Fareed Zakaria: Americans want a 'magic' economy

[Editor's note: The video discussed below can be viewed on the CNN website.]

Now that the election’s over we’re just waiting to hear about how the new Congress and a humbled (or “shellacked”) President are actually going to fix our economic problems. CNN’s Fareed Zakaria offers a lot of wisdom to the question “Can Obama and the GOP really cut the deficit?” (emphasis added):

“I think frankly things look very bad in terms of America’s ability to solve some of its problems,” Zakaria told CNN. “We have very serious problems that are going to require a kind of set of comprehensive solutions. There are compromises out there to be made, Republicans have to concede some on taxes, the Democrats have to concede some on spending, and you could put together a package, in which both sides would get something, but not everything.

“The problem is the political system right now doesn’t seem to function in a way where either side can accept compromise. If that produces gridlock and paralysis the problem is we really move into a fairly unsustainable fiscal situation.”

The author and host of CNN’s “Fareed Zakaria GPS” spoke to CNN on Thursday. Here is an edited transcript:

CNN: In your column for TIME, you raise the question of whether the Republicans are serious about cutting the deficit this time after earlier failed attempts to do so. What do you think?

Fareed Zakaria: I think it’s going to be pretty doubtful; the reality here is that the American people want a certain level of government. It’s something of a fantasy to believe that they really want a radically smaller government than the one we have.

The American government, the federal government, has roughly been between 20, 21, 22 percent of GDP [Gross Domestic Product]. That includes Social Security and Medicare and the interest deduction on mortgages and all that stuff — it costs a lot of money. The money is all in the big popular programs and Americans seem to want them and there seems to be very little appetite for cutting them.

What Americans seem to want is to have this very large government but also to have even lower taxes then we have now, or very low taxes in general. That’s the part that’s very difficult to make work. I mean that’s the part where they are asking for magic because you can’t have the size of government they seem to want with the level of taxes they want. We’ve pretended otherwise for a generation and the result is nearly $14 trillion in debt.

Fareed gives Paul Ryan credit for putting together a plan that makes some tough choices, even though he doesn’t think Americans or even other Republicans can support it:

The whole thing [the Ryan "Road Map" plan] may be too revolutionary to take place and it may also short-shrift seniors on health care, so I have some concerns about it. But basically it gets us thinking about how do you create a more rational, more simplified tax and entitlement structure that is sustainable in a world in which you have many, many more retirees then you had when this whole system was set up. But, the key is there are no Republicans who support it. Paul Ryan is pretty much out there on his own.

And he doesn’t sugar-coat the fact that Democrats don’t even have a plan:

CNN: What about on the Democratic side? Is there any likelihood that we will see some innovative proposals from the White House or Democratic leadership?

Zakaria: I doubt it, I think the Democrats, if the past is to be any guide, will tend to cling to the idea of preserving Social Security, preserving Medicare, and sort of try to paint the Republicans as the cruel heartless people who want to cut all this stuff. So if the Republicans are frankly, totally in a stubborn fantasy land on taxes where they simply cannot conceive of any possibility in which they would need to raise taxes to raise revenues, the Democrats are in a stubborn fantasy on cutting entitlement spending.

Watching the Anderson Cooper story (above) about the wild claims about the cost of the President’s upcoming trip to India (brought up, oddly, in response to a question about how the Republicans propose to bring Medicare spending under control), you might conclude we are “toast” when it comes to compromising for the sake of deficit reduction and fiscal responsibility in general. (For more clips the AC360 show came up with to highlight the lack of specifics in the spending cut proposals, see this video.)

Incidentally, the deficit adds about $4 billion per day to our national debt, or double the “wildly inflated” or even “comical” claimed total cost of the President’s trip. But our debt trip just goes on and on.

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