In the last few weeks, there has been plenty of debate over the debt deal and America’s economic troubles. Some have blamed everything on government spending, some have called the Tea Party and GOP blackmailers, some have been disappointed in President Obama, and some are still blaming everything on George Bush – the only agreement seems to be that no one is particularly happy with our economic condition. I’d like to share what I think the basic root problems are, and make it clear that there are no easy fixes and assigning blame doesn’t help.

We basically have two problems that have inconveniently but inevitably met. First, our long term fiscal policy is unsustainable. In simple terms that means we (America) are spending more that we make and have been for some time, and unless we drastically change some things it will only get worse. We could conceivably get away with that for a long time as long as we keep our economy growing indefinitely and never run into anything unexpected or make any mistakes. Clearly that turned out not to be the case and now people are rightly a little worried about our long-term debt issues.

Problem number two is simply the recession, and should be a short term problem. Basically, we can always expect something unexpected (like the housing bubble bursting) will happen and temporarily stifle the economy. In these times, unemployment is likely to go up and make the original problem more wide spread. The government can, and should, step in to stimulate the economy and ease these short-term problems. They have a number of tools to do this including lowering interest rates and increasing government spending. However, this requires us to temporarily take on more debt.

So we’ve gotten ourselves into a big mess because we took on a lot of debt when we didn’t need to before the recession. Now we’ve added a short-term crisis on top of our spending problems and we haven’t been able to fix it for a combination of reasons: our normal tools of government spending and interest rates were less effective because we were already spending a lot and keeping interest rates low (China had a little too do with this too because they do the exact opposite), the spending we did wasn’t particularly well targeted (the Stimulus Bill probably kept our economy from falling apart but didn’t really create any jobs), and the fact that we are adding even more long term debt scared some people (hence the downgrade of our credit status). (For additional explanation, check out my posts from last November about economics, parts 1 and 2.) Now, high unemployment from a short-term crisis has persisted so long that we’re losing long-term earning and growth potential and the two problems which can usually be dealt with relatively independently have become very interconnected.

Some people would like to add a third root problem to the list: our politics. They like to blame one party or the other or both, thinking that if only we elected the right people they would be able to solve all our problems. I don’t agree; in fact I’ve found a rare occasion to agree with Charles Krauthammer, who stated in a recent article, “Our political system is working well (I make no such claims for our economy), indeed, precisely as designed.” Our politicians are meant to represent us, and they are doing precisely that. As individuals, we thought it was fine for the last few decades to spend more that we made, assuming credit would always be easy, our standards of living would always increase, and nothing would ever go wrong – and our government represented that. Now, some Americans think that our one and only priority is to reduce debt, and that idea is being represented. Others think that we shouldn’t worry about long term debt issues until we fix our current unemployment problems, and that idea is also being represented. People on one side of an issue in this country aren’t generally good at accepting that ideas from the other side have any merit – and that mentality is also represented in our government.

So how do we fix it all? We have to accept that we’ve gotten into a difficult situation with two big problems and that fixing either makes the other worse. When we try to end our short-term recession we increase our long-term debt problems, and when we try to cut our debt we have the potential to extend the recession. So we can’t accept the mentality that there is a quick fix or that one problem is more important that the other. In a recent article, Thomas Friedman asked, “Can you remember the last time you felt a national leader looked us in the eye and told us there is no easy solution to our major problems, that we’ve gotten into this mess by being self-indulgent or ideologically fixated over two decades and that now we need to spend the next five years rolling up our sleeves, possibly accepting a lower living standard and making up for our excesses?” We need to find ways to cut extraneous spending from our budget to reduce the deficit while spending what is necessary to create jobs and stimulate the short-term economy. We need to accept that this can’t and won’t happen fast and we need to have some significant changes that may not be easy.