The Debt Deal's Failure

Congress proved incapable of solving our nation's money problems. The result is that we've lost the world's trust

By Fareed Zakaria Monday, Aug. 15, 2011
    • Illustration by James Victore for TIME

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    American parties now function like European parliamentary ones, ideologically pure and with tight discipline. But we don't have a European system. In parliamentary systems, power is united so that when, for example, the British Prime Minister's coalition takes office, it controls the legislative branch as well as the executive. The Prime Minister is, in effect, chief legislator as well as chief executive. The ruling party gets a chance to implement its agenda, and then the public can either re-elect it or throw the bums out. The U.S. system is one of shared and overlapping powers. No one person or party is fully in control; everyone is checked and balanced. People have to cooperate for anything to get done. That is why the Tea Party's insistence on holding the debt ceiling hostage in order to force its policies on the country — the first time the debt ceiling has been used this way — was so deeply un-American.

    The strength of the Tea Party is part of a broader phenomenon: the rise of small, intensely motivated groups that have been able to capture American politics. The causes are by now familiar. The redistricting of Congress creates safe seats, so the incentive is to pander to the extremes to fend off primary challenges, rather than to work toward the center. Narrowcast media amplify strong voices at the ends of the spectrum and make politicians pay a price for any deviation from dogma. A more open and transparent Congress has meant a Congress more easily pressured by small interest groups and lobbyists. Ironically, during this period, more and more Americans identify as independents. Registered independents are at an all-time high. But that doesn't matter. The system in Congress reflects not rule by the majority but rule by the minority — fanatical, organized minorities.

    These dysfunctions have reached crisis levels at the very time the U.S. faces intense pressures from an aging population, technological change and globalization. We need smart policies in every field. We need to pare spending in areas like health care and pensions but invest in others like research and development, infrastructure and education in order to grow. In an age of budgetary limits, money needs to be spent wisely and only on projects that are effective. But in area after area — energy, immigration, infrastructure — government policy is suboptimal, a sad mixture of political payoffs and ideological positioning. Countries from Canada to Australia to Singapore implement smart policies and copy best practices from around the world. We bicker and remain paralyzed.

    Some of those best practices used to be American. The world once looked at America with awe as we built the interstate highway system, created the best public education in the world, put a man on the moon and invested in the frontiers of knowledge. That is not how the world sees America today. People watched what happened over the past month and could not comprehend it. We have taken something that the world never doubted — the credibility of the U.S. — and put it into question. From now on, every time the debt ceiling has to be debated, the world will wonder, Will America honor its commitments? Will it keep its word? Will the system break down? We have taken our most precious resource, the trust of the world, and gambled with it. If, as a result of these congressional antics, interest rates on America's debt rise by 1% — in other words, if the world asks for just a little bit more interest to lend us money — the budget deficit will rise by $1.3 trillion over 10 years. That would more than wipe out the entire 10 years of cuts proposed in the debt deal. That's the American system at work these days.

    The original version of this article stated that by 2008, the debt had ballooned to $5.8 billion. The debt had ballooned to $10 trillion.

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