For US and Europe, governance by brinkmanship
The US and Europe are handling their fiscal crises with political brinkmanship, resulting in piecemeal solutions. The US seems to have adopted German Chancellor Angel Merkel’s much maligned step-by-step approach to problem-solving. Politically, that may be the only choice.
For years Europe has been pilloried by politicians and commentators for its perceived mismanagement of the euro crisis. Always a day late and a euro short, the old continent was addicted to last-minute temporary fixes, to piecemeal and half-hearted approaches. Analysts chided the European Union for its lack of leadership and incompetence. So systemic was the dysfunction among the EU’s 27 member countries, or so the narrative goes, that it could never happen in a determined nation-state like the United States.Skip to next paragraph
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Well, think again.
Welcome to the land of cliffs and other obstacles, in which crisis management looks frighteningly similar to Europe’s. So similar indeed that the British magazine The Economist found it appropriate to call the Jan. 1 “fiscal cliff” deal, “America’s European moment.”
If anything, that’s an understatement. It is not just a point in time when America looks like Europe. The future will provide for an extensive pattern of similarities with Europe. Like it or not, coming into stark relief is the truly transatlantic nature of this crisis – the parallel way in which these two different democratic systems grapple with identical problems, and perhaps even learn from each other.
Notwithstanding differences in economic structure and governance, the heart of the problem in Europe and the US is the same: Citizens are demanding services from their governments that they are not willing to pay for. Politicians have increasingly filled this gap by incurring debt. Demographic change and the shift of economic vibrancy away from mature western democracies dramatically aggravate the problem. In theory, the solution is clear: Improve competitiveness and growth potential, introduce fiscal prudence and reduce government services.
In practice, reform is exceedingly hard in societies in which every bit of change will be resisted by some pressure group. In Europe, it’s even harder because the continent has a common currency, but lacks centralized institutions to steer fiscal policy among the 17 countries that use the euro. Therefore, the sole way of making change happen in Europe is “on-the-brink.”
Only when politicians look into the abyss, will they do what they would otherwise find too difficult to do. And they will do so repeatedly as long as the legislative package in front of them is never too big. Consequently, big-bang solutions are not possible, and may not even be desirable, given the needed impetus of crisis for political action.
Following this practice of governance by brinkmanship, the United States has Europeanized its crisis response by artificially erecting a number of cliffs, obstacles, and deadlines. No comprehensive solution is sought on any of these occasions. Every time a small solution is found, the public also recognizes that the big can has been kicked down the road. In the US, yet another showdown is just around the corner – raising the debt ceiling. The Congress seems to have adopted German Chancellor Angela Merkel’s much maligned step-by-step approach to Europe-wide problem-solving.
This approach has serious downsides. Decisionmaking under the pressure of deadlines does not allow for an EU member country’s legislature to study and deliberate about the proposals that come down from EU headquarters in Brussels. They can barely read before they vote. The reaction of legislators in Congress is exactly the same as in any parliament in Europe: They are howling.