The next crisis according to Roubini could be just two months away, with spending cuts set to kick in at about the same time that the U.S. hits the debt ceiling. This is going to begin another “messy” debate between Democrats and Republicans.
“The longer-term picture is bleaker still. The reality is that America is yet to wake up to the full extent of its fiscal nightmare. Even the typical Republican voter is not – being on average older and poorer than a Democrat voter – in favour of gutting the welfare state. Tea Party extremists are more noise than signal. That is why the plans of Mitt Romney and Paul Ryan, the Republicans’ losing presidential ticket, postponed all the tough spending cuts on Social Security and Medicare by a decade.
Neither Democrats nor Republicans recognize that maintaining a basic welfare state, which is right and necessary in our age of globalization, rapid technological change and demographic pressure, implies higher taxes for the middle class as well as for the rich. A deal that extends unsustainable tax cuts for 98 per cent of Americans is therefore a pyrrhic victory for Mr Obama.
In short, the “mini deal” on the fiscal cliff dodged all the important questions. By not including spending cuts in the deal, the Democrats have emboldened Republicans who are determined to slash taxes but lack a plan to pay for it. It is again up to Washington’s policy makers to fix the problem before the market does it for them. Tuesday’s deal suggests this will not happen with any ease.”
Read the entire piece at the Financial Times
US has been let down by its leadership, what leadership is that? Don’t we have to have leadership before we can be let down. And our very own Communist seems particularly inept at that.