FRIEDMAN: Americans need to reshape a really big plan

Given where we are, the tax-cut deal with the Republicans was the best President Barack Obama could do since raising taxes in a recession would not have been a good idea and the Republicans had the votes to prevent it. But given where we need to go, this deal is just another shot of morphine to a country that needs to do things that are big and hard and still only wants to do things that are easy and small.

It still feels to me as though we’re splitting the difference between the two parties, not making a difference for the country as a whole.

More than ever, America today reminds me of a working couple where the husband has just lost his job, they have two kids in junior high school, a mortgage and they’re maxed out on their credit cards. On top of it all, they recently agreed to take in their troubled cousin, Kabul, who just can’t get his act together and keeps bouncing from relative to relative.

Meanwhile, their Indian nanny, who traded room and board for baby-sitting, just got accepted to MIT on a full scholarship and will be leaving them in a few months. What to do?

One strategy would be to hunker down, don’t spend a dime on anything other than food, the mortgage and paying off their credit card debts. They would get by, but there’s not much future in it. Another strategy would be to borrow against their life insurance policies to make up for the loss of income, keep living like they’re living, and hope that the husband’s job comes back before his unemployment checks run out.

A third strategy—the right one—would be to tell themselves: “You know, we’re in a totally new situation. Dad’s job isn’t coming back. If we want a better future, we need a plan to cut, save and invest all at the same time, and as wisely as we possibly can, because we’ve got no more cushion.

“Instead of Disney World this year, we’ll go camping in the state park and use those savings so that dad can go back and get a master’s degree. After all, unemployment among the college-educated is only around 5 percent. We’re also going to give up buying any new gadgets, cell phone apps or video games and use those savings to pay for extra tutoring in physics and violin for our boys. And, finally, we’re going to tell cousin Kabul that he needs to get a job, move into his own place and stand on his own two feet.”

Like our mythical family, we need a plan, not just more sugar treats. We don’t seem to realize: We’re in a hole and still digging. Our educational attainment levels are stagnating; our infrastructure is fraying. We don’t have enough smart incentives to foster both innovation and manufacturing here, and we’re not importing enough talent in an age when we have to compete for jobs with low-wage but high-skilled Indians and Chinese.

Responding to all this will require a whole new hybrid politics for where to cut, where to save, where to invest, where to tax and where to untax. Shaping that new politics is a revolutionary role I still hope Obama will play.

Read a recent article in The New York Times about how international education experts were stunned that students in Shanghai outscored their counterparts in dozens of other countries, in reading as well as in math and science.

Economics is not war. It can be win-win, so it’s good for the world if China is doing better. But it can’t be good for America if every time we come to a hard choice we borrow more money from a country that is not just out-saving and out-hustling us, but is also starting to out-educate us. We need a plan.•

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Friedman is a New York Times columnist. Send comments on this column to ibjedit@ibj.com.