Global Relief on Fiscal Cliff Misses the Point

The fiscal cliff has been averted. Asian and European stock markets rose 1-3 percent after the U.S. Congress managed to avoid the previously mandated spending cuts and tax increases. The rally is unlikely to last long. The initial response was rational. Inaction on the measures otherwise due to start immediately would probably have led to an American recession, almost inevitably bringing a global slowdown. Still, the whole crisis is basically discouraging. There was no need for a deadline, if only Congress and the president had been able to agree on a long-term deficit reduction plan any time over the last four years. The temporary resolution was entirely predictable - a messy and inadequate compromise with tax increases and vague commitments to reduce spending. It could have been found days, weeks or months ago. Equally silly battles loom. The mandated cuts were merely deferred for two ...