Miles on Money: A missed opportunity
Friday, July 26, 2013 7:00 AM
Never let a good crisis go to waste. I don’t know who coined the phrase, but he or she must be terribly disappointed in Washington, D.C. Lord knows the opportunity was there.
The Great Recession laid bare the cracks in our current fiscal order: a housing bubble built upon excess personal debt and lax credit standards, a tax system badly laced with special interest loopholes, social entitlements which, however valuable, appear on a path to exceed the nation’s ability to pay, a burgeoning national debt, and an economy that stubbornly resists the creation of new jobs.
If ever there was a time for our elected leaders to throw off the shackles of politics as usual and honestly consider new approaches, these last five years have been that time.
I fear that the opportunity for change may have passed. Don’t get me wrong. I welcome the prospect that the worst may be behind us.
Too many individuals have had their financial lives permanently damaged by the collapse of home values, the loss of jobs and havoc in the financial markets.
So even modest economic growth, continued recovery in housing prices and the creation of some 200,000 jobs a month this year are all good news.
But I don’t believe that the larger fiscal issues facing our country will be fixed simply through the passage of time. My lament, then, is for the missed opportunity to put our nation’s fiscal house in order.
Our recovery to-date owes much to the extraordinary monetary stimulus provided by the Federal Reserve.
I have disagreed with the Fed on certain policy particulars, but I strongly endorse its unflagging, and most often solitary, efforts to heal our economy.
Fiscal policymakers, however, have been largely absent. Near term, I concur with Fed Chair Ben Bernanke’s July 17 statement to Congress: “The economic recovery has continued at a moderate pace in recent quarters despite the strong headwinds created by federal fiscal policy.”
One could be more understanding if hard decisions had been taken to address our longer-term fiscal imbalances.
Sadly they haven’t done that either.
For now, the financial crisis appears to have passed. At this point, the U.S. economy is as strong as it has been since the Great Recession began.
And though the federal debt has reached an eye-popping $17 trillion, current fiscal year federal tax receipts are running well ahead of expectations, the sequester cuts have slowed expenditures, and the federal deficit is expected to come in at less than half its fiscal 2009 level. Indeed, sufficient progress has been made that the Fed is talking openly about lifting the lid on long-term interest rates by tapering its monthly bond buying.
This very progress, however, has apparently stalled any momentum for real fiscal reforms. True, two near-term items – the need for a continuing resolution to fund the government by Oct. 1 and, shortly thereafter, the requirement to once again raise the federal debt ceiling – could be a spur to action.
But recent experience demonstrates that such voluntary crises – those that can be readily averted through a last-minute deal – tend to be polarizing and do not lead to lasting solutions.
With the U.S. stock market up roughly 18 percent this year, and the underlying economy making small, but unmistakable steps forward, it may seem poor form to bear ill tidings.
I am no naysayer when it comes to America’s economic potential, but when it comes to making fiscal policy changes to avoid a completely foreseeable day of reckoning in the years to come, it is disappointing that federal policymakers have let the moment pass.
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