The problems of the U.S. are enormous; however, the country is in good standing when compared to the eurozone. America has time to solve its problems — Europe doesn’t.
What a spectacle in Washington: The negotiations concerning raising the debt limit dragged on for weeks, versions of bills were drafted and discarded, alliances were forged and betrayed. One press conference filled with political rhetoric followed the next. All that was left for the citizens was a flight into gallows humor. “Members of the U.S. Congress reported Wednesday they were continuing to carefully debate the issue of whether or not they should allow the country to descend into a roiling economic meltdown of historically dire proportions,” wrote the satirical newspaper The Onion of the wrangling.
The superpower’s inability to pay was not averted until the last minute. And much worse: All involved parties know that the last minute compromise is only a stopgap measure. Even hardened Washington veterans appear shaken by the political theater. It is the “Worst. Congress. Ever,” judged political scientist Norman Ornstein. In contrast, the Europeans seem to have their crisis under better control. EU officials tied up a second relief packet for Greece nearly noiselessly.
But the impression is deceptive. America’s standing is better. In any case, that is the assertion of Simon Johnson, former chief economist of the International Monetary Fund. The problems in Europe have only been pushed further into the future, writes Johnson in a current analysis. “The issue is lack of effective governance within the eurozone.” Because creditors of countries like Greece, Ireland and Portugal could count on having prosperous neighbors — for instance, Germany — jump in if needed, the governments could easily go into debt.
That created a moral hazard — a moral risk for the system. Now the investors must fear that they will need to accept unanticipated losses. However, in the opinion of Johnson, it will be difficult to reform the eurozone. Especially now, when the large economies like Italy are also affected. In the opinion of the economist, only an economic miracle could solve the debt problem. And that’s not the way it’s looking.
In contrast, the U.S. is fighting with a comparatively simpler problem. The debts are due to the banking crisis and not due to wastefulness, as is the case in Greece. The real budget problems of the U.S. are not the current expenditures. For the year 2012, Johnson anticipates — before the deduction of interest — a small surplus in the Washington budget.
No question: The U.S. also faces enormous problems. Johnson does not doubt this. But they are long-term problems. Above all, in the face of an aging population, the government health care system, Medicare, which is financially liable for the health care of retired people over the age of 65, is a burden that the country can no longer shoulder in its present form. But time still remains to tackle it.
According to present day calculations, the U.S. problem will become serious in 2020. Even if the emotionally charged dispute about the debt limit at this time only grazed Medicare reform, Walter Russell Mead, political scientist and professor at liberal Bard College, sees the discussion as a positive sign: “In contrast to Europe, here there is open debate about the limits of the welfare state.”* And that divergent convictions collide to such an extent is not strange. After all, the cultural and social contrasts between individual states is almost as great as those between individual EU members. “The gap between Alabama and Vermont is at least as big as the difference between Italy and the Netherlands.”*
Correspondingly difficult is unity in Washington. Mead also doesn’t think the much-criticized tea party is a destroyer of democracy. “Many of these people are citizens who are really concerned about their country, and therefore become politically active and intervene — such involvement is a positive thing,”* thinks Mead.
In the debt debate, much boiled to the surface that had little to do with the budget, but all the more with the situation of the people: fear of downswing, fantasies of revolution, social inequality. That sounds like the end of the American Dream. However, Mead sees something quite different: He sees labor pains. Unlike other foundering nations, the problems of the U.S. are not the result of decades of failure, but rather the problems of the avant-garde.
“We were the first 'Fordist' society, where mass affluence was built on mass production in the factories of the 20th century. We are now trying to be the first successful post-Fordist society, trying to work out a way to have a prosperous country that depends on something other than mass employment in manufacturing,” wrote the political scientist recently in his often-quoted, recent Buck Up America essay. The rest of the world will need to face this question sooner or later. “We hit the walls first, we figure out how to climb them first, and then we are over the obstacle and sprinting ahead...”
*Editor's Note: Original quotations could not be verified.