The heights of complacency in US economic policy-making

The lawmakers in Washington DC can be expected to resort to old rigmarole in the coming weeks and waste the nation's valuable time while faced with unprecedented economic challenges. Holding timetaking discussions about whether or not to extend Bush tax cuts and whether or not to increase the debt ceiling have become periodic rituals for a political establishment that is mired in old and increasingly irrelevant divisions. On several occasions in the recent past, the Democratic Party has either capitulated to affluent vested interests or it has displayed amazing incompetence when it comes to fighting for its traditional support groups. It is not too much of a stretch to say that the Democratic Party has betrayed its traditional agenda. As far as old divisions go, what better friends can the Republicans have than the current Democrats in the Congress and in the White House ? In the last few years, the Democrats ( at least significant segments of the Democratic Party ) have either acceded to Republican demands about economic policy or they have engaged in subterfuge with their own stated principles.

The country is faced not just with short-term " fiscal cliffs ", but also long-term fiscal precipices that can create enormous problems for the economy. The small and medium scale business sectors are displaying weakness and the fiscal and monetary medicines that have been tried have failed to create the conditions for the desired levels of short-term growth and for optimism for the long-term. Let the political establishment in Washington DC not forget that the housing crisis and the financial crisis did happen in a capitalist economy where the economic decisions of many private sector players proved to be too reckless in hindsight. A further curbing of extreme laissez faire tendencies in the economy may well be needed to prevent future catastrophe. A very predictable burgeoning of the public debt to GDP ratio cannot be left to be solved by continuing the fiscal policy mistakes of the past. Compromises between traditional Republican stances on the issue and the recent feebleness of the Democrats on the issue will most likely lead to a lot of false assurances and will create the conditions for a public debt-default precipice in about a decade. Unless care is taken, the economy may well come face to face with that precipice even before that. Moreover the long-term problem of job loss and job destruction in the United States can get exacerbated if left to the mercy of market forces alone. It is time for the political establishment in Washington DC to switch gears on questions like public debt, job losses to foreign countries and weak net job growth.

by C. Jayant Praharaj ( send comments to cjpraharaj.blog@gmail.com )