Home again to a gloomy economy and political paralysis

Home again to a hot and deeply green Washington after a few weeks in Europe. Midsummer Eve in Sweden today. Maybe I should have stayed another couple of days and enjoyed all the things of Midsummer, but with Europe in crisis and Greece in revolt the attraction wasn’t really there.

So I’m home again, and it feels good even if the political or economic situation is just as, or maybe even more, gloomy.

On the foreign policy front, I was met by President Obama’s statements to begin pulling back troops from Afghanistan, a statement criticized from both the left and the right. The country’s military leaders regard the troop reductions as too rapid and too drastic, but they have accepted them, while the left wing of the Democratic Party believes that the pull out is not fast enough.

Obama’s decision to withdraw 33,000 troops by next summer is a compromise that also reflects the declining support among the American public for war in Afghanistan after Osama bin Laden’s death. Doyle McManus in the Los Angeles Times and Fred Kaplan of Slate Magazine have some excellent reflections on the background and reasons for Obama’s decision.

On the domestic front, I was met by continued political paralysis in Washington, so characteristic of the divided power structure, with the White House and the Senate in Democratic hands, and with Republicans in the lead in the House of Representatives.

August 2 – the deadline for raising the debt ceiling – is fast approaching. This should be a routine decision like so many times before over the years, but it has now turned into a decision about everything in the American economy – debt, deficit, taxes, Medicare, pensions.

So far, there are no indications of a breakthrough in the negotiations led by Vice President Joe Biden. On the contrary. This week the Republican representatives left the negotiating table. The main reason was a continuing and stubborn “no” to anything that might look like a tax increases, including proposals from the Democrats to pay for part of budget cuts of two trillion dollars by not extending current tax breaks for the wealthiest in the American society.

David Leonhardt in his column, “Economic Scene” the other day in New York Times explains.

At the same time, words this week about the economy from Federal Reserve Chairman Ben Bernanke were surprisingly gloomy, as he predicted economic growth this year and next year probably will be lower than what the Fed predicted just a few months ago.

Midsummer in Sweden does not sound so bad … after all.


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