Fear can pave the way to avoid the “financial cliff”

I haven’t blogged much lately, in fact, very little since the November 6 elections. I needed a break, and I hope you haven’t missed me too much. In any case, I am back with the goal of writing more about issues beyond politics and the political quagmire here in Washington.

My blog posting yesterday about the death of jazz legend, Dave Brubeck, was part of that effort, and I hope to continue so. But, first, I must write about the “financial cliff” – the financial Armageddon that looms at the end of the year if the White House and Congress cannot agree on a new approach on how to solve America’s serious financial problems and growing national debt.

It’s already a month since President Barack Obama’s convincing victory over the Republican challenger Mitt Romney. The Republicans are still trying to come to terms with what actually happened and why. Meanwhile, all eyes in Washington have been focused on the “fiscal cliff,” by some called the “austerity crisis,” a matter of seldom seen proportions and seldom seen consequences if not dealt with before the New Year. If the White House and Congress cannot come to an agreement, a series of automatic events – all extremely negative — will unfold, both on taxes and on budget cuts.

The financial cliff came about because of previous failures in Washington after the big debt ceiling crisis of 2011 to lower the budget deficit and the national debt. The parties decided to postpone the tough decisions – kick the can down the road, as it is so often put. So, no one imposed the cliff on Washington – the politicians did it this to themselves, and they will go down together if there is no deal before December 31, although polls show that most voters will blame the Republicans.

If there is no deal, all American will see their taxes go up next year — by an average of 3 446 dollars. In addition, 200 billion dollars in tough spending cuts will take effect. A non-deal will cause the U.S. economy to shrink and unemployment to turn upwards, to over 9 percent. That would be not only a shame, it would be catastrophic for an economy that now shows encouraging signs of steady improvement, including steadily lower unemployment figures – to now 7.7 percent, the lowest since December 2008, just before Obama entered the White House.

Indeed, it’s a frightening scenario, and, for many, it seems incomprehensible that the White House and Congress will let this happen. Too much is at stake, both politically for the parties, and economically for the whole country. No one wants to be blamed for such a collapse and common sense says that there will be a deal. But time is rapidly running out in this “magic moment,” for a deal, as a leading Democrat put it recently. There is no better time than right now to make a deal.

So far, the Republicans have resisted the “balanced approach” — with tax rate hikes for the richest two percent of the population, those with incomes of over 250,000 dollars per year, combined with a series of spending cuts – an approach on which Obama campaigned and won the election. Stubbornly, the Republicans have so far said no to all tax rate hikes, but without them, Obama has repeatedly and firmly stated, there will be no deal.

During the election campaign, the majority of voters seemed to think that Obama’s “balanced approach” was sensible, and those sentiments linger. The President’s approval ratings are up, over 50 percent, and he is now clearly in the driver’s seat.

Maybe, in the end, plain fear of a failure and the subsequent wrath of the voters, who want a deal and want Washington to come together, will drive the parties together to reach an agreement. There have been cracks in the unified resistance among the Republicans in Congress to higher taxes. No doubt they see the writing on the wall.

If the Republicans don’t meet Obama partway, they “would contribute to a recession that would discredit them for a decade,” David Brooks warns in the New York Times today.

Fear… fine! Who cares? The main thing is that there is a deal before midnight strikes on December 31.

Oh, how I wish I had gone to The Last Book Sale

I was thinking of going, but, somehow, it didn’t work out, and now, reading Larry McMurtry’s own account in the New York Review of Books of The Last Book Sale at his store Booked Up Inc. in his home town Archer City, Texas, out there northwest of Dallas/Fort Worth and south of Wichita Falls, I realize how much I would have loved to have gone.

300,000 out of McMurtry’s 400,000 books were on sale on that hot recent August weekend. The 200 bidders came from the all over the country, from Oregon, Wisconsin, Tampa, San Francisco, Natchez, Austin, and Magnolia, Arkansas. Most of the books sold, except the fiction, McMurtry, eminent author but also eminent book dealer, writes.

Readers of this blog know how much I like the old book stores, and that I have found many wonderful such stores all around America. But I have never been to Booked Up in Archer City, Texas, and this was the time to go. Or maybe there is a next time?

For Pittsburgh, a new future without steel

On the road again…

…and once again to Pittsburgh, the old steel city among the green hills of western Pennsylvania, where old friends live in a city of optimism and hope.

From Mount Washington, where the Monongahela and Allegheny rivers come together and become the Ohio River, the view of downtown Pittsburgh from the steep mountain as dramatic as in any other American city. Below, some twenty bridges in all directions cross the rivers between the city’s many neighborhoods. Among the skyscrapers downtown are some of America’s finest buildings, from the days of Carnegie, Heinz, and Mellon to modern masterpieces by Philip Johnson and others, and to native sons Andy Warhol’s and August Wilson’s museum and cultural center, respectively.

And across the rivers lie the splendid ballparks for the Steelers and the Pirates, important landmark in a city of passionate sports fans.

Carson Street on Pittsburgh’s south side reminds me of Haight Street in Haight-Ashbury, San Francisco’s old hippie neighborhood, with its galleries, rock clubs and small shops. Old mixes with new, former philosophy professor Edward Gelblum’s lovely old bookstore “City Books” with young Jake Nickman’s “Buddy’s Brew on Carson” – the finest of beer stores.

Coming into the city, along Monongahela River in Mon Valley, where the steel mills lie as giant monuments to a bygone era, side by side, mile after mile, in the small towns of McKeesport, Braddock, and Homestead, with furnaces long since cold and chimneys without smoke, the optimism and sense of hope might be a bit hard to understand. At its peak, the steel mills employed well over 100,000 workers, but in the crisis of the 70s and 80s, most of them lost their jobs, and Pittsburgh’s steel industry is only a fraction of what once was.

Today, Pittsburgh is the prime example that the old industrial cities in the “Rust Belt” can come back. But the recovery is based on something completely different than the steel, on distinguished universities and hospitals – biotech, green technology, health care, finance, and research. Today, the University of Pittsburgh Medical Center’s (UPMC) logo is seen on top of what once was U.S. Steel’s 64-story headquarters, and with its 50,000 employees, the university hospital is western Pennsylvania’s largest employer.

It’s a city of history and character, and of excitement. I will return, again.

“Solidarity” behind the success of the Nordic model

Here is a good read about the economies in Sweden and the countries in northern Europe, where, “befuddling Americans, economic growth is robust, and unemployment is lower than in most other European countries.”

So writes Stockholm-based businessman Daniel Sachs under the headline “The Nordic Model’s Economic Appeal” in the latest issue of “The Globalist.”

“The Nordic model leads to one great benefit: it promotes adaptability and openness to change…Openness to change is a core aspect of the competitiveness of the Nordic economies.”

Sachs, who was educated in Sweden and at the Wharton School at the University of Pennsylvania, writes that he believes in “incentives” but then uses a word seldom, if ever, used in the U.S. debate — “solidarity.”

“What the Nordic experience shows is that ‘individual’ incentives can be soundly balanced by solidarity on a ‘societal’ level. Solidarity makes good economic sense. Solidarity — that is, risk-sharing — is a key ingredient in being open to change…These aspects of the Nordic model — the relationship between state and individual, generous social protection, freedom of the individual and high levels of trust — all help foster risk-taking and openness to change.”

In turn, he ends, this has led to high levels of trust, fairness and transparency, low transaction costs and low corruption – all reasons why he as a businessman likes the Nordic model.

Anything to learn here?