The Price of Split Government : Europe’s Confidence in Us Suffers Broad Decline

Throughout Western Europe, but particularly in Britain, America is being held responsible for last month’s collapse in world finance markets. The significant thing about this wave of criticism it that it is most strongly voiced among those normally ranked as staunch friends of the United States.

Margaret Thatcher, who in eight years in office has supported America, at least in public, on every major issue but one (the invasion of Grenada), has been quite open in identifying America’s continuing budget deficit as the principal cause of the crisis. She has been seconded by her chancellor of the exchequer, Nigel Lawson, as pro-American by temperament and conviction as they come. Thatcher and Lawson make no secret of their view that the U.S. Administration and Congress should quickly come to an agreement both to cut spending and raise taxes.

What is not grasped over here, however, is the constitutional weakness that makes a large and chronic budget deficit so difficult to eliminate. Indeed, I doubt if many Americans appreciate the extent to which the present fiscal difficulties have constitutional roots.

America’s founders, in their wisdom, made the separation of powers formal and drew an absolute distinction between the executive and legislative spheres. Such a system has enormous advantages, especially if, as George Washington hoped and believed, party politics could be kept out of the presidency.

But with the development of highly organized parties, separation carries the danger that the executive can be controlled by one party and the legislature by another. This happened as early as 1826, when John Quincy Adams lost control of Congress. The remainder of his presidency was a disaster.

Such a division of authority has remained comparatively rare until recently. But in the last two decades, the Democratic grip on Congress has been in marked contrast to the Republican success in capturing the presidency. In 15 of these 20 years the Republicans have controlled the White House. But in none have they possessed a majority in the House of Representatives, and in only six years have they controlled the Senate.

Experienced Washington politicians, and even students of American history, tend to make light of this political schizophrenia. They agree that it is harmful in theory, but argue that in practice a Republican President can always construct a legislative coalition with the help of conservative Democrats and get his vital policies through Congress.

There is some truth in this view. Certainly, until the last year or so, Ronald Reagan found that he could usually put together a winning combination. But there is a price to be paid, and that price has been--and still is--a large and continuing budget deficit.

For the fact remains that, on vital aspects of national economic policy, there are fundamental differences between the two parties. Reagan and most other Republicans want to keep taxes low and cut expenditures, except on defense. Most Democrats believe that taxes should be raised and oppose spending cuts except on defense.

Since neither side is in a position to put its policy into practice, both have to compromise. As is almost inevitable, the compromise is the easy way out: to keep taxes low, expenditures (including defense) high, and prolong the deficit.

Each side blames the other. Both are almost equally responsible. In a sense both the White House and Congress are prisoners of a constitutional flaw. But flaws exist in all political systems, and ways must be found ‘round them. The fact is, the leadership that the nation is entitled to expect has not been forthcoming from either the President or senior Democrats in Congress.

Running a chronic deficit is a way of handing on the problem to the next generation. But recent events have shown that this soft option is no longer open to the United States. The world’s financial markets have pronounced a verdict on the way in which U.S. spending and fiscal policies are run, and the verdict is “guilty.”

European statesmen lack sympathy with Reagan’s difficulties because most of them belong to systems where the executive must command a parliamentary majority to hold office at all.

It is true that in France, where the time-scale of presidential and parliamentary elections is different, the presidency and the Parliament can be in the hands of different parties. Indeed, France now has a socialist president and a conservative legislature. This has caused many difficulties and is a source of grave weakness. But economic matters are not affected, since the president’s reserve powers are largely confined to defense and foreign affairs.

Europe hopes and expects that the stock market crisis will force Reagan and Congress to take drastic and rapid steps to make America solvent again. If there is no decisive action from Washington, the effect in Europe will be profound, and it will not be confined to the economic sphere.

What will be called in question will be the fundamental power and ability of the United States to lead the Western world. It is no secret that the European nations, especially Britain and West Germany, were deeply shocked by Reagan’s apparent willingness, at the Iceland summit, to do a deal with Mikhail Gorbachev that ignored their interests. That cast doubt on America’s continuing military commitment to Europe.

Now, a year later, Europe is becoming deeply anxious about the economic capacity of America to carry the burden of leadership. Is the United States, as some over here already believe, a superpower that is past its peak and now in irreversible decline?

Europeans watched silently while the Japanese economy overtook the United States’, first in competitive manufacturing, more recently in financial strength. They have seen Japanese investors take on much of the burden of the U.S. national debt and buy their way into the heart of the U.S. economy.

They are now saying openly that this is the last financial market crisis in which Wall Street will be the paramount influence. By the time the next one comes along, Tokyo will be on top in every sense, and the U.S. economy will have fallen into second place.

Does this mean the era of American predominance in the free world is coming to an end? Not necessarily, and certainly not soon. America still has huge physical and psychological resources to draw on. It is worth remembering that similar doubts were cast on American leadership during the Carter presidency, especially in the years 1979-80, and then were triumphantly resolved by Ronald Reagan during his confident early years in office.

Even at this late point in his presidency, Reagan can still win back at least some of Europe’s confidence with a decisive act of economic statesmanship. America’s best friends in Europe are impatiently, almost desperately, hoping that he will provide it--soon.