Washington needs adult supervision

In most disciplines, forecasting is hit and miss. With US politics, however, it is like predicting the time. With metronomic precision, this coming Friday Washington will permit the US economy to go into “sequestration” – the latest, and by no means last, phase of the town’s rolling fiscal cliff.

The March 1 deadline will trigger $85bn in cuts that will be applied indiscriminately to defence and domestic budgets but leaves entitlements programmes untouched. Economists say it will lop anything between 0.2 per cent and 0.6 per cent off US growth in 2013, depending on how long it stays in place. It is bad macroeconomic policy and appallingly crude budgeting.

Both Barack Obama and the Republican party deserve blame. It is still not too late to set US fiscal policy on a saner track. Mr Obama is right to insist the sequestration be replaced by a more balanced package of revenue increases and spending cuts that would be phased in over a longer period. The US recovery is still too fragile to take this kind of hit in one go.

But the White House has done precious little to persuade Republicans it is serious about addressing Medicare and Social Security, which are the real drivers of long-term US budget deficits. All talk of a grand fiscal bargain has been abandoned. As president, Mr Obama could do much more to start that conversation in earnest.

The Republicans deserve still more of the blame. Having conceded tax increases on the very wealthiest – those earning more than $450,000 a year – at the last fiscal cliff in early January, the party is determined it will never happen again. But it will and it should.

Mr Obama is right to target the panoply of tax loopholes for elimination. The GOP is wrong to dig its heels in defence of inefficient and unmerited tax breaks for the wealthy. But it is right to argue that entitlements be tackled soon. Holding the US government to permanent ransom is no way of accomplishing this.

The Republican-controlled House should pass its own package of entitlement reforms and bargain from there. Alas, such courage is lacking on both sides. Politicians know how unpopular any cuts will be. Thus on Friday, sequestration will happen. Most expect it will last only to March 27, the date when a government shutdown looms. In all likelihood that will happen too. The fiscal circus keeps rolling. And Washington remains in desperate need of adult supervision.