Quite an unusual sight today at the White House. After a panel discussion about how to fix the ailing US economy, President Obama opened up the floor to Q and A. Not from reporters, but from business leaders, analysts and most notably politicians from the legislative branch both friend and foe -- and the opening question came from his opponent in last year's election, Sen. John McCain (R-AZ). This is almost unprecedented in the American experience; we tend to see that thing in Question Period in Canada or the UK or Australia.
Very refreshing, and an indication that Obama is serious about a different kind of politics, one with more give and take and certainly more accountability from the executive branch than what we've come to expect since the Reagan Administration. And interestingly, McCain's question was about the Marines wanting to procure a new generation of helicopters to replace the fleet that currently serves the President -- the current fleet being, believe it or not, Sikorsky Sea Kings! (The 1960's era helicopters that are a constant source of irritation for Canada but seem to work just fine for Americans.) Obama replied every discretionary item is under review right now -- and by the way, he's quite happy with Marine One just the way it is.
Unfortunately, there's only so much you can cut on the discretionary side. Even in defence he only has so much room since he wants to refocus America on Afghanistan as it pulls out of Iraq.
Like Canada and most other developed nations, the US is bound and gagged by entitlement payments -- social security for seniors and the unemployed, Medicare for seniors, Medicaid for welfare recipients, farm subsidies, etc. That's not necessarily a bad thing, a developed economy should have a safety net for its most vulnerable.
But in the States, with the first flight of baby boomers set to start collecting their pensions in just two years, and far fewer people paying into FICA to pay for pensions and UI than those collecting benefits (the ratio used to be 8 payers for every payee, now it's closer to 2 to 1 and shrinking rapidly) this is a ticking time bomb. Obama is going to have to very courageous in the budget he releases later this week, and be willing to make major reforms on who qualifies and when. People who are about to collect should of course get their benefits; but people some years away are going to have to have their future entitlements slashed -- no two ways about it.
And in his speech to Congress tomorrow night, he'll have to say that "Yes we can" is going to mean major sacrifices across all classes and not just a rollback of tax cuts for the top 2%.
At this rate, I think Obama has to say as clearly as possible that America is going to need major shock therapy to recover. And it's not just the US.
How bad is it? We've seen major protests in Ireland this past weekend, where the right wing government now wants civil servants in the ex-Celtic Tiger to being to pay for their public service pensions -- which will mean a raise in the payroll tax of up to €2800 (about $3500) per year. On the other side of the EU in Latvia, the former Baltic Tiger has had to turn to the IMF, the World Bank and its EU partners for an emergency loan, upwards of €7.5 billion (about $9.5 billion) -- and just like the UK in the 1970s some embarrassing austerity measures have had to be put in. We still remember the protests in Greece and the UK as well.
And an unstable Europe will certainly lead to greater instability in America. It's incredible that some would say that the world is experiencing "tension" and not a recession. If tension this is, then I'd to know when the bottom's going to fall out from under all of us!
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