Published in Insights, The New Zealand Initiative’s newsletter, 9 November 2012
No one should ever compile a cost-benefit analysis of the United States elections. After a campaign that lasted about 18 months (and felt even longer), and having spent an estimated US$6 billion promoting both candidates, nothing has changed.
Barack Obama is still President, the Republicans still hold the House, and the political landscape is as polarised as before.
More importantly, the many problems of the United States haven’t moved an inch closer to a solution. That’s unsurprising since both candidates had focused their campaigns on rubbishing their opponents instead of developing credible policies of their own. America’s crisis is so severe that the outcome of the election barely matters as both sides of politics deny realities that do not fit their worldview.
The political left is unwilling to consider cuts in entitlements and discretionary spending despite a massive structural budget deficit. The political right is unwilling to discuss tax increases (and often even outrageous exemptions) to plug the fiscal gap despite the United States recording an even lower tax-to-GDP ratio (18.3%) than the notorious tax evaders of Greece (20.2%).
According to all plausible forecasts, the United States government will spend more than it receives in taxes for the indefinite future. However, indefinite overspending is not a realistic long-term option. As the former United States Presidential Adviser, Herbert Stein famously said, “If something cannot go on forever, it will stop.”
The choice for the nation did not end with this week’s elections. On the contrary, it is only after the elections that the real choice becomes clear.
Robert L. Bixby, Executive Director of bipartisan think tank The Concord Coalition, put it well:
“If the country is on an unsustainable fiscal path, which it is, and if continued partisan bickering will not solve this problem, which it won’t, and if divided government has been re-elected, which it has, then the only choices are calamity or compromise.”
To solve the United States’ economic challenges, President Obama and the Republican-led House must do what neither side wants: reform the tax system by broadening the tax base and reform all entitlement programmes to control spending.
What the United States can least afford is four more years of election campaign-style politics. Both camps must work together to avert fiscal disaster. But are Democrats and Republicans willing to cooperate for positive change?
The citizens have gone to the polls. Now the leaders must make their choice.