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The deal to avoid the “fiscal cliff” is a small victory for sanity, but what it says about the future is bleak. Washington will lurch from crisis to crisis, kicking problems forward and placing Band-Aids on those that it does address. There are likely to be no large-scale policy initiatives – on tax reform, entitlements, energy policy or probably even immigration reform. This is worrying, because beyond the self-inflicted crises of the cliff and the debt ceiling, the United States faces a much deeper challenge.
For more than a decade now – a many decades, by some measures – America’s growth rates have slowed, recoveries have been jobless and median wages have declined. Some combination of the information revolution and globalization has placed tough pressures on high-wage countries like the United States. These new forces are accelerating, and without a strategy to revive long-term growth, all of our problems get worse, especially our debt. Washington’s focus has been on taxing and cutting – but it should really be on reforming and investing in the American economy.
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