The National Debt: A Guide for the Perplexed (and Alarmed)

Since coming back to the US, I have been surprised how often the national debt comes up in conversations about most any political topic.  In discussions about inequality, for instance, I hear that we can hardly trust the government to address inequality given its own financial incompetence, and that if there is financial injustice about, surely the greatest injustice is the government’s systematic stealing from our children and grandchildren, whom we are saddling with an intolerable burden of debt.  The theme of the travesty and looming catastrophe of US government debt has fueled the rise of the Tea Party, and played a role in the ridiculous fiscal standoffs in Congress over the past couple years.  Of course, it is an important fiscal concern that both parties should be attentive to, but this is not usually how one hears it discussed—i.e., in the context of particular policies for fiscal responsibility.  Rather, it is used as a universal putdown—a way of claiming, no matter what the particular point is under discussion, that the government cannot be trusted because its debt is both irresponsible and immoral, and that only a radical overhaul (one might almost say “overthrow” from some of the rhetoric) of our government can save us from imminent disaster.

As someone who used to be something of a national debt alarmist myself, I thought it might be helpful to put the issue in the proper context.  The following is an expanded form of a little explanation I gave to a friend on the question after a political discussion last week.

1) Use real numbers
For one thing, inflation is generally ignored.  All you have to do is yell out $16 trillion—an obviously immense sum—and point proven, right?  “Over the last forty years, the debt has risen from $500 billion to $16 trillion—our debt is spiraling out of control.”  Adjust for inflation, though, and it’s only risen from $2.4 trillion to $16.8 trillion.  Obviously, however, that’s still a pretty substantial increase.  That’s why it’s important to: Read More


Obamacare and the Task of Responsible Opposition, Pt. 2: Democracy at Work?

(See Pt. 1 here and Pt. 3 here.)

The biggest objection I received to my invocation of Hooker on Obamacare and the government shutdown, unsurprisingly, was that these statements of his could not take into account the particular Constitutional structures of the United States.  He wrote in an age and in a constitutional setting where there really was very little recourse if you didn’t like the law—it was the Queen’s way or the highway, so to speak.  Sure, there was a Parliament through whom elected representatives made decisions on behalf of the body politic, but its power was limited, and its claim to meaningfully represent the people was fairly tenuous by our modern standards.  The right and wrong current debate in the United States Congress could not, of course, be adjudicated by standards from 16th-century England, but only by standards applicable in 21st-century America—including, above all, the Constitution.  So the objection went.

Of course, I was well aware of the anachronism of the post, which I sought to humorously highlight in its title.  I do not think, however, that the appeal to the American constitutional system affects my core point in invoking Hooker; for, as I have sought to highlight in the previous installment, this concerned the rhetoric and attitude behind current Republican obstructionism, rather than its mechanism per se.  It is quite possible to stay within the letter of the law in the means of political opposition used, without in any way maintaining an attitude of respectful obedience toward the law.  Indeed, it is my contention that the forms in which this objection has been voiced simply reinforces the fundamental problem of political and societal breakdown that I wanted to highlight in my post.

I have been told that using such measures as a government shutdown or potential debt default as bargaining chips to pass legislation is simply “democracy at work,” and that the “power of the purse” is a “political weapon” that the Constitution “granted to the House to be employed as it was found to be necessary.”  Of course, debates over to what extent the current crisis is unprecedented or routine have become a prominent part of the partisan back-and-forth over the past week.  I do not feel historically-qualified to resolve them entirely, although I have become reasonably convinced of the following conclusions:

(1) there is considerable precedent for using government shutdowns as leverage for resolving policy disputes, even if the current situation is uncharacteristic by virtue of the sheer boldness of the Republican demands, which, requiring as they did the overturn of such a signature and significant piece of legislation, could not really be considered as a good-faith negotiating position

(2) there has been considerable precedent of negotiating against the backdrop of an impending debt-ceiling, in which the possibility of default loomed as an implicit threat above the heads of both parties, but the current situation is largely distinctive inasmuch as Republicans have turned this implicit threat into an explicit ultimatum, inasmuch as their core demand (the repeal of Obamacare) is essentially extraneous to the budget debate itself, and inasmuch as their demands were so exorbitant that they could never conceivably be attained by ordinary political means.  (For more on this, see the interaction between Jonathan Chait and Ross Douthat here, here, here, and here).

So commentators on the left are unfair to treat all of this as wholly unprecedented political terrorism.  However, that does not mean that it is reasonable to describe all of this simply as business as usual, or “democracy at work.” Read More


Obamacare and the Task of Responsible Opposition, Pt. 1: The Law of the Land

 Last week, flush with the successful defense of my Ph.D, disgusted with the news I heard trickling out of my country, and tickled to re-discover the perennial relevance of Richard Hooker’s political wisdom, I lobbed a 2,500-word grenade 3,500 miles across the pond, exposing the stubborn self-indulgence of the GOP’s stance vis-a-vis the government shutdown.  Hooker’s message struck a chord with many readers, but also elicited some predictable protests.  Since returning to my homeland a few days ago, I have immersed myself in the resulting discussions, and in reading whatever would shed light on the current fiscal crisis.  The situation, of course, is too complex, too rapidly-evolving, and too obscured with duplicity and half-truths, to offer anything like a full statement on the debate here.  Indeed, in a salutary development, the posture at which my post last week was aimed—demanding the overthrow of Obamacare—seems to be being rapidly abandoned by Republican leadership, to the outrage of the hard-right agitators who were dictating terms until recently.  It remains to be seen whether the new direction will hold momentum, and if so, whether it will mark the final abandonment of the Obamacare fight by conservatives—though I am doubtful they are ready to throw in the towel just yet.  Inasmuch, however, as the Obamacare question continued to dominate discourse up through early this week, and remains an extremely live issue in many conservatives, I want to use the following trilogy of posts today to expand upon my “Open Letter from Richard Hooker,” clarifying the object of my critique and to answer some common rejoinders I have received.  (Some of the same principles, incidentally, apply to the broader budget-deficit concerns which now dominate debate, but I will leave it to readers to draw those applications). Read More


The New Depression

Visualize a sinking ship with captain and crew frantically bailing out water to keep the ship above the waves.  Now, instead of a great wooden vessel, imagine a credit-inflated rubber raft from which credit is leaking through numerous holes.  Policy makers are desperately pumping more credit into the raft to stop it from going down.  That raft is the global economy.  Humanity lives on top of it.  There are no lifeboats.  If the raft sinks, people are going to die.  

That harsh reality is driving and will continue to drive economic policy.

The prospects for rescue are far from certain, and in fact, diminishing with each passing month.  Nevertheless, policy makers can be counted on to keep pumping credit into that raft until their strength runs out.  They are lost at sea and don’t know what else to do.

Richard Duncan, The New Depression, ch. 7

Buy it.  Read it.  Very sobering stuff, but an essential guide to understanding what has been happening in the world economy over the past few years, why politicians are doing what they’ve been doing, and what, if anything, can be done going forward.


Down with Democracy?

The past 36 hours have witnessed a maelstrom of geopolitical and financial chaos to rival the most tumultuous days of September and October 2008.  The unlikely culprit?  Democracy.  The original article, for that matter–Greek democracy, for that matter.

For much of the past couple years, and increasingly in the last three months, world financial markets have been held hostage by the debt problems of a small Meditteranean nation that accounts of 0.5% of the world’s GDP.  Whenever prospects for Greece looked better, stocks soared, bonds fell, the euro rose and the dollar fell, economists cheerily prognosticated on the likelihood of buoyant global growth over the coming months and years.  Whenever prospects for Greece looked worse, stocks plunged, bonds soared, the euro fell and the dollar rose, economists filled the airwaves with somber assessments of economic health and prophecies of impeding doom.  After the most most harrowing and pessimistic period yet, markets suddenly gained new faith in Europe at the beginning of October, and began a heady and exhilarating climb to new heights of optimism, capped off by an exultant surge last week as European leaders overcame their differences to agree on a dramatic and it seemed decisive solution to the Greek problem.  

But what goes up must come down, and Greek Prime Minister George Papandreou’s announcement Monday night of a referendum pullled the rug out from under the market about as decisively as a terrorist attack on Wall Street could’ve done.  From Tokyo to New York, stock markets plunged, erasing their recent gains.  Bank stocks took what Obama would call a “shellacking.”  US Treasury bonds rallied so fast that experienced traders were left dizzy and disoriented.  World leaders and economists erupted in furor–how dare he?  How dare he call a referendum?  Papandreou himself was suddenly sitting in the hotseat, facing a no-confidence vote and the defection of key party members, his government at risk of collapse.

 

After years of seemingly endless crisis management carried out by a mysterious top tier of financial and political elites behind closed doors at dramatically-titled “emergency summits,” the idea that a key decision should be made by “the people” seemed ludicrous and downright quaint.  In view of the recent wave of “Occupy” protests, a popular outcry against the mismanagement of the economic crisis by the elites, it was an irony worthy of Greek drama that the next global crisis threatened to come from giving power back to the people.  After all, despite Papandreou’s stalwart confidence that a referendum on the new rescue plan would at last establish a political mandate for the difficult reforms needed, many quite reasonably feared that the Greek people, incensed by recent austerity measures, would stubbornly reject the rescue plan, pulling the plug on the euro and defaulting on their debts as the lights of Europe went out one by one.  Indeed, it is perhaps a tribute to the courage of Greek politicians that in a world increasingly ruled by plebiscite, they have until now been willing to resolutely govern, making painful decisions for the long-term good in the teeth of popular outrage.  This courage is the more impressive when viewed alongside the mass abdication of America’s political “leaders,” who, confronted by similar budget woes, have refused to lead, choosing rather to be led nowhere by the fickle will of popular opinion.

However, whether one thinks that the referendum represents a noble re-empowerment of the long-disenfranchised masses, or a cowardly and reckless abdication in the midst of crisis, the reaction it has evoked reveals that, for all our rhapsodic paeans to “democracy,” we in the West are not really ready for it.  Sure, democracy is fine for things we no longer really care about–things like gay marriage and the like.  By all means, let’s decide those by mass referenda.  But when it comes to the things that really matter, the gears that turn the wheels of the world–when it comes to money, in short–we know that “the people” can’t really be trusted, and that expert leadership needs to take charge of the situation.  Democracy may be a great ideal, a fine motivation for bombing a few oil-rich Middle Eastern countries, but it’s much too risky to actually practice.