DEFICIT SHOWDOWN President Obama and the GOP hammered out a debt-ceiling deal, but still differ sharply over their visions for America.
true import of the debt-ceiling deal is much more fundamental than the upper limit of Uncle Sam’s credit card. Meltzer warns the era of U.S. global economic dominance may be on the verge of ending. “The United
States has been
the leader in the post-war era,” he says. “It hasn’t always done the right thing, but it’s been pretty good on the whole.
“It’s produced the world’s longest period of sustained growth, affecting more people in more countries than ever before. But it’s coming to an end. It’s coming to an end because the United States can’t manage its own system. That’s the crisis.” Among the indications the U.S. economy could be in big trouble: The economic recovery has been “moribund,” Meltzer says. The U.S. economy only grew by a meager .4 percent in the fi rst quarter, even though the Federal Reserve was still pumping billions into the economy at that point.
In past economic cycles, econo-
mists could count on real estate val- ues and federal stimulus spending to
prop up consumer confi dence. But The Wall Street Journal reports these “shock absorbers,” which cushioned the blow of past downturns, “are no longer working.” Nor are they expected to recover anytime soon. The expected credit-rating down- grades aren’t strictly a Beltway phe- nomenon. Moody’s has warned hun- dreds of cities in 31 states that their credit ratings could be downgraded as well.
Businessweek reports the “fi scal gap” between U.S. revenues and pro- jected liabilities now stands at a stag- gering $211 trillion. Meltzer, best known in economic circles for authoring a defi nitive book on the Federal Reserve, says there’s still time to restore the United States economy to its previous glory. But doing so, he says, will require some- thing much more fundamental than political deal-making can provide: He says Americans must decide what type of country they want to have. According to Meltzer, the debt- ceiling debate revealed that two very different forces are struggling over the nation’s future.
“We’re divided between those who want to protect the welfare state and raise tax rates,” Meltzer says, “and those who want to grow the economy. That’s the issue we’re fi ghting . . . the issue really is, Are we going to be a growing economy, as we’ve been over the last 150 years, or are we going to be a welfare state like France, with low growth and high unemployment rates and a lot of welfare?”
If Americans want a welfare state, he says, then they need to raise taxes in order to pay for it. And if they want to continue the historic U.S. aver- age of 3 percent annual economic growth, then the government has to cut back on its promises, especially regarding Medicare and Medicaid. “That’s really the issue,” he says. “And what we’re going to decide is how to kick the can down past the election, so the voters get to decide that question. And that will be the issue for the 2012 election.” So if the United States is going to
ever stop schlepping toward default, it will happen based on how voters cast their ballots in 2012.
SEPTEMBER 2011 / NEWSMAX 11
ANDREW HARRER-POOL/GETTY IMAGES
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