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Outside editorial: Greek lessons

Posted: November 6, 2011 - 1:08am

The following editorial first appeared in the Los Angeles Times:

Perhaps the toughest job in Washington today is being a member of the congressional “super committee” trying to slash federal borrowing by at least $1.2 trillion over the coming decade. To hit that target, members will have to bridge a deep partisan divide over taxes, spending programs and the effect of government spending on the economy. If they have any doubts about the need to cut a deal, however, they should turn their attention to what’s happening on the other side of the Atlantic.

The chances of the committee succeeding seemed to fade last week when its six Democrats and six Republicans released separate proposals that were quickly dismissed by the other party as “a joke” or “not serious.” The reasons for the lack of consensus were distressingly familiar: The GOP wouldn’t countenance tax increases, but without them Democrats wouldn’t accept cuts in Medicaid and Medicare benefits. Should the committee fail, $1.2 trillion would be cut automatically from the federal budget over the coming decade. More immediately, the display of governmental dysfunction could trigger a potentially damaging downgrade of federal bonds.

While the committee has been deliberating, leaders in Europe have been struggling to contain the damage caused by a potential default by Greece. They agreed last week to a partial bailout for Greece’s creditors, most of which are European banks. But the deal, which was barely adequate at best, is in danger of unraveling because Greek Prime Minister George Papandreou has called for a referendum that would allow Greek voters to reject the deal, and banks are balking at the “voluntary” losses they’ve been urged to take. Global stock markets have plunged, reflecting fears that Greece will default and the debt crisis will spread wider and more chaotically.

The fiscal problems faced in Europe are different from the ones here, but the challenge for policymakers is essentially the same: Having promised the public more than they can reasonably deliver, governments now have to pare back in a way that limits the damage to the economy and spreads the pain equitably. Washington’s short-term deficit problems stem mainly from the recession; the long-term ones are due primarily to rising healthcare costs that are making Medicare and Medicaid unsustainable.

The way forward for the committee has been charted by a series of expert panels that have developed detailed proposals for bringing the federal debt under control. Although their specifics differ, they all call for much more deficit reduction — $4 trillion — accomplished through program cuts, benefit reductions and tax increases. In other words, the plans call for two things the committee has yet to embrace: a real solution instead of a half measure, and truly shared sacrifice. Last week’s proposal from European leaders didn’t have those qualities either.

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