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Sunday, July 10, 2011

Fringeville Edition #10, July 10 2011

We are having what I like to call a “Tuchman moment.”

The late historian Barbara Tuchman published a wonderful book in 1985 called The March of Folly.

Most people find history a dull read, but this is a powerful and immensely readable book.

In short, Tuchman focuses on folly: The actions of government against their own best interests, even when other paths are available, paths easily seen while the folly itself is in play.

You can make the argument that there are an abundance of “Tuchman Moments” out there right now, but the one I’m speaking about is the impending debt crisis. It will be catastrophic for the U.S. to go into default, even for a brief period. The clear alternative is an increase in revenue combined with a significant reduction in government spending. To do otherwise; to raise taxes without spending cuts or to slash spending without raising revenues; is folly, pure and simple.

Which is exactly where we’re headed, barring a breakthrough in the next few weeks.

All the parties involved …the White House, the Democrats and the Republicans …are perhaps hopelessly locked into ideologies from which they refuse to compromise. It is the culmination of years of increasingly bitter partisanship that is placing the nation in peril for the sake of saving face.

And that alternate path? True compromise. 1) Close the tax loopholes and flatten the tax code. Closing loopholes is not raising taxes. It is restoring revenue lost out the back door. 2) Significantly cut government spending. The number I see kicked around is $4 trillion in spending cuts. That’s a serious number that sends a serious message.

What will likely happen is a half-measure that kicks the can down the road.

Or, worse, a US default.

And for those who say that won’t happen, I offer Barbara Tuchman’s study in folly. Tuchman used the examples of the Trojan Horse, corrupt Popes in the Renaissance, the British loss of the American colonies and the US intervention in Vietnam as powerful proofs that folly occurs on a spectacular scale in the course of human history.

The question I have: Are we writing another chapter in the book of folly, or will we pull back from the precipice?