"Kicking the can down the road" quickly became a cliche to describe European policy-makers' inadequate response to the debt crisis. I suspect it will just as quickly become the cliched description of US fiscal policy. As Ed Dolan says, the deal to avert the fiscal cliff "does nothing" but postpone many important decisions, and Jeff Sachs in the Times (£) says: "US incoherence and unpredictability have a long way to run."
This raises a more profound question than generally realized: what exactly is the economic function of politicians?
Let's put the US debacle into perspective. From the 1970s onwards, it became the conventional wisdom in the west that a big job of government was to provide a stable framework so that businesses could stop fretting about at least some sources of uncertainty; this view united both Milton Friedman's famous AEA presidential lecture (pdf) and Ed Balls' thinking (pdf) about New Labour's macroeconomic policy. Of course, the crisis has taught us that this is not sufficient to achieve acceptable economic growth, but it might be necessary. As Nick Bloom and colleagues have shown, policy uncertainty can have hugely adverse (pdf) effects upon investment and jobs.
And yet policy uncertainty is exactly what Congress - and we might add euro area "leaders" - are offering.
An analogy from Michael Oakeshott helps us see why this has happened.He wrote (pdf):
The image of the ruler is the umpire whose business is to administer the rules of the game, or the chairman who governs the debate according to known rules but does not himself participate in it.
The pursuit of these principles, however, is undermining the function of government as the provider of certainty. What we're seeing here is an example of Poulantzas's relative autonomy of the state - the state is acting against the interests of capital (and, indeed, labour!)*.
But this is not the only sense in which politicians are not doing the job economists think they should. Here in the UK, the government has been unable to solve a simple problem of market failure - in social care - even when there is good advice on how to do so. And it has been woefully ignorant of what, to an economist, provides a role for government - that fact that the pursuit of self-interest can sometimes lead to outcomes that are collectively sub-optimal.
Hence my question. If politicians not only don't provide policy certainty but actually tend to increase it, and if they can't solve problems of market failure and collective action, what is, or should be, their purpose? In this sense, the US's fiscal cliff is part of an existential crisis of politics.