THE BLOG
12/20/2010 02:41 pm ET Updated May 25, 2011

The Real World vs. The Make Believe World

These thoughts were inspired by an exchange I watched on CNBC this morning between Tom Friedman, Pulitzer prize winning author and columnist for the New York Times and Joe Kernen, a co-anchor on CNBC's Squawk Box. Friedman commented that although the extension of the Bush tax cuts may have been necessary given the state of the economy, they added billions of dollars to our debt to China. He argued correctly that the only way for the U.S. to get out of our difficulties is to find a way to create jobs, reduce debt, innovate products that allow us to become competitive, improve education and increase immigration of highly qualified people. Kernen didn't see why the tax reduction should be characterized as increasing the debt to China since it was "our money" and thought the real solution to all the problems was to just "get the government out of the way."

As I see the political structure of America both of these concepts fall into the realm of the make believe world. Yes, Friedman is right on target as to what is needed for this country to regain its financial and political position. It would be great if the nation would be able to gird its loins and face the realities of the huge competitive and structural unemployment, the debt, the failure of our education system and the damaging restrictions on immigration. Unfortunately, the simplistic formulation by Kernen explains why all that will not happen.

I previously noted that creating jobs, reducing the debt and making America competitive

cannot be accomplished without enormous sacrifices by every elements of our society. It will require that labor gives up hard earned health and pension benefits, that managements very sharply reduce their salaries and benefits; that federal, state and city governments pare down costs across the board, including pension payments for retired employees; that taxes be raised far beyond merely eliminating the Bush tax cuts; that social security and Medicare benefits be adjusted to reduce costs. All will feel the pain of reduced standards of living -- labor, management, the affluent, the old and the young.

I raised the question: "Can the American democratic system manage such painful change... Can our democracy survive when it has to take from each constituency something of great value?

The first test of our willingness to make tough choices came up in the extension of the Bush tax cuts and we saw part of the answer. True, there was a rationalization for not increasing taxes on the middle class during this stressful economic period but the extension of benefits went well beyond the middle class to the very wealthy and included reducing estate and other taxes. It is not a great leap of the imagination to expect that when the cuts expire in 2012 -- an election year -- they will be extended again.

We also witnessed the reaction to the efforts by the Simpson-Bowles led National Commission on Fiscal Responsibility and Reform. Even fourteen members of the Commission could not agree on the recommendations in order to bring them to the floor of Congress. Moreover, its recommendations were immediately denounced by elements on the left and the right.

The Kernen mantra that we should just "get government out of the way" disguises the problem with misdirection. The bulk of pubic spending is on Social Security, Medicare, the military and interest on the debt. There is no way that in our system the government will get out of the way of those activities and, in addition, we will always need services and programs that only the government and not business can deliver. There is also no possibility that the American electorate will vote for such a drastic approach. But repeating the mantra as if it were a solution, allows the cop out on what realistically could and must be done - the belt tightening sacrifices from all the American constituencies to reduce debt yet allocate resources to carry out the kind of recommendations that Friedman made. This is reality. Until it happens, we will continue to live in a world of "make believe" and neither "get government out of the way" nor carry out Friedman's recommendations.

Robert K. Lifton has written extensively on political, business and economic issues. He is presently writing a memoir titled: Life's Stories and Lessons from a Member of the 'Greatest Generation.