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Obamacare may not be the main problem, but the lack of structural reform is
Dialogue with the Alter Ego on the government shutdown in the US, drafted and published on Oct. 2, 2013
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Question by Alter Ego of Noah denkt™ (AE): European media tend to have hard time to understand why the
three branches of the US government cannot agree on a new budget for fiscal year 2013-2014. In particular,
Europeans like to accuse the tea party group within the Republican Party to hold the country hostage over their
ideological opposition to the Affordable Care Act, otherwise known as Obamacare.
Noah denkt™ has earlier on
expressed its own skepticism towards a mandatory health care system in the US. Does our project now
sympathise with the tea party position in the current budget stalemate?
Answer by Noah denkt™ (Nd): Well, we would probably be a little more willing to accept that the Affordable
Care Act is here to stay than our friends in the tea party movement are. In our mind, however, the opposition
against Obamacare is less inspired by the aversion against another large entitlement project that the US tax
payer is forced to fund than by the fact that no meaningful structural reform in the US entitlement system has
so far been undertaken. In other words, it seems to us as if the current government shutdown has more to do
with the unease over the general direction of fiscal policy in the US than with a particular item in that fiscal
policy.

AE: So what’s wrong then with the “general direction of fiscal policy” in the US?
Nd: Ultimately, it is the fact that the eternal battle between supply side (Friedman) and demand side economics
(
Keynes) is a lot less resolved in the US than it is in Europe. After all, it is due to Ms. Merkel’s and Mr. Rehn’s
leadership that the tough decisions on austerity have at least been initiated in Europe. The US however is still
stuck with old Keynesian ideas of government’s preeminent obligation to finance growth. No wonder that this is
causing certain members of the US Congress to freak out.  

AE: And yet, the US is witnessing currently a 2% growth while Europe is still stuck with a lackluster recovery and
high unemployment.
Nd: The 2% growth in the US is just as anaemic as the 0% growth in Europe. The difference is that the Europe
is now laying the foundations for a healthy growth later on while the US economy is still heavy on Keynesian
steroid abuse.

AE: Look, the devastation that the sub-prime crash brought about was too widespread that any non-Keynesian
rescue plan would have been thinkable.
Nd: Granted. But we are now 5 years on from 2008 and there is still no talk about the need for fundamental
structural reform.

AE: That is because such a reform should be undertaken when the economy is on a sound footing and not
when it is still in the doldrums.
Nd: This is like arguing that
the issues surrounding the Syrian civil war should best be resolved when internal
peace has been restored in that country.

AE: Well, the matters of economic management are different in nature to those of war and peace.
Nd: The truth is that economic issues are just as much based on matters of human nature than those of
international relations are. It is hence mistaken to believe that you could delay the resolution of a pressing
issues to the point when the public doesn’t perceive that issue to be pressing anymore.

AE: But isn’t it immature to rush to judgement when reason dictates to not get carried away by short-term
hysteria.
Nd: As an individual you can demonstrate leadership and stay cool, calm and collected in the face of crisis. But
if you have to find democratic and parliamentary majorities you have to have the momentum on your side.
That’s why you should strike the iron when it is still glowing hot and not when it has already cooled down.    
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Keywords:

government shutdown in the US, tea party opposition against Obamacare, structural reforms in US entitlement
programs, structural reforms in US fiscal policy, supply side versus demand side economics, tea party opposition
to Keynesian policies
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