Well, after all these years, in fact ever since the Reagan era of massive deregulation, the US economy has been skipping the "bankruptcy" spot on the wheel of fortune. Whether it was Bush I who continued to surf on the leftovers of the Reagan era, Clinton who benefited from the Internet bubble, Bush II who went on massive military spending and pumped false growth in the US economy, here we are now with Obama trying to clean up their mess in the midst of winding down the military buildup of Bush II and crawling out of the 2008 Reagan/Bush-Wall Street-friends-induced sub-prime crisis.
So how do you restructure this mess? Unlike a corporate restructuring and turnaround, a nation, much less a leading nation whose currency is a world reference for most commodities, cannot default on its debt. Can it sit down with its creditors, mostly US pension funds, Oil-producing Gulf nations and its prime supplier China and negotiate a debt restructuring deal? Sure it can.
Should the Administration come up with a "kicker" interest in its current debt load? it could be payable in 30 years in exchange for a 5-year interest and principal moratorium. That debt-pause would certainly allow the US government to shore up its cash flow and depend less on short term tax revenues.
Simultaneously, a massive tax break should be put in place to favor existing businesses to invest and for consumers to spend and save. A five-year 50% cut on the tax base of all businesses would dope hiring and investment, and for consumers it would go a long way in building savings accounts, catching up on mortgages, building home equity and spending. This plan of course will have to be implemented with a parallel plan of significantly cutting government spending and cutting down the federal budget by a good 25% over the same 5 years, from military, to useless agencies, to layers of redundant bureaucrats, to pork-barrel projects.
Better yet, congress should pass "The Golden Rule" amendment to be written in the Constitution. Government cannot spend more than it has. Better it cannot raise short term debt and taxes to accommodate its spending. All debt and tax raises passed by Congress in any given year would only get into effect 5-years down the line, hence, forcing our leadership to manage for the long term and not the short term in accordance with their re-election agenda
What administration and congress would have the guts and vision to pass such a plan? Whoever wins the next presidency, Obama or Perry, I am not convinced either one could deliver a real turnaround plan as outlined. And so with that, the U.S. global leadership might have peaked. With no debt restructuring in sight, U.S. influence on all fronts might be over, we have just not faced it yet. We might even be denying it says Pres. Obama "we will always be a triple-A nation".