First, here is a bit from my Reuters Breakingviews column:
President Barack Obama might have stumbled upon a three-step path to financial crisis: 1) admit nation is dangerously in debt; 2) create high-profile deficit commission to find solution; 3) have commission fail. Subsequent market tumult could, of course, force a sudden, dramatic and harsh fix to America’s fiscal ills. But a rush job would be a poor way to solve the country’s long-term financial problems.
The immediate casualty of failure, however, would be the markets. Recall the House’s first vote against the $700 billion bank bailout in September 2008. The Dow industrials fell an unlucky 777 points in a flash. The bill passed two days later when panic set in on the Hill. Failure of the commission would send a frightful message to investors globally who have continued to buy trillions in Treasuries under the assumption hard budget choices would eventually be made.
True, a market jolt would again focus Congress’s attention. But that risks a hasty, ill-considered budget fix such as hiking taxes without a structural reform of America’s social insurance system. That would really be no solution at all.
Me: It’s like there arent’t all kinds of plans to cut spending. But Americans need to decide if they want to close the long-term budget gap through lower spending or higher taxes.
Virtually all of America’s fiscal woes could be addressed quite simply: stop giving a huge chunk of our economy away tax-free to foreign exporters. Return to a sensible trade policy that employs tariffs to assure a balance of trade as was done for the first 171 years of our nation’s history, before the advocates of radical “free trade” economic theories hijacked our trade policy. There was a time when all federal revenue came from tariffs and there was no such thing as an income tax. The deficit would easily be cut in half and all of our manufacturing jobs would come back home. Economy fixed. Unemployment fixed. Health care affordability fixed.