Bloomberg Businessweek
Go To Businessweek.com
During the past 20 years, the author has watch China move from being a developing country into an industrial superpower
Money Moves, 5/24: Chocomize Co-Founder Fabian Kaempfer talks with Bloomberg’s Deirdre Bolton about the business of customizing chocolate
The president's campaign has a new rule—no cell phones allowed
In honor of remote control inventor Eugene Polley, we recognize other influential but neglected inventors who have felt the sting of stolen glory
Forget Adderall. Traders now pop chia seeds to stay focused and energized
The Italian automaker and others are adding hybrid technology to elite cars
The storied bridge that links San Francisco and Marin County changed the face of California
Schools cultivate ties with startups before they're big successes
Dave McClure's traveling venture capital show scours the world for promising startups
Photo Illustration by 731
The Nov. 21 demise of the congressional “supercommittee” on debt reduction provided analysts, legislators, talking heads, occupiers, anti-occupiers, and even the silent reasonable majority with another opportunity to decry the scourge of American politics: gridlock. “Washington is broken,” announced Representative Tim Walz (D-Minn.) in a written statement. “Americans are understandably frustrated with the bickering and gridlock that has become a staple of the way Washington operates.” Said Representative Dan Lungren (R-Calif.): “With the failure of the supercommittee, Congress once again has neglected to face head-on a long-foreseen and fast-approaching crisis.” Goldman Sachs equity analyst David J. Kostin predicted in a report that “the inability of elected officials to act in the long-term best interests of all Americans” could send the Standard & Poor’s 500-stock index down 9.5 percent, to 1,100. Sure enough, in the hours before the co-chairs of the supercommittee effectively closed up shop through e-mailed statements released to the press, the stock market plummeted.
On cue, Republicans and Democrats sought to blame each other. “The supercommittee’s failure is a direct result of President Obama’s negligence and Democrats’ intransigence,” Republican National Committee Chairman Reince Priebus said in a statement. Obama countered that Republican lawmakers “refused to listen to the voices of reason and compromise.” And so on.
The irony in all the fulminating is that the universe has finally gone so topsy-turvy—and the political forces have run so amok—that gridlock has become a stealth agent of change. Under the terms of last summer’s on-the-precipice deal to raise the federal debt ceiling, the supercommittee’s failure to agree on a deficit-reduction package means that, starting in 2013, a combination of $1.2 trillion in spending cuts and scheduled tax-break expirations will take effect. That would accomplish more in the way of fiscal restraint than anyone with open eyes expects from the current crop of posturing incumbents. “The problem is not gridlock,” says Tyler Cowen, a professor of economics at George Mason University. “If Congress would do nothing now, we would be O.K. What we need is some gridlock.”
The do-nothing approach, of course, carries big risks. Unless the economy strengthens considerably in the next year, lockstep austerity—while it would achieve the goal of deficit reduction— could plunge the U.S. into another recession. However, a third path to deficit reduction does exist. The catch is that it requires one party to abandon the only thing it seems to care about.
Let’s return, for a moment, to gridlock. Cowen, a free-market conservative with iconoclastic tendencies, figures that if lawmakers would simply adhere to the debt-ceiling deal struck in August, the nation might actually get deficit reduction worth trillions of dollars over the next decade, all of it done on legislative autopilot. Runaway expenditures could be reined in, while revenue would increase beginning in 2013 primarily from the “sunsetting” of the tax cuts introduced by the George W. Bush Administration. “That would be huge,” Cowen says.
Unfortunately members of Congress show no interest in taking advantage of a perfectly good opportunity to wallow in stalemate. Before the leaders of the 12-member bipartisan supercommittee announced that their negotiations had ended in frustration, lawmakers on both sides of the aisle were working various legislative levers to stop the $1.2 trillion in automatic spending cuts from taking effect. To cite the most conspicuous example, GOP lawmakers such as Senators John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) have vowed to prevent Congress from reducing the Pentagon budget by $600 billion, a cut that would ostensibly be “triggered” by the supercommittee’s inaction. They draw support from Defense Secretary Leon I. Panetta, who has said the proposed cuts would be “devastating” for the Pentagon.
