by THE EDITORS/ pic by BLOOMBERG

OBSERVERS calling for a more consensual style of American politics were dealt something of a corrective by US President Donald Trump and Congress this week.

Republicans and Democrats agreed that public spending and public borrowing should rise a lot faster than previously promised. For the moment, it seems, fiscal indiscipline is a bipartisan endeavour.

Granted, there’s one good thing about this agreement, and it’s important. The deal postpones for a couple of years the next debt-ceiling-and-government-shutdown crisis, which Congress and the administration had previously pencilled in for September.

Threatening financial markets from time to time with deliberately induced calamities is a proven failure as a way to contain spending pressures. It also needlessly destabilises the economy, and makes the US Federal Reserve’s difficult job even harder.

So, it’s good that the next debt-ceiling “showdown” has been avoided. But the US needs a permanent remedy for this management-by-crisis syndrome, not a temporary one. And in the meantime, it needs Congress and the administration to concern themselves with fiscal sustainability — in a way that yields results, not pointless posturing.

According to the Committee for a Responsible Federal Budget, the deal just announced will add US$1.7 trillion (RM6.99 trillion) to public spending over the next 10 years — roughly as much as the 2017 tax cuts, which were themselves unaffordable. So-called offsets within the plan fall way short of paying for the increases, meaning that public debt will rise even faster than the steady increase that was already forecast.

The projected debt ratio approaches 100% of GDP by 2029, even assuming no recession between now and then. When the next recession does arrive, diminished space for fiscal manoeuvre will make it harder to deliver a strong budget stimulus when it’s actually needed.

A consensus based on the Democratic Party’s fondness for public spending of most kinds and the Republican Party’s aversion to taxes of any kind won’t serve the US well. In the past, the case of fiscal austerity has been overdone, and the kind of fiscal rigidity that equates the government’s budget with an ordinary household’s financial planning oversimplifies the issue.

But it’s no oversimplification to say that a policy of high and relentlessly rising deficits and debt ratios, with the economy already at full employment and short of spare capacity, is grossly irresponsible.

Just because there’s consensus, doesn’t make it right. — Bloomberg

The views expressed are of the writer and do not necessarily reflect the stand of the newspaper’s owners and editorial board.