consider itself immune to the laws ofeconomics that govern everybody else.
American exceptionalism
Millions and billions and trillions tend to blur into a haze of zeros, but the essentials here are pretty clear.
The U.S. government borrows about 40 cents of every dollar it spendsand it is on track this year to borrow about $1.3 trillion. That is theequivalent of borrowing Canada's entire economic output for 2009.
And that deficit will be piled onto the debt, which now stands atabout $13.8 trillion and rising. Actually, if you add all theliabilities that Washington simply doesn't have the money to pay for(social security and Medicare are the biggies), the real debt issomething like $40 trillion, which is a figure that defiescomprehension.
Certainly, it defies repayment.
Now, most developed nations accept that when they've dug themselvesinto a deep fiscal hole, the solution is first to stop digging, thenimpose a combination of spending cuts and tax increases.
Canada did that in the 1990s and several European countries are doing it right now.
Meanwhilein Dublin on Dec. 7, one of many protestors outside governmentbuildings as a tough-minded austerity budget is announced. (CathalMcNaughton/Reuters)
Not America, though. Because this is an exceptional place.
There's even a doctrine of American exceptionalism, accepted bypretty much everyone here, but embraced with particular passion byconservatives.
Potential presidential candidates such as Sarah Palin, Mitt Romneyand Mike Huckabee are even making it a theme, with the the Republicanprimary races just a year away.
"To deny American exceptionalism is in essence to deny the heart andsoul of this nation," is how Huckabee, a former Arkansas governor, putit recently.
And so, exceptionally, America isn't subjecting itself to any restraint at all. The remedy here, at least so far: Tax cuts and spending increases.
What frugality?
Ifthat all sounds politically craven or, at the very least,irresponsible, remember, this is the most democratic country in theworld and the politicians in Washington are only channeling the peoplewho sent them here.
Current statistics indicate the so-called "new austerity" that wassupposed to have gripped a newly sobered nation two years ago duringthe credit crisis has evaporated, if it ever existed at all.
Americans are enthusiastically spending again, even if they don't have any money.
They're apparently sick of waiting for things to get better, and thenotion of reducing one's debts and saving for purchases is just not theAmerican way.
"People are going through frugality fatigue," financial analyst Marshal Cohen explained recently in Newsweek.
"You stop spending and you stop living," a financially delinquent Las Vegas waitress told the magazine.
Sure, the debt piles up. Sure, you eventually get to the point wherejust paying the interest sucks up all your disposable income. Butthat's what bankruptcy is for.
That's why almost every other television commercial in this countryadvertises companies that will "stand between you and your creditors."Or between you and the tax collector.
For a fee, these companies will haggle for you and you will get awaywith paying a fraction of what you owe. Or at least that's what thecommercials claim.
Indeed, what the government's figures indicate is that the majorityof U.S. household debt that has disappeared over the past two yearshasn't actually been paid off. It's been erased due to defaults,foreclosures and bankruptcies.
Meaning the bank haggled, or the debtor simply walked away, or someone waved a legal wand and made the debt disappear.
Printing money
For the federal government, making debt disappear is even easier.
Washington has an option the ordinary people don't. Last month, theU.S. Federal Reserve announced $600 billion worth of "quantitativeeasing," which is a euphemism for printing money.
Basically, the Fed creates the money out of thin air, then lends itto the government by buying long-term U.S. Treasury bills. That meansexpanding the money supply, which of course makes every dollar alreadyout there worth a little less. Which, in turn, impoverishes anyone whoholds American debt.
Technically, it's a form of default. Expect more of it. It neatlysolves the problem without any unpopular spending cuts or tax increases.
It also forces the rest of the world to share America's pain and theworld is probably just going to have to put up with it because, likethose Wall Street banks, the U.S. government is literally too big tofail.
Just watch. It won't be difficult for the exceptionalists to talkthemselves into endorsing the idea. America's been good to the rest ofthe world, they'll say, it's time the rest of the world gave a littleback. The world needs to start paying for the security Americaprovides. Here in America we write our own rules. Etc., etc.
The speeches almost pen themselves.
Of course, it is always possible politicians here might do the rightthing. Maybe they'll emulate the Europeans and explain the arithmeticof debt to the American electorate.
Maybe they will even acquire the spine to make difficult, unpopulardecisions. Maybe the American voter will accept real austerity.
Maybe. But how much of your money would you bet on it?