The markets are very nervous – and rightly so – about the debt crises in Europe and the United States.
Yet the frustrating thing about both crises is that they should be relatively easy to avert. They are not mega-tsunamis or planet-killing asteroid strikes that are beyond all human control. Nor are they mysterious: there is no need for a new Keynes to tell us what is happening, because anyone who can read a newspaper and do basic arithmetic knows exactly what the problems are. They are foreseeable and were foreseen, and indeed have both been rather unmissable for some years now.
Above all, they should be very easy to solve, given the political will. The solutions are not rocket-science. Everyone knows what needs to be done, and what will eventually have to be done.
In the United States, the government must stop spending as much as it does. The federal deficit is unsustainable. Sooner or later, there must be cuts, and there will be. Delaying the evil hour only makes it worse. Even the flawed Class of 2008 understood that there comes a time when unpleasant decisions cannot be put off.
In Europe, there is a limit to how much the more prudent nations can prop up the more feckless in order to maintain the pretence of a single currency. Does anyone, even the most sincere European federalist, really believe that Greece can and will remain a member of the eurozone indefinitely?
Everyone in the business world knows what has to happen. So – at least privately – do most politicians. So why delay? Everyone is agreed on the decisions that need to be made, so the sooner they are made the better.
Yet the political class seems paralysed with indecision. President Obama, obsessed with his re-election next year, has failed to take control of negotiations with Congressional leaders by advocating bold measures: once again, he has shown himself to be a reactive President, rather than one who seizes the initiative. Meanwhile, across the Pond, the European Establishment is terrified that suspension from the euro of Greece – and then probably Portugal and Spain, and maybe Italy and Ireland – will undermine the credibility of their whole cherished project of European integration.
It is tragic that in the whole pack, there is not one real leader with the guts to say, “We all know what we are going to have to do. Let’s just do it.”
For the real tragedy is that nothing magical is required here, only the courage and honesty to do what clearly needs to be done – in other words, leadership.