It’s certainly good for the U.S. and global economies that a big fiscal showdown between the two parties with the federal government’s solvency held hostage is vastly less likely than it looked at the beginning of the year. But it’s probably a good time to acknowlege a “grand bargain” isn’t happening any time soon, not because it’s unnecessary, but because the two parties represent vastly different economic philosophies that are difficult to reconcile in any sort of “compromise” that doesn’t actually make things worse from everybody’s perspective.
What we really need is a coherent economic strategy for the country, and it’s not at all clear that can emerge from any sort of bipartisan compromise. Paul Krugman agrees:
When will we be ready for a long-run fiscal deal? My answer is, once voters have spoken decisively in favor of one or the other of the rival visions driving our current political polarization. Maybe President Hillary Clinton, fresh off her upset victory in the 2018 midterms, will be able to broker a long-run budget compromise with chastened Republicans; or maybe demoralized Democrats will sign on to President Paul Ryan’s plan to privatize Medicare. Either way, the time for big decisions about the long run is not yet.
And because that time is not yet, influential people need to stop using the future as an excuse for inaction. The clear and present danger is mass unemployment, and we should deal with it, now.
Unfortunately, under the economic theories popular in today’s Republican Party, the solution to mass unemployment–itself a product not of inadequate consumer demand but of excessive burdens on investment and innovation aggravated by extravagant subsidies for idleness–is upper-end tax cuts and de-regulation, accompanied by cuts in federal domestic spending. Changing the subject from debts and deficits to the current economy doesn’t get rid of the gridlock. While bipartisanship is possible if not likely in all sorts of areas, on the big picture issues determining economic and fiscal policy, somebody’s going to have to win and somebody’s going to have to lose to get things moving again in Washington.