The fiscal cliff deal
By The Economist
From The Economist
Published: January 17, 2013
The troubling similarities between the fiscal mismanagement in Washington and the mess in the euro zone.
Jan 5th 2013 | from the print edition
FOR the past three years America's leaders have looked on Europe's management of the euro crisis with barely disguised contempt. In the White House and on Capitol Hill there has been incredulity that Europe's politicians could be so incompetent at handling an economic problem; so addicted to last-minute, short-term fixes; and so incapable of agreeing on a long-term strategy for the single currency.
Those criticisms were all valid, but now those who made them should take the planks from their own eyes. America's economy may not be in as bad a state as Europe's, but the failures of its politicians—epitomised by this week's 11th-hour deal to avoid the calamity of the "fiscal cliff"—suggest that Washington's pattern of dysfunction is disturbingly similar to the euro zone's in three depressing ways.
Can-kicking is a transatlantic sport
The first is an inability to get beyond patching up. The euro crisis deepened because Europe's politicians serially failed to solve the single currency's structural weaknesses, resorting instead to a succession of temporary fixes, usually negotiated well after midnight. America's problems are different. Rather than facing an imminent debt crisis, as many European countries do, it needs to deal with the huge long-term gap between tax revenue and spending promises, particularly on health care, while not squeezing the economy too much in the short term. But its politicians now show themselves similarly addicted to kicking the can down the road at the last minute.
This week's agreement, hammered out between Republican senators and the White House on New Year's Eve, passed by the Senate in the early hours of New Year's Day and by the House of Representatives later the same day, averted the spectre of recession. It eliminated most of the sweeping tax increases that were otherwise due to take effect from January 1st, except for those on the very wealthy, and temporarily put off all the threatened spending cuts (see article). Like many of Europe's crisis summits, that staved off complete disaster: rather than squeezing 5% out of the economy (as the fiscal cliff implied) there will now be a more manageable fiscal squeeze of just over 1% of GDP in 2013. Markets rallied in relief.
But for how long? The automatic spending cuts have merely been postponed for two months, by which time Congress must also vote to increase the country's debt ceiling if the Treasury is to be able to go on paying its bills. So more budgetary brinkmanship will be on display in the coming weeks.
And the temporary fix ignored America's underlying fiscal problems. It did nothing to control the unsustainable path of "entitlement" spending on pensions and health care (the latter is on track to double as a share of GDP over the next 25 years); nothing to rationalise America's hideously complex and distorting tax code, which includes more than $1 trillion of deductions; and virtually nothing to close America's big structural budget deficit. (Putting up tax rates at the very top simply does not raise much money.) Viewed through anything other than a two-month prism, it was an abject failure. The final deal raised less tax revenue than John Boehner, the Republican speaker in the House of Representatives, once offered during the negotiations, and it included none of the entitlement reforms that President Barack Obama was once prepared to contemplate.
The reason behind this lamentable outcome is the outsize influence of narrow interest groups—which marks a second, unhappy parallel with Europe. The inability of Europeans to rise above petty national concerns, whether over who pays for bail-outs or who controls bank supervision, has prevented them from making the big compromises necessary to secure the single currency's future. America's Democrats and Republicans have proved similarly incapable of reaching a grand bargain; both are far too driven by their parties' extremists and too focused on winning concessions from the other side to work steadily together to secure the country's fiscal future.
The third parallel is that politicians have failed to be honest with voters. Just as Chancellor Angela Merkel and President François Hollande have avoided coming clean to the Germans and the French about what it will take to save the single currency, so neither Mr Obama nor the Republican leaders have been brave enough to tell Americans what it will really take to fix the fiscal mess. Democrats pretend that no changes are necessary to Medicare (health care for the elderly) or Social Security (pensions). Republican solutions always involve unspecified spending cuts, and they regard any tax rise as socialism. Each side prefers to denounce the other, reinforcing the very polarisation that is preventing progress.
Fixed today, hobbled tomorrow
Optimists will point out that America is unlikely to face a European-style debt crisis in the near future, but the slow-burning fuse is itself a problem. One positive side-effect of Europe's crisis is that it has forced euro-zone countries to raise their retirement ages and rationalise pensions and health-care promises. America, which has the biggest structural budget deficit in the rich world bar Japan, will become an outlier in its failure to deal with the fiscal consequences of an ageing population. Its ageing is slower than Europe's but, as its debt piles up and business and consumer confidence is dampened, the eventual crunch will be more painful.
The saddest thing about this week's deal is how unaware Messrs Obama and Boehner seem to be of the wider damage their petty partisanship is doing to their country. National security is not just about the number of tanks or rockets you have. As it has failed to deal with the single currency, Europe's standing has crumbled in the world. Why should developing countries trust American leadership, when it seems incapable of solving anything at home? And while the West's foremost democracy stays paralysed, China is making decisions and forging ahead.
This week Mr Obama boasted that he had fulfilled his mandate by raising taxes on the rich. In fact, by failing once again to clear up America's fundamental fiscal trouble, he and Republican leaders are building Brussels on the Potomac.
美國淪為歐洲翻版
2013-01-09 天下雜誌 514期 作者：經濟學人
美國嘲笑歐洲解決不了歐元危機，但是現在看來，這是五十步笑百步。
過去三年，美國政治領袖對歐洲處理歐元危機的能力嗤之以鼻。美國朝野認為，歐洲政客真是無能，怎麼會迷信短期治標不治本的急就章？又怎麼會難以就歐元的長期策略，達成共識？
這些批評至今依然適用，只是批評的人也該照照鏡子了。
美國經濟或許沒有歐洲那麼糟，但美國兩黨為避免發生「財政懸崖」，而進行十一小時的談判，卻反映了美國政治的失能，與歐元區的情況恰有許多相似之處。
首先是一直停在「補破洞」的階段。歐元危機之所以加深，是因為歐洲政客連續錯失了解決歐元結構性弱點的機會，反而再三用暫時性的補救措施，而且通常協調到半夜才達成決議。
美國的問題與此不同。雖然沒有像歐洲國家所面對的緊急債務危機，卻需要解決長期以來，稅收和支出承諾的巨大落差，特別是醫療健保的問題，同時卻不能因此排擠到短期的經濟發展。
然而，大西洋兩岸的政客，卻如出一轍，總要到最後一分鐘，才火燒屁股似地趕來救火。
閃過財政懸崖
共和黨參議員和白宮，在歲末深夜達成的協議，終於在新年的凌晨由參議院通過，眾議院在同一天內也表決通過，避免了發生經濟衰退的可能。
他們的決議，只是延長布希時代的減稅方案，提高對富人的增稅，並暫時延後削減開支的計劃。
如同歐洲的危機高峰會，這的確避免了大災難，讓美國經濟不會有五％的衰退（也就是所謂的財政懸崖）。但今年還是難免會有一個多百分點的放緩。全球股市鬆了一口氣，大漲慶祝。
但慶祝行情可以維持多久？自動支出的削減，僅能延後兩個月。到時，國會也得投票決定調高舉債上限。因此未來幾週，又會有一番關於預算的激烈攻防，即將上演。
而這些暫時性的補救措施，也忽略了美國潛在的財政問題。由於完全沒有去控制難以延續的福利退休支出和醫療健保，也沒有去解決美國複雜的稅制，更沒有彌補龐大結構性預算赤字的對策，這項協議是徹底失敗。
最後的決議比眾議院議長邦諾的版本更難徵得到稅，也沒有把歐巴馬總統想做的福利改革列進去。
背後的原因是利益團體的巨大影響力，而這正是歐洲所面對的相同難題。（林昭儀譯）
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