WHEN SEN. Mark Warner took to the floor last week to speak on deficit reduction and tax reform, his language, as the Virginia Democrat acknowledged, was not exactly senatorial. It was, Mr. Warner said, time to “put up or shut up.” The senator said he planned to vote for this year’s tax package – adding $858 billion to the national debt. But, he argued, “We also have to demonstrate that this body can actually walk and chew gum, that we can do short-term stimulus now, but next year engage in meaningful tax reform and deficit reduction.”

Key words: next year. Not 2012, and certainly not 2013.

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By MANUEL HINDS

It is ironic that the international monetary system of floating currencies is based on a theory called the “Optimal Currency Area” that celebrates the freedom of central banks to print money at will. The idea is that total freedom to create money would promote global progress and employment, smooth out business cycles, and prevent bubbles and their associated crises.

The irony is that the system is obviously suboptimal. It goes against the grain of globalization, the process that is defining our economic times. To accommodate the central bankers’ wishes to control their own currencies, the floating system requires splitting the world’s monetary markets into as many currency areas as there are countries.

This introduces a grave fragmentation in the international monetary markets precisely when all other markets, including the financial ones, are coming together into a single global market.

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Some Americans might be under the impression that they just watched a lame duck Congress engage in a lame-o budget fight. But Senate Republicans’ stunning defeat last night of the Democrats’ omnibus spending bill was anything but boring.

What our great nation just watched was the Democratic Party preview its political strategy for the next two years. It also watched a united Senate GOP defeat that approach, though not before a handful of Republicans considered walking straight into the Democratic trap. The whole episode was an early peek at the GOP’s biggest challenge going forward.

That challenge is, as it always is, spending. Republicans lost in 2006 primarily because of their profligacy, and they won this year primarily because they swore off that profligacy. It’s that simple—and don’t think Democrats don’t know it. President Obama, Harry Reid and Nancy Pelosi understand that the surest, quickest and most delicious way to undermine their opponents is to tempt them into renouncing their own promises of fiscal responsibility. The added beauty is that Democrats continue to get exactly what they want: bigger government.

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