Anyone who follows American politics closely knows that the current mode of Washington policy making cannot last. The years of the GOP touting tax cuts and Democrats touting more spending as panaceas is ending quickly. The Obama administration's success in passing a large economic stimulus bill and landmark health care reform certainly marks the end of the era of pleasant promises.
The hard work begins, at the latest, tomorrow. New facts make new politics. The Congressional Budget Office estimates that budget deficits will average at least $600 billion each year until 2020 and even higher levels after that. That amounts to about five percent of GDP, much higher than the one to three percent of GDP that many economists say is fiscally sustainable.
Something has to give. Both parties can't avoid getting serious about cutting the deficit. President Obama understands this. That's why he pressed for a law creating a bipartisan deficit reduction commission whose recommendations would be subject to a mandatory vote on the floor of the House and Senate. Congress, still in denial, refused to go along, so Obama create a nonbinding commission via executive order.
Last week, New York Times columnist Thomas Friedman summarized Obama's plan for America's Future:
Obama-ism posits that we are now in a hypercompetitive global economy, where the country that thrives will be the one that brings together the most educated, creative and diverse work force with the best infrastructure--bandwidth, ports, airports, high-speed rail and good governance. And we're in a world with a warming climate that is growing from 6.8 billion people to 9.2 billion by 2050, so demand for clean energy is going to go through the roof. Therefore, E.T.--energy technology--is going to be the next great global industry.
So, government matters. It needs to be incentivizing businesses to build their next factory in this country--at a time when every other nation is throwing incentives their way; it needs to be recruiting highly skilled immigrants; it needs to be setting the highest national education standards and funding basic research; it needs to be laying down the right energy regulations that will stimulate more clean-tech companies.
Obama has a plan for us. The problem, Friedman notes, is that paying for all this in the era of mammoth deficits is extremely problematic, and Democrats have not provided those details yet. Hence Obama's call for a deficit reduction commission.