Advertising timid measures as progress

The recent Congressional fiscal cliff deal consists of timid measures on the taxation side. However, by averting drastic and sudden spending cuts, it helps ensure that the US economy does not see more negative effects for human welfare and for public sector jobs. The deal does not do much to address the long term debt build-up of the US economy. Republicans have indicated that they will keep pushing for spending cuts when the debt ceiling debate takes place.

So, nothing much changed as a result of the fiscal cliff deal. Republicans ceded some ground on taxes, but not much. The actual amount of tax revenue increase is not significant compared to the scale of the deficit problem. Sudden spending cuts are fraught with dangers and the compromise recognises the fact. The long-term debate about spending will continue. These measures will not be able to prevent a debt build-up that may lead to a sovereign debt crisis in a decade. It looks more like a desperate compromise attempt to prevent the onset of sudden and drastic policy measures. It does not signal confidence on the part of the Democratic Party or of the political establishment. More than that, it shows that the part of the academic establishment concerned with economic policy and the part of the intelligentsia concerned with economic policy have not been able to provide timely solutions for the country's economic problems during these grave times. They have not been able to convince the political establishment about the urgency of many of the problems facing the country's economy. They are probably too caught up with old ideological divisions and have not been able to speak with one voice about some core principles concerning US economic policy. There is a tendency to persist with policy measures that have not provided very good results, like in the case of Japan during much of the last two decades. The academic and political establishment lack coherence and believability when they try to communicate their diagnoses and their solutions to the public. And there is a tendency to advertise any and every deal as some kind of achievement worth boasting about without regard for the actual numbers like debt accumulation. Something needs to change in the culture of economic policy making in the US if the goals of sound economic health and human welfare are to be achieved in the country.

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