US debt crisis: What’s wrong with America?

BOSTON — Is something fundamentally wrong with America?

As the clock counts down to Aug. 2, the day we are told this country will begin defaulting on its enormous public debt obligations unless the current ceiling is raised, this question is being asked with increasing urgency by people in nations around the globe. 

Why, they ask, is America’s political leadership unable to resolve something that previously had been nothing more than a routine procedure, carried out innumerable times under both Republican and Democratic presidents?

First, America’s economy is at near-recession levels, with slow growth prospects and enormous unemployment.

With 9.2 percent of its workforce unemployed, the United States may not be as badly off as Spain where joblessness is above 20 percent, or Greece where it is 15 percent. But a comparison to most of the other major global economic powers is decidedly unfavorable to America.

China has official unemployment of only 4.1 percent, Germany 6 percent, Brazil 6.5 percent, Russia 7.6 percent.

Even Japan, with all of its recent struggles, has official unemployment of only 4.5 percent. In fact, joblessness in the United States has been very close to or above 9 percent since April 2009, more than two years and counting. This is the longest period of high unemployment since the winter of 1982.

With more than 14 million Americans without jobs, and many with little prospect of work in the months to come, it is not surprising that the U.S. economy is hardly growing. The fastest and best cure to America’s debt and deficit problems is a strengthening economy with more jobs, more consumption of goods and services, and more tax revenue for the U.S. Treasury.

Second, America has been fighting two wars in distant places for an incredibly long time — Afghanistan since October 2001 and Iraq since March 2003. This has never happened before in U.S. history. The cost of these wars has many estimates, but all begin well above 13 digits — that’s more than a trillion dollars. It’s a burden the country can no longer afford. A decade of enormous spending by the Defense Department has added significantly to the national debt.

Third, on the domestic side, spending for entitlements, especially for the giant health insurance programs Medicare and Medicaid, has continued to grow at percentage rates that are far above inflation and far above what is sustainable. An aging population and the first waves of retirement by the Baby Boom generation are compounding the rate of growth. The inability of either government or private industry to gain control of health care costs may well be the single most critical factor in the burgeoning national debt.

Fourth, the United States is mired in a revenue drought brought on by President George W. Bush and the Republican Congress who engineered two massive income tax cuts, the first in 2001 and the second in 2003. Whatever one’s point of view may be about the justification for these tax cuts, it is indisputable that they have added huge new sums to the nation’s debt and deficit problem.

The Bush tax cuts were extended for two years in December 2010, after considerable debate between the parties, and will expire again in 2013. According to the Congressional Budget Office, this extension alone will add $3.3 trillion to the national debt. That’s as much as all of the spending cuts being discussed this week in Washington as the price of raising the debt ceiling.

Finally, and perhaps most important of all, there is a growing realization here in the United States that as a result of all of the above factors the United States has failed for too long to invest in the country’s infrastructure — both physical and intellectual. As a result, America is losing much of its future competitiveness in the global economy.

Is something fundamentally wrong with America? Yes.

Will a resolution of the current debt ceiling crisis resolve the real problems facing the country? No, it will not.

America has a deep political malaise. Seldom before in the nation’s history have the two main parties been so bitterly divided and so unable to find common ground in the national interest. Average Americans are worried and deeply frustrated. Many are angry.

No matter how the debt ceiling crisis is resolved, it appears the United States is headed toward a titanic and historic battle in the 2012 presidential elections.

Americans have a great fighting spirit and a better future is still theirs to create. Aug. 2 will come and go, but these challenges will remain.

Philip Balboni is co-founder and chief executive officer of GlobalPost.