09 February 2010

Obama And Congress Flounder Over Deficit

Econimist: Clueless in Washington
Neither the president nor Congress shows any sign of knowing how to tackle the deficit

In the medium term there are only two ways to bring the deficit back to a sustainable level—which means no more than 3% of GDP. Either taxes will have to rise, or a serious attempt must be made to rein in the entitlements—legally mandated programmes such as Medicare, Medicaid and Social Security—that constitute the great bulk of spending.

Mr Obama is proposing only a bit of the first, and none of the second.

Any serious attempt to tackle entitlements now looks doomed. Health care offered a chance to do so (broader coverage could come with tougher cost controls). But a weak administration and a greedy Congress conspired to produce a baggy monster of a bill which, from a fiscal point of view, might have made things worse. No one dares touch defence, in a troubled world. The Social Security pension scheme is deemed sacrosanct by nervy politicians.

It is a deeply depressing picture—and Mr Obama did nothing this week to lighten it.

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