If the Republican Party takes full control of the U.S. Congress in the midterm election, policy gridlock is likely to worsen, risking a rerun of the damaging fiscal battles that led last year to a government shutdown and almost to a technical debt default. More broadly, the gridlock will prevent the passage of important structural reforms that the U.S. needs to boost growth.
The U.S. economy is growing slowly and Europe's hardly at all. The stock market lurch last week is a belated acknowledgement that our two economies share a common affliction, and Europe suffers more seriously. The affliction is austerity. And yet the main remedy being promoted by the U.S. government and its European allies is a trade and investment deal known as T-TIP, which stands for the Trans-Atlantic Trade and Investment Partnership. According to the deal's sponsors, T-TIP would help stimulate recovery by removing barriers to trade and promoting regulatory convergence and hence investment. The proposed deal is not popular in the U.S. Congress, which has to approve negotiating authority. The administration, say well-placed sources, hopes to cram through the necessary approval during the lame duck session of Congress after the November 4 election. That still will not assure approval, because the deal is also increasingly unpopular in Europe.
CEOs and other executives are overpaid nowadays by any reasonable standard. To make matters worse, taxpayers are footing a large part of the bill. Thanks to some historical lobbying and maneuvering, corporations are able to deduct much of the money they pay to their most highly compensated executives. We can blame corporate CEOs for selfish, shortsighted, and greedy behavior, and we should. But that misses an important point: government policy actually encourages them to behave that way. In one of its lesser-known provisions, the Affordable Care Act limited these tax breaks for health insurers who benefit from the law. While that may sound arcane, the implications could be profound and far-reaching.
The latest reports from Europe indicate that the continent is slipping back into recession. The U.S. is doing only slightly better, with positive economic growth but scant progress on the jobs front, and no growth in the earnings of the vast majority of Americans. Meanwhile, global climate change continues to worsen, producing unprecedented policy conundrums of how to reconcile the very survival of the planet with improved living standards for the world's impoverished billions and for most Americans, whose real incomes have declined since the year 2000. Amid all of these serious challenges, what common strategies are top U.S. and European leaders pursuing? Why, a new trade and investment deal modeled on NAFTA, to make it harder for governments to regulate capitalism.