President Obama never really had a plan and the GOP couldn't stop lying about theirs. Both sides were dealing in fantasy economics that were predicated on not ending a sixteen trillion dollar debt (which makes it important to remember than American GDP is only fourteen trillion) without touching their beloved middle class or current entitlement recipients, which is a recipe for disaster.
You can't say that you're going retire a debt of that size - or even significantly reduce deficits - in a reasonable period of time without going to where the money is.
The Romney-Ryan plan cut rates in ways that no mathematically literate adult thought they could pay for and was more than made up for with trillions in new defense spending. Furthermore, by cutting entitlement spending only for future retirees, they exploded the short-term deficits.
Republicans said that they oppose any tax increases because they would hamper future economic growth, which is another indication that they don't know what they're talking about if they're, in fact, telling the truth.
As I've mentioned before, what happened in September of 2008 wasn't a recession. The recession started in the summer of 2007. The collapse of Lehman Brothers precipitated a financial panic, which is a very different breed of animal. History tells us that financial panics take a decade or more to fully recover from. The world's third-largest economy, Japan, still hasn't recovered from its 1990s financial panic.
There are other reasons to doubt a full American recovery. Most significantly, The economic superpower status of the United States was artificial to begin with. America grew the way that it did after World War II for the simple reason that all of its major competitor economies were destroyed by the war.
By the time that Europe and Japan fully recovered from the war, in the early 1970s, real American household income stagnated, which was hidden by massive borrowing, both public and private. By 1980, the frugality of the "Greatest Generation" was dead, American families began living on credit and inflation was rampant. President Reagan broke inflation by inflicting the 1982 recession on the economy, but his tax cuts exploded the public debt. Throughout it all, Congress ballooned both military and entitlement spending. Private business grew the economy in the late '80s with the Leveraged Buyout (LBO) phenomenon, but that further raised the level by which debt as a driver of economic growth.
Globalization aggravated the problem by almost entirely wiping out the U.S manufacturing sector. Without manufacturing, there was no way that America could sustain its already artificially high living standards, except through the debt of last resort: their home equity. As manufacturing died, the financial service industry replaced it, but only for a time. You can only grow an industry like that so long as there remains a window to create debt.
In the fall of 2008, the bottom fell out of the debt-driven economy that sustained everything for almost forty years and that window slammed shut. Worse, there's not going to be anything to replace it in the near or mid-terms. I have no reason to believe that the United States will ever return to the levels of its Golden Age.
Neither the Republicans or the Democrats are going to tell you the truth about that. Ever. To do so would burst the bubble of the American Dream that has kept Washington from ever being questioned in anything resembling a serious way.
All that leaves is debt. In perverse way, the death of American economic expansion creates the ideal atmosphere in which to address that debt. Even a really bad recession won't look or feel much worse than what the United States is in now, so Washington doesn't really need to worry about the political cost of structural economic reform that minimizes at least the pubic debt. Of course, that requires the political class finally telling people the truth for once in their fucking lives.
The Republican party, in particular, has been singularly unwilling to do that, instead relying on Paul Ryan's almost pornographic fantasies to save them. This brings me to The National Commission on Fiscal Responsibility and Reform, which most of you know as Simpson-Bowles.
Contrary to Republican assertions, Obama didn't "walk away from Simpson-Bowles. The GOP strangled it in the cradle.
Any realistic solution to an intrinsic problem is going to cause pain and if there's one thing a democracy abhors, it's pain. That's why commissions like Simpson-Bowles are created in the first place, to do the job that Congress can't.
Simpson-Bowles was supposed to be modelled after the military base closing commission that was created after the end of the Cold War. Presidents Bush and Clinton, along with Congress, knew that base closings were to be an all or nothing proposition.
For that reason, Congress created a commission that severly limited its own powers. The commission's final report would be introduced and Congress could only give it "an up-or-down vote," meaning that amendments couldn't be attatched to it and it wouldn't be subject to the Senate's filibuster rule. It worked beautifully with base closings and it was supposed to be the model for Simpson-Bowles.
Then the six Republicans that had sponsored the enabling legislation to create Simpson-Bowles voted against it on final passage. That meant that if Obama introduced its final report to Congress, it would be amended to death in the House and filibustered in the Senate. Worse, the GOP would be able to demagogue all of the worst parts of it on the campaign trail this year. The President would have been crazy if he did that.
And the GOP continues to be singularly dishonest. On Wednesday, Speaker John Boehner took a break from crying to say that "We’re willing to accept new revenue under the right conditions." That sounds great until you realize that what he means by "revenues" is closing loopholes through tax reform, but not raising new revenues with tax increases. Basically, he's using the Romney plan as his negotiating position.
Now, I don't know how many of you were paying attention this week, but the Romney plan was pretty thoroughly discredited. Unless he's completely out of his mind, I can't see why Obama would bother to win an election only to pass the crown jewel of the loser's economic plan. Can you?
To be fair, the Democratic plan to raise taxes on "the top 2%" is also horseshit because it doesn't raise anywhere near the revenue needed to address the problem in a serious way. Also, the rich aren't driving the debt, the middle class is, with all of its insane entitlements and tax breaks. The Bush tax cuts need to expire for everybody. That alone raises about $4 trillion over the next ten years.
There's absolutely no chance of a "Grand Bargain" between now and December 31. And Washington should definitely not be allowed to kick the can down the road by passing legislation to defer the sequester by even a second. If you do that, you effectively make the Bush tax cuts permanent and make things even harder to negotiate down the road.
That leaves two choices: A clean vote on Simpson-Bowles or the fiscal cliff. I prefer either to waiting and seeing nothing get done.
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