Downgrade of Our Political System

It seems we will ultimately not default. Just hours before the looming deadline, President signed the bill passed by both houses of congress which will allow treasury to borrow money and continue to pay its bills.

The whole spectacle forces one to wonder about the quality of our political system. If Moody's or S&P were in the business of rating political systems, they should have downgraded us to junk status.

While no one party or group came out looking good, I think following three entities especially came out diminished.

Tea party, which propelled republicans into majority in the house in the last years elections, seems to have misread their mandate. They looked irresponsible in this debate when they denied that defaulting on our debt is a big deal. They don't understand that complex problem like our debt which has been accumulated over decades requires thoughtful solution and can not be fixed overnight. They have one answer to all the problems of the world: tax-cuts.

Liberals on the other end seem to be living in a different planet where there are unlimited resources, country has no debt and more spending is the answer to all the problems. They believe in Keynesian economics and want to spend more and tax more. They blame corporations and rich people for almost everything that ails us today ignoring the fact that it is the private sector which drives our economic engine. According to them, if people are getting richer, they must be doing it on the backs of working poor.

President also came out of this debate diminished. Instead of showing true leadership on fiscal issues, in the beginning, he just offered lip service. Having taken a beating in health care debate, he could not muster the courage to take on this problem. He setup the debt commission but completely ignored its recommendations. His budget this year did nothing to address the probelm. He made a political calculation of not coming out with specific debt reduction plan of his own and in this he completely misread the mood of the country.

The real solution to our long term fiscal challenges will require entitlement reform and tax reform, not addressed in the current deal. Looking at what it took to just increase the debt ceiling, I am not very confident that we will solve this problem any time soon.