Clive Crook: Government lurches between phony crises

The vote Tuesday night in the House of Representatives brought to a close the latest Washington master class in dereliction of duty. After a few days of arguing about who won or lost, we can move on to the next manufactured crisis.

In itself, not much of a surprise, the fiscal-cliff deal avoids most of the tax increases and postpones almost all of the spending cuts that were about to be triggered. Throughout this farce, financial markets had refused to believe that the U.S. government would inflict a recession rather than strike a budget agreement, especially because they knew that, all posturing aside, the distance between the two parties was small. Markets wobbled but didn't collapse.

Let's hope they react with similar equanimity to the next pointless quarrel, over the debt ceiling. Treasury Secretary Timothy Geithner told Congress last week that the current limit on government borrowing was about to be reached. He said "extraordinary measures" (essentially, shuffling funds among government accounts) would be used to prevent the debt from breaking through the ceiling.How long can that go on? Geithner wasn't sure. Maybe two months under normal circumstances, he said, but "given the significant uncertainty that now exists with regard to unresolved tax and spending policies for 2013, it is not possible to predict the effective duration of these measures." The latest fiscal deal does little to resolve those uncertainties. The spending-cut part has merely been delayed by two months. The tax increase for couples making more than $450,000, together with other changes and estimated savings in debt interest, shaves about $700 billion from the 10-year deficit. Savings of about $2 trillion will be needed to stabilize the ratio of public debt to national income. Bringing that ratio down to a safer level requires spending cuts and tax increases worth $4 trillion -- the original "grand bargain" ambition.

Instead of dealing calmly with the problem, fiscal policy has settled into a mode of perpetual phony crisis. Phony doesn't mean harmless, however. The risk of a real fiscal crisis gradually builds. Meanwhile, the cumulative effects of simulated crises might be almost as bad. It's the difference between an acute illness and a chronic wasting disease -- one that's beginning to look incurable.

Don't tell me the economy just had a lucky escape. Whatever happens next, it has been paying for the fiscal standoff for months. It's paying for what Congress might do with the next debt ceiling, and the one after that. The "significant uncertainty" that Geithner referred to has already held back the U.S. recovery. Another temporary fiscal patch isn't a remedy. It's just more of the same.

The economy needs a lasting fiscal compact that commands broad, bipartisan support. I can hear the groans. Not another call for compromise. Many Democrats and almost all Republicans find the idea disgusting. On Capitol Hill, it's no longer enough for one side to win; the other has to be seen to lose. That attitude is the growing burden the economy has to carry.

The tax cuts passed under President George W. Bush show what happens when reforms lack broad support. They were pushed through in 2001 and 2003 against solid Democratic opposition. For more than a decade, the overriding aim of Democratic politics has been to (partially) reverse them. Mission accomplished -- for now.

A similar fate might be in store for health care reform. With uncertain support from the public, the Affordable Care Act faces the skepticism of Republican governors and the outright hostility of a Republican-controlled House of Representatives.