Jeremi Suri

President Barack Obama’s commitment to negotiations, compromise, and deal-making is one of his strongest attributes. It is indeed refreshing to have a president who cares more about building consensus and solving problems than thumping his chest and declaring “victories” in all corners of the globe. Obama’s pragmatism has served him very well in the fight against Al Qaeda, which is now on its last legs. Obama’s pragmatism has also created new momentum for cooperation among the biggest states to contain and reduce the proliferation of nuclear, biological, and chemical weapons. On terrorism and weapons mass destruction, the two overriding threats of the early twenty-first century, Obama has made good deals for the United States.

On the federal budget and the management of America’s ballooning debt, Obama’s deal-making has undermined his purposes and weakened the United States as a whole. The federal debt is now about equal to the nation’s annual Gross Domestic Product and it is rising at a dangerous rate. The nation’s economy is also growing at an anemic pace, in part because businesses are wary of hiring new employees or investing in new capital, and consumers are scared to purchase homes and other large items. The federal debt is a huge problem, and President Obama is wise to work toward some agreement that gets it under control.

The Debt Mess

For the last 6 months, however, President Obama has confronted the worst intransigence, pig-headedness, and cry-baby behavior from both Republicans and Democrats. Both sides refuse to face the facts that everyone recognizes:

Entitlements are out of control. In 1962 they accounted for 2% of GDP, today they are almost 10%, and they will continue to rise with the retiring baby boomers. The United States spends 1 of every 10 dollars in the economy on people who are no longer contributing to the economy. No wonder our growth is so slow. Democrats refuse to give ground on this issue, for all their talk of accepting budget cuts. Instead, they have prioritized cuts in education and infrastructure, both of which are the surest investments for future growth.

Tax revenue is also terribly distorted. During the second half of the twentieth century the United States benefited from unprecedented economic growth with average annual federal tax revenues of 18.2% of the gross domestic product. Today federal tax revenues are at the their lowest level since the early 1950s: 14.8% of gross domestic product. This is unsustainable at a time when the nation is starved for domestic investment, stymied by crumbling infrastructure (have you visited a major airport lately?), and hemorrhaging money from education (have you visited a major university or a city high school lately?)

Over-taxing smothers innovation, but under-taxing encourages too much personal consumption and too little investment in economic productivity. That is where the United States is today: lots of wealth but lots of unmet capital needs. Our affluent suburbs, for example, have big houses and fancy cars, but chronic problems with roads, schools, Internet access, and the electrical power grid. How else are we going to pay for basic improvements if not through intelligent, moderate taxes?

The debt deal that President Obama accepted on July 31 did not address any of these problems with excessive entitlements or insufficient tax revenue. Quite the contrary, the deal created an intentionally convoluted procedure (with “triggers,” “committees,” and “deadlines”) that leaves entitlements and taxes just as they are. The majority of the spending cuts come from an indiscriminate meat-axe to education and infrastructure, with promises of more in the future. Defense spending, at a low historical average of about 5% of gross domestic product (although still too large), will take a disproportionate and indiscriminate cut too.

Self-Destruction

What a deal!! The nation will radically reduce domestic investments in economic productivity and national security. At the same time, the nation will continue to distribute its treasure to retirees and allow the most wealthy citizens to keep more and give less back. This is a deal for dummies, not a nation on the rise. Would anyone run a business or a household this way?

Sorry, Johnny, we can’t send you to college because Grandma needs fancy surgery and mom and dad refuse to pay the taxes that will finance the public university in our state. Sorry, Johnny, you will now live worse than your grandparents or parents. But don’t worry, we will still include you in our nice family vacations. Isn’t America great?

The Speech Obama Should Have Given

President Obama deserves high praise for his serious efforts to work between the intransigent “more entitlements” and “no taxes” positions. He really tried. When, however, it became clear in the last week that a serious compromise was not possible, the time had come for a different strategy.

Leadership requires serious efforts at compromise, but also bold moves during moments of stalemate. Although bold moves are risky, they are sometimes necessary. That was the insight of President Franklin Roosevelt in the Depression and the Second World War. President Obama admires Roosevelt, but he did not show similar courage on this issue. Pragmatism is necessary, but not sufficient for strong leadership in a time of crisis. Sometimes, a leader has to carry a country in a new direction.

What should President Obama have done? Last week, when it appeared that real compromise was not possible despite his best efforts, the president should have invoked his powers in the 14th Amendment to protect the full faith and credit of the United States from political extortion. That is, after all, why the provision was added to the 14th Amendment after the Civil War – to prevent partisans in the South and elsewhere from holding federal policy hostage to debt authorizations.

President Obama should have spoken to the American people, foreign viewers, and credit rating agencies with the following sincere and courageous words:

“Ladies and Gentlemen, I have tried for the last 6 months to forge a compromise that will solve our budget problems, problems faced by every major Western nation today. The parties at the table have chosen short-term political gains over the long-term needs of the country. They are unwilling to budge. They are short-sighted. Instead of accepting a compromise that will make matters worse, I have determined that I have no choice but to invoke my constitutional powers to protect the full faith and credit of the United States. I will raise the debt ceiling to maintain our credibility as a free and solvent society, a society that always pays its debts. I will redouble my efforts to address the real problems in our budget. I call on Democrats and Republicans to end their bickering and join me in the real work of reducing our excessive entitlements and raising the necessary revenues to get our country moving. This is the moment when we really prepare for a new era of prosperity. I will not allow partisan intransigence to imperil our country’s future.”

President Obama should have given that speech. His desire for a deal, in this case, undermined his efforts at leadership. For the United States to escape the present economic mess, President Obama must find new courage in coming months. Too much boldness becomes superficial bombast; too much pragmatism becomes self-defeating. The real balance the president needs is to seek negotiation, but also recognize when he has to stand alone.

This blog post originally appeared at http://globalbrief.ca