The Cycle | January 07, 2013
>> bonjour. or whatever. i can't -- i have no -- our next guest says while american politicians have lamented and even derided european politician politicians unable to get on the same page, leaving everything to the last moment and banging out a late-night deal that are short-term patches without addressing the structural weaknesses of the system, sounds a bit familiar.
>> tres familiar.
>> think this is from the script? this is off the top of my head. in "the economist" can kicking is a transatlantic sport. here to tell us about the government's stylings and strategies is greg ipp. thank you for putting up with that somewhat ridiculous intro. but your premise here is basically the dysfunction that sort of defined europe . manifesting itself in the united states . can you take us through what you're trying to argue there?
>> sure. i mean anybody following the economic debate here in washington for a couple of years hearing the fed chairman or the treasury secretary and sometimes the president complain everything would be fine if those guys in europe didn't keep screwing up their own crisis and patching over everything in the middle of the night and getting us the can kicking deals and i have to say that the europeans can throw that right back at us. i mean, like this is a forth time with the last fiscal cliff deal up to the deadline and basically patched the way over and without fixing the fundamental problems and honestly i think you think about the united states now and wonder if the united states is becoming the big risk to the economy. only two months to hit yet another fiscal cliff deadline. who knows what happens after that?
>> i agree that the brinkmanship we're seeing and flirting with the debt ceiling could have a cataclysmic affect and wonder if the comparisons overstate the crisis here. there's a report that basically said you have a 1.2 trillion -- if you do a $1.2 trillion deficit reduction plan will cover you for 10 years so that your debt to gdp ratio is stabilize. much lower rate than anything in europe . are we overstating that comparison a bit?
>> i don't think so. but i think the accurate way to look at it is slightly different situations. europe taken as a whole has a debt somewhat lower than america's. the share of gdp. it's a distribution of the debt that's a problem. you have the counties in the south and northern countries that don't want to pick up the tab for it and the nexus of the problem, a dispute of how to get paid for. you know, if you think about it, that's a little bit of what we have going on here. neither democrats or republicans disagree there's a debt problem and nobody really disagrees that the problem is fixable as the numbers you quoted tell us. the big fight is over how to deal with it. neither side seems to want to accept any of the other side's recipe for getting this done and that's why we have dysfunction.
>> well, greg , to your point you write in this "economist" piece this week mr. obama boasted he had fulfilled the mandate by raising taxes on the rich. in fact, he and republican leaders are building a brussels on the potomac. i think you're right and tea party conservatives had been sounding that alarm for years and then, you know, sort of fiscal conservatives like me had been warning up until the very last moments of the fiscal cliff debate it wasn't going to solve any of the big problems that we still have looming on the horiz horizon. why have the warnings gone ignored for so long?
>> i think one of the reasons is there's a very important difference between us and europe which is that we are not only the brink of a financial crisis and about to be shut out of the world's financial markets . we have the world's reserve currency . we have a central bank . the greeks don't have that. the italians don't have that. we versely, i think that's more rope to hang ourselves with because the markets seem complacent about our ability to always pull a rabbit out of a hat at the last minute and takes away the pressure on the politicians to act. one of the silver linings if you could say that about the crisis in europe is forcing the greeks, italians, spaniards for necessary reforms for thely boar market. we don't have that pressure here.
>> i agree with the frustration about your sentiment that we can't seem to work together. we're managing the government just floating from crisis to crisis. i certainly share in that frustration but you write about both sides being driven by their party's extremists and i think that if we're going to solve the problem of the dysfunctional government, we have to be honest about the political calculus going on and republicans have this whole organization, this whole group of organization that is have sprung up to challenge republicans who are not far enough to the right in primaries, you have the tea party , the club for growth and other organizations and you don't have a comparable thing on the left so the political calculus is a bit different and i think the fiscal cliff deal illustrates that calculus of 85 republicans that voted for the deal, they were either from more centrist districts where the president won or lost but not by that much or they're retiring so they're not worried about election, not worried about challenges from their right flanks so it seems like it's not so much that both sides are to blame but republicans much more concerned with playing to their base and also if you look at polling from the last debt ceiling crisis that we unfortunately lived through in 2011 , when you ask people whether they favored compromise to avoid default or people to stick to their principles no matter what, democrats 81% wants compromise, independents 69%, republicans 53% so just in general, democrats are more amenable and interested in compromise.
>> i think that you're absolutely right that if you had to pick the party that was more intransigent and inflexible it would be the republicans at least for a few years but go back --
>> democrats . i think you mean the democrats , right?
>> no, he doesn't.
>> no. correct me if i'm wrong.
>> i'll get to the democrats . don't worry. the point is about the 85 republicans who the minority of the caucus that voted for the tax deal but i mean, ask yourself why is it that it was such a hard sell . if you're a republican, you got nothing in return other than making the tax cuts permanent. there are a lot of republicans saying that they would vote for a deal to make significant progress and got, you know, a big bagel hole. nothing. and so they're doubly upset. now, you can make a point, though, that the president needs to lead in terms of offering what they're willing to put on the table. and as hard as a tax piece has been for the republicans , i think the entitlement lift will be just as difficult for democrats . and by the way, i would add that on entitlements, it's a bipartisan weak spot in the sense that republicans are no more enthusiast than democrats of the next election telling the elderly that their sacred programs are cut back so i think the next piece is harder than the last one that was about taxes.
>> greg , i wasn't trying to make a point there. i thought you said republicans and meant democrats . i wasn't trying to sort of be a, you know, pushy there. i was trying to get it right.
>> that's all right.
>> all right. we have cleared that up. greg , sorry to leave you hanging there. thank you. america's biggest problems are hurdling at us at lightning speed. up next, jonathan whihite puts us on asteroid alert.