Long-term versus short-term problems in the US

There are many daunting issues facing the United States. This country has an employment problem, a debt problem, an infrastructure problem and a political problem, to name a few. However, not all of these problems are created equal. Some are causing immediate  pain to the country (unemployment) while others are not currently causing us any pain at all (debt). The crucial distinction that people often forget when they talk about the country’s “problems” is that there are long-term problems and there are short-term problems and the these issues need to be tackled as such.

For instance, the US does not currently have a debt problem. Interest rates are at record lows and investors are actually paying the US to borrow more money. The US government’s debt load is not currently hurting the US economy at all. However, in about ten years or so, we will have a debt problem because around then the world economy will be different and we will not be able to borrow money for free. We will have to bring down our debt over the next decade or so, but for the time being, our debt is not really a even a nuisance. Therefore, our debt is a long-term problem. Solutions to that problem should focus on taming long-term drivers of debt, not on de-funding NPR or other such nonsense.

The US has an immediate employment problem. We have an unemployment rate of 9 percent and millions of people stuck in jobs they don’t want to be. This is a short-term problem that requires a short  term solution. Unfortunately, a solution to our employment issues is likely to involve measures  that temporarily increase the deficit. The government can solve the jobs problem,  but to do so it has to temporarily increase the deficit. That’s OK, because for now we do not have a debt problem– that problem is off in the future– and to a certain extent, we have to solve the jobs problem before we can solve the debt problem. To solve the debt problems we  need more people working and less people on public assistance (the symptoms of our jobs problem). Temporary spending now can solve our jobs problem, while also setting the stage for solving our debt problem down the road.

The US also has an infrastructure problem. Most  of our bridges, dams, schools, levees, highways, power lines and railroad tracks were built before the 1970s. The number of deficient dams in the US tripled from 2001 to 2007, while our roads are crumbling, even as the funding to replace them is dropping. We obviously need infrastructure, and sooner or later the bill to fix our bridges will come due. Call it our second national debt. When you run budget deficits every year, they eventually add up and have to be re-payed. When you underfund your infrastructure  every year, it eventually has to be rebuilt. There’s no way around it. Fixing our infrastructure will cost money and will hurt the deficit whenever it is done. I’d say its a long-term problem, though its  best to fix it now. If we fix it now, while borrowing is free, it will hurt the debt much less than if we do it years from now when borrowing costs us money again. Spending money now on fixing our infrastructure will also put people back to work, helping to solve our jobs crisis. The solutions to all these problems have a way of intermingling.

Finally, our political crisis. This is both a short- and a long-term problem for the US. S&P downgraded US debt because they believe our political system will be unable to solve our debt problem. Businesses won’t invest in the economy because they don’t think our jobs problem will be solved soon. Foreigners are increasingly unwilling to invest in the US  because our infrastructure is lagging behind.

All this leads back to Washington. We have a political system that people have no faith in. Republicans almost caused a default back in August and rejected a proposal that would have solved our debt problem. There’s been almost no movement on jobs since last January, and the political system seems unable to complete even the simplest tasks. I fear this may be the most difficult problem to solve. Its a shame because solving our political problem is also the key to juggling and solving our other impending short-and long-term predicaments.

Advertisements
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: