I won’t waste the time and space to dignify the recent deal reached by Congress and the President on the “debt ceiling crisis”. Suffice to say, it can be characterized as too little, too late, not serious. But let’s move on, because nothing will be settled until after the November 2012 referendum on this regime.
Arthur Brooks of the American Enterprise Institute has the issue framed well: First, it’s not a party fight; it’s about the 50-year trend in the role of government. Second, as I have said repeatedly, it’s not an economic fight, it’s a moral one. Third, even with regime change, it’s not a fight that anyone can win in the 15 months until the presidential election; it will require at least ten years of hard work. And in the end, it may very well be that there are only two possible scenarios–the Swedish model, where so few are producing the revenue necessary to support the rest that we stabilize at very high taxation and a very expensive welfare state, or the Greek model, where the welfare state collapses and we get long-term austerity financed by the productive economies of the world at very high interest rates (and, as Margaret Thatcher warned us, “the problem with socialism is that eventually, you run out of other people’s money”). Frankly folks, if we want other choices, we need different leaders.
Meanwhile, I continue to wonder why we are so unwilling to frame this crisis in moral terms. Why can’t we understand that the debt burden is a symptom of our decline, not the cause? Why can’t we confront the socialist impulse with a reasoned response that refutes its premises in economic terms that are supported by moral instincts? Examples: incentives for economic growth are important not just to build individual wealth, but to expand opportunity for all, and lower tax rates are the correct policy not to further enrich the wealthy but to properly reward merit and economic growth, which results in increased tax revenue. In short, this debate is not about economic efficiency, it’s about the moral issues of freedom and opportunity. Again, it’s not just a math problem. Free market principles have lost their moral voice and it seems that the left has commandeered the language of morality, which would be a strange scenario for our founders, who had no problem with the moral language necessary to advance public policy.
I recently came across the following passage from a short 1980 essay by Irving Kristol in The Public Interest, which captures this sentiment as well as anything I have seen:
Economic theory lives on…….because of that bedrock of truths about the human condition….: (1) the overwhelming majority of men and women are naturally and incorrigibly interested in improving their material conditions; (2) efforts to repress this natural desire lead only to coercive and impoverished politics; (3) when this natural desire is given sufficient latitude so that commercial transactions are not discouraged, economic growth takes place; (4) as a result of such growth, everyone does eventually indeed improve his condition, however unequally in extent or time; (5) such economic growth results in a huge expansion of the property-owning middle classes–a necessary (though not sufficient) condition for a liberal society in which individual rights are respected. This is not all we need to know, but it is what we do know, and it is surely not asking too much of economic theory that in its passion for sophisticated methodology it not leave this knowledge behind.