Mr. Roubini blames poor American leadership for the fiscal cliff shenanigans, but we voters get the government we deserve.
Neither Democrats nor Republicans recognize that maintaining a basic welfare state, which is right and necessary in our age of globalization, rapid technological change and demographic pressure, implies higher taxes for the middle class as well as for the rich.
Americans are in agreement that we require a social safety net, but then no one agrees about how to pay for it. For years, the plan has been to borrow money and let our grandchildren foot the bill. Unfortunately, we have now discovered that we are the grandchildren.
In 2012, federal spending on all programs was $3.7tr, and we collected revenues of about $2.6tr for a deficit of $1.1tr. Either the country reduces the amount of services it offers, or it raises revenue to plug this gap.
Neither side of the aisle is correct here. Democrats believe that the whole trillion may be raised by tax hikes while Republicans believe that the gap may be closed by cuts. Of course, the tax hikes are always on someone else (the rich), and the cuts never affect anyone currently or about to enter the system but are displaced to future generations.
The reality is that if you want a guaranteed, lifetime pension with an extensive health insurance plan at the time of your life when it will cost the most, you will have to pay lots of money for them. Voters only have themselves to blame. Ever since Al Gore talked himself out of the presidency with his “lockbox” example, we have know that the day of reckoning would soon be upon us.
Rather than paying attention to the math, we allowed our elected representatives to tell us what we wanted to hear. Eventually, our system will change to account for the persistent budget gaps. The question is only will we change it ourselves or allow the financial markets to change it for us.