Whether Barack Obama or Mitt Romney wins the election on Tuesday, on Wednesday he will face the same urgent challenge: how to stop the U.S. from falling off the fiscal cliff. But let's hope he also takes on the larger challenge of fixing a political system that has brought us close to disaster twice in two years.
Unless Congress acts, the spending cuts and tax increases that would be triggered automatically next January would take 5.1% out of the country's GDP in one year, according to the Congressional Budget Office. That would be one of the most severe experiments with austerity in history--larger than anything Greece, Spain, Italy or the U.K. has tried. In fact, it is almost three times the size of Britain's program. And the results of those European austerity policies have thus far been a dramatic slowdown in economic growth and a sharp spike in unemployment. Virtually every economist who has studied this believes that similar measures, even if enacted for a few months, could push the U.S. into a double-dip recession.
Even a prominent CEO-sponsored public campaign geared explicitly toward deficit reduction has warned that this much reduction this fast would be catastrophic for the country. In fact, just the fear that it might happen has already stopped companies from expanding. And once again, the rest of the world watches to see if the U.S.--the center of the global economy--will actually commit economic hara-kiri.
The most puzzling aspect of our dilemmas is how manageable they are. Unlike Greece and Spain, the U.S. has a fundamentally healthy economy. We have problems, but we have solutions to them. The true virtue of the Simpson-Bowles deficit-reduction plan is that it illustrates that the U.S.'s debt issues could be readily resolved as long as both parties compromise. Paul Ryan and Paul Krugman criticize the specifics of the plan, but that proves the point: neither side would get what it wants but the budget would be placed on a much more stable footing.
The truth is, most of the U.S.'s problems could be solved using some version of the Simpson-Bowles approach. Imagine a bipartisan and independent panel that proposed comprehensive immigration reform. Or one that tackled Social Security. Or tax reform. Perhaps we need an independent agency chartered by Congress to generate such plans when asked.
Whatever the mechanism, the U.S. needs some kind of process to produce compromise proposals that Congress would have to take seriously. Ideally, lawmakers would be forced to vote up or down on them. This is not an abstract theory. When used before--for example, for base closings after the Cold War and for trade legislation--the process has been very successful. In fact, a required vote was part of the original design of the Republican proposal for what became Simpson-Bowles. But once Obama agreed to it, seven Republican co-sponsors of the resolution reversed course and denounced the idea. And congressional Democrats weren't all that unhappy with the outcome.