There is something deeply ingrained in the American character — something evident not only in how we vote but in how we use credit cards and take out mortgages — that simply can’t accept that one can take on too much debt. We have faith that the bill will never come due, or that if it does someone other than us should pay it.
Although I appreciate the argument, I think it’s quite wrong.
Up until St. Ronald, American fiscal policy was quite responsible. There were deficits during World War II, but even during Vietnam, Lyndon Johnson imposed a surtax on very high incomes to pay for it.
Getting something for nothing, then, isn’t deeply ingrained in the American character: it’s deeply ingrained in the political strategy of the Conservative Movement, and now the Republican Party. “We’ll eliminate waste, fraud and abuse” has been the GOP mantra since Reagan: don’t worry about your programs, the Republicans have always said. We’ll make those people — and you know who they are — start working like “real Americans” (and you know who they are).
This strategy was pioneered in California under Proposition 13, when Howard Jarvis denied that slashing property taxes wouldn’t lead to any cuts in services. “Scare tactics,” he screamed. And when it was shown that libraries might have to cut back their hours, he replied “who the hell wants to go to a library in the morning anyway”? (He obviously never met a child in school). That’s why the best history of the Proposition 13 campaign is subtitled, “Something For Nothing in California”. The GOP took this strategy and ran with it; we’ve been living with the results ever since.
I am completely unpersuaded by Bagehot’s citation of one British poll saying that Britons believe that the current government’s cuts aren’t deep enough. Americans believe that the “government: should cut “spending” too — until they learn what those cuts are, and then they reject them. The Economist has essentially turned into a vehicle for right-wing agitprop: its current editor, John Micklethwait, is essentially a Movement Conservative. Micklethwait loudly proclaimed in 2004, parroting Karl Rove’s talking points, that the GOP would become a hegemonic party. So much for that.
Americans may be less responsible than other electorates, but given a good bit of European fiscal problems over the last several decades, I would need to see a lot more evidence for it. That said, what America has that other countries don’t is a major political party devoted to plutocracy, and committed to intellectual dishonesty in order to foster it. That means that the United States has powerful interests that are more irresponsible than other countries. That’s not about the American character, whatever that is: it is very much, however, about American political economy.
Exactly right. Stupid old liberals who try to balance the budget in good times and apply stimulus in bad have rings run around them by sociopaths who scream “we’re broke!” whenever any spending for the public good is attempted and “prosperity is right around the corner!” when they want to cut taxes for the rich. Keith’s “Americans are profligate!” is a perfect rhetorical fit for this whipsawing: as employment is weak, we should cut the deficit. Oy.
I agree almost wholeheartedly, except for the idea that only one of our parties is devoted to plutocracy - it seems to me that both of them are, it’s just that one (the Democrats) believes you need a reasonably functional and equitable society to ensure that the wealthiest maintain and expand their wealth, while the other (the Republicans) wants to turn back the clock to the 19th century and couldn’t care less about the complexities of a modern economy, just as long as they get theirs.
It wasn’t so long ago when I thought, “The Republicans have proven themselves irrelevant and destructive to the electorate for good, and pretty soon the Democrats will split into the Democratic and Progressive Parties, and things might get better substantially,” but I was so young, so naive, so wrong ….
The post is spot on.
My only two cents are these: The destruction of good government continues apace, not because people want debt, and not because people want spending cuts. It continues apace because we lack a leadership with vision to re-develop our nation. Obama has proven to be a Weimar Democrat. And the Republicans continue to vomit leaders whose incompetence is the only aspect of their personalities which exceeds their fascistic tendencies. And I guess, for that we should be grateful…
“it’s just that one (the Democrats) believes you need a reasonably functional and equitable society to ensure that the wealthiest maintain and expand their wealth”
Nah, Democrats, elected ones anyway, don’t much care how functional society is. They just understand government employees and dependents of government programs to be an important voting base, and so want them maximized. To a large extent maximizing the number of people dependent on government programs actually conflicts with making society functional…
The post is hilarious. Indeed, who can forget all the balanced budgets Democratic Congresses have submitted to Republican Presidents, only to see them vetoed…
Hi Jonathan: Thanks for a spirited riposte. It rests on a distinction that I think is hard to sustain, namely that the past 30 years of a nation’s history in no way reflects on its national character.
Keith: in several of those years, which happened to coincide with a Democrat holding the Presidency (and, I’ll grant, the GOP holding both houses of Congress), the U.S. not only did not run a deficit but ran a substantial surplus, and was on course to pay off the national debt. The President’s popularity, and trust in government, went up substantially during those years-not down, as the “national character” argument would suggest.
I’m not actually a deficit hawk, and think that the numbers show we could pretty much get the debt under control by letting the Bush tax cuts expire, cutting defense modestly, and above all *growing* again, which means not cutting too soon. But facts are facts.
Finally, I think it’s hard for those used to parliamentary systems to realize fully just how much difference separation of powers (or better, Neustadt’s “separated institutions *sharing* powers”) makes. Americans can “want a balanced budget” but literally not know whom to hold accountable when big deficits occur. Each party can claim, quite credibly, that the other wasn’t willing to go along with what was required. That’s one reason why both parties feel so moralistic right now. Democrats feel nothing can excuse the results of unified Republican government under George W. Bush, and Republicans feel the same about unified Democratic government under Obama (not acknowledging, I submit, that Democrats as a matter of sincere principle think deficit spending is a great idea in a recession but not in a boom). But that ability to focus blame on one party is not the normal state of things.
JZ for the win. A veritable slam dunk. With the assist from AS.
“It continues apace because we lack a leadership with vision to re-develop our nation.”
It’s so tempting to blame others, isn’t it — in this case leaders and politicians.
But the fact is that
- we have a thirty year track record of this political philosophy AND
- the American PEOPLE have repeatedly voted for it.
Yes, there have been (and remain) a number of scandals, from Florida 2000 to who is allowed to vote and under what circumstances. Nevertheless, the fact is that it’s not like it is a trivial minority in the US who support this political philosophy but something between a substantial minority and a small majority.
The American people have spoken — many many times. And what they have frequently said is that
- they believe in magic
- they do NOT believe in science when it says unpleasant things
- they’d rather suffer than allow a black person to have a decent life
- the answer to any foreign policy problem is to kill some foreigners
I don’t know what the “national character” is when it comes to debt in general, but if you guys are talking about the “national” debt, i.e. the federal government debt, then Americans in general, i.e. not readers of this blog, are too pig-ignorant about it to have a coherent position. But I could be wrong, so I want to see poll results on the following questions:
1) What is your household’s share of the federal government debt?
2) Which presidential candidate did you vote for in 2008?
I cannot fund such a poll myself, but I wish somebody would. Please note that the first question is ill-posed. A respondent may know the rough size of the federal government debt, and may also know the approximate number of households in the US, and be able to divide the one by the other, and STILL give the wrong answer. (It would be the right answer only if that particular respondent’s household is the “average” one; very few are.) But the point of the question is to learn what people think their share of the debt is. It would be interesting to know whether Americans as a whole (as extrapolated from the random sample) think the federal government debt is of the order $1T, $10T, $100T, or what.
The second question is well-posed, though some might argue it’s less informative than the typical “which way do you lean” kind of question. Still, I would love to see whether Obama voters or McCain voters answer the first question differently.
This would be a bit of a “push poll”, actually. The idea being pushed is this: whether the government debt is big or small, it matters to us ordinary Americans only to the extent that “the government is us”. If the “national debt” is something “the government” owes — and not something We The People owe — then why the hell should we care how big it is? And if it is in fact us Americans who owe the debt, then we have to divvy it up amongst ourselves SOMEHOW.
It’s nigh on 10 years since I first proposed, tongue only half in cheek, that we should “privatize the national debt”, i.e. assign each American his share of the outstanding debt to service or pay down as he sees fit. Split the check, explicitly. TELL (don’t ask) each American how much of the federal debt is his personal responsibility. We’d have a lovely brawl over whether David Koch’s household ought to be on the hook for a bigger, similar, or smaller share of the “national” debt as Brett Bellmore’s household. But once we settled the brawl, once we explicitly split the check, we’d need much less acrimony over whether “we” can afford to vote for politicians who increase our individual share of the debt by cutting taxes at the top or cutting services at the bottom.
-TP
JZ, This is the most concise summary of what has gone wrong in American politics that I’ve possibly ever read. I hadn’t really known about Jarvis, but it’s all clear now: Reagan was schooled in a California conservative fiscal model based on a fiction. That, combined with his Hollywood charm, led to the remodeling of the conservative movement-conservatives realized that they could run on nothing, on hypocrisy, on lies even, and get away with it, so long as the lies were compelling enough. In a funny and also tragic way, it’s worked, as you point out.
Andrew writes:
I’m not actually a deficit hawk…
It’s time for us to redefine our choice of words here.
Hawk is a cool, punchy, and sharp word.
May I suggest instead:
I’m not actually a deficit buzzard…
Or…
I’m not actually a deficit vulture…
This is a good, concise summary of the cause of the fix the USA is in.
Matt J. puts his finger right on the root but it needs to be pointed out that the fiction of trickle down economics is not some delussion of the leaders of the GOP. It is a myth constucted with great care and defended at great cost to market a program designed to dismantle the american government’s ability to function as a modern government is expected to. The reason is simple: The government (primarily federal but at it’s behest and support state and local) is the line of defense for the middle class from being ravaged by predator corporate interests.
The intentional nature of this assault on the economic stability of the vast majority of americans needs to be pointed to repeatedly when these matters are discussed so readers can see the broad outlines of this intentional program of distruction while examining the details.
No doubt sceptics and trolls will scoff that this is a “conspiracy theory” and so it is. This is a conspiracy that has been orchestrated by “think tanks” (propaganda mills) funded since the 1970s by a small group of wealthy individuals with the ultimate goal of destroying american democracy. These people are the inheritors (some literally) of the Tories and they seek to undo the american revolution.
It should be noted that the Boston Tea Party was a demonstration against the British East India Company, the corporation the British Crown used to exert it’s economic contol over the colonies. The spark was the granting of tax exemption to the corporation so as to squeeze out the colonial small businesses in the tea importation business. The colonials were not protesting the taxes they had to pay but the special treatment (tax exemtion) given to their major competitor. Government acting hand in glove to benefit mutinational corporate interests to the detriment and impoverishment of the middle class sounds like today.
“the U.S. not only did not run a deficit but ran a substantial surplus, and was on course to pay off the national debt. “
Um, question: How can you be on a course to pay off the national debt, at a time when the national debt is getting bigger every single year? (Here, look it up yourself.) The answer is, you use accounting standards that you’d jail people for using in the private sector, and just don’t count all of the debt you incur for purposes of determining that you have a surplus.
But I will grant that we got fairly close to balancing the budget back then. It only took divided government, the legislative and executive branches at each others throats, and a stock market bubble. I suspect we might have the first two after the 2012 elections, but the last seems unlikely to reoccur again soon.
Andy: Whenever the Dallas Cowboys lost, they used to say “Those weren’t the real cowboys out there today”. As John Brodie once retorted “Really, how many guys do they have on their roster?”.
The elected leaders who supported more debt were Americans, elected by Americans. The Housing Bubble and mortgage disaster was created by Americans. The massive household credit card debt has been run up by Americans.
I am not saying these things were good, they were not, but they were all as American as apple pie, they were not implemented by a covert team of 6 Albanian agents or visiting Martians. Millions upon millions of us created the country we have and in my mind there is no shirking that responsibility, and no changing the country until that responsibility is admitted.
brett: “How can you be on a course to pay off the national debt, at a time when the national debt is getting bigger every single year?”
I’ve tried to explain this before but here goes again.
What matters for long-run fiscal sustainability is not the absolute magnitude of the national debt, real or nominal, but its ratio to GDP. This declines if and only if the government runs a primary budget surplus, calculated before interest and capital payments on outstanding debt. If new borrowing is less than the payments due on current debt, the debt-to-GDP ratio falls. This isn’t trick accounting but Public Finance 101; and it’s what the Clinton Administration claimed and achieved.
Work it out for yourself, on the extreme assumptions that all debt is 3-month Treasuries, and all debt is undated consols.
It most cases this strategy wouldn’t be prudent for a private individual; but the government is not a private individual. However, consider the Duke of Omnium with 100,000 acres of prime farmland, 100% mortgaged. Rents and the value of the land are expected to rise steadily. The Duke’s aim is to reduce the ratio of his mortgages to the land value, not their absolute value. For him, running a primary budget surplus is still the criterion. He can borrow a little more every year.
Keith, there is a fundamental problem with the argument “the popularly-elected US government does X, therefore the American people support X”.
Consider the past decade’s elections. When Jane and John Doe go to the polls, they have lots of concerns to weigh: war, terrorism, the economy, health care, taxes, education, the environment, social security, immigration, abortion, labor, trade, crime, … and the national debt.
To express their preference, they can vote for party A, or party B. In some years, they have the further option of voting for party A for President and party B for congress, or vice versa.
So you can’t really say that most election results prove that the American people have some particular position on any individual issue. The most you can say here is that Americans are not so angry about the national debt that it outweighs all their other concerns.
Of course, this doesn’t prevent the winners of elections from claiming that they’ve just been given a popular mandate to push their preferred policy on every issue. (E.g., Rep. Doe says “My re-election in 2018 proves that my constituents approve of my support for this trade agreement with Outer Transylvania!” when the voters actually just wanted to vote against Doe’s opponent, whose views on abortion rights were deeply out-of-touch with the leanings of this congressional district).
You might have a point if national policy were made by referendum.
As far as I can tell, Keith, Jonathan and Andrew agree on what has happened, but Keith is putting more blame on gullible Americans (whether conservative or liberal), while Jonathan and Andrew are putting the blame on conservatism, specifically Republicans.
I think if conservatism disappeared, we could have easily balanced our budget - there would be little opposition to taxing to pay for it. Yet conservatism is a very large and intellectually prosperous movement, finding support for it’s assumptions and promises from near majorities of Americans. So I don’t see how you can say it is one or the other. And if the reverse happened, and liberalism disappeared, the budget would also be balanced, as there would be little opposition.
These two worlds would indeed be quite different. But neither is the world we live in, in which the country is polarized, often between friends and family (and within themselves, in the case of the so-called independent middle, whom I’ll never understand!). All of these competing philosophies are difficult to sort out, and many Americans - maybe this is the real problem - seem to just lack proper engagement. Although this seems in a way a dodge, because plenty of engaged Americans simply do by hewing to one side or another.
Final thought: how much of this stalemate, resulting in low taxes and more services, reflects the nature of our particular political model, which makes sweeping change more difficult?
Keith on debt: I am not saying these things were good, they were not, but they were all as American as apple pie…
And the pie is delicious…
If there is one thing both right and left economists can agree on, it is that the American debt has allowed China and other parts of the third world to lift people out of poverty. That seems like a transparent good. The railing against debt says something interesting about the railers’s personalities. They are Jeffersonian agrarians at heart. They think in terms of seed corn and saving for a rainless day. And that’s a good thing. Just so long as debt vultures don’t dominate our politics and our future…
My suggesting to debt vultures fearful of government IOU is to check their Puritan cloaks in at the door, and look at the pattern laid down in our past. Since the South Sea Bubble we’ve had 50 (or so) separate financial crises. That pattern is greater than anyone’s ideology. The cycles of boom and bust litter our past. They appear to be inescapable. And the game is to meliorate them. To sync government exhales with private sector inhales. That minimizes the pain associated with the cycles and keeps the world moving forward apace. Towards greater science and tech wealth for all…
This is the reality-based, adult-view of debt.
And I can say that because at heart I’m a Jeffersonian agrarian too. A debt Puritan.
I own no debts. Everything is paid for. My personality is such I simply can’t take on debt.
But I’ve put my debt-scold on hold for the country as a whole.
Our times demand it of us.
J: Please consider the totality of my argument, not just the political level. Who took out all those mortgages they could not afford? We did. Who racks up enormous credit card debt? We do. In what country can I open the newspaper every day and see adds for luxury cars that were leased for 36 months and the seller needs to get out of the lease early? Here.
My case for the American acceptance of credit and indebtedness doesn’t rest entirely on politics, it runs through our entire economy and how we live.
Actually, the VietNam-War-income-tax-surcharge was *not* on high incomes, it was across-the-board. It was nonetheless progressive, because the overall i ncome tax structure was then much more progressive than it is now.
Keith:
OK, you want to diagnose some flaw in Americans’ national character (we’re spendthrifts). To justify the diagnosis, you point to a rather odd mixture of anecdotes that conflate actual household economies (“American newspapers have ads from people who leased expensive cars they can no longer afford”) with self-reported perceptions of national economies (“Britons say that their government should spend less”).
The obvious rejoinder to this is: How many Americans say their government should spend less? How many Britons are overextended in their household finances?
I’d find the diagnosis more convincing if you had something a bit more consistent and objective to point to. For example, one could look at data on households’ financial liabilities in OECD countries. I just did some very quick back-of-the-envelope calculations based on data here (total household loans in 2009 by country, divided by 2009 GDP) and the US seems to be tied with New Zealand for 8th place in the OECD, behind Denmark, the Netherlands, Switzerland, Ireland, Australia, United Kingdom, and Portugal.
Now, there could be all kinds of problems with that. I may be misunderstanding the data I used, I may have calculated something wrong, … who knows. If anyone cares enough, they could look into how to do this kind of trans-national comparison correctly.
But at least I made the effort to offer something a little better than cherry-picked anecdotes! I enjoy reading this site, and have read many of your posts that I found insightful or eye-opening. This one (well, “that one” since this thread is on Jonathan’s post, not yours) doesn’t seem worth defending.
We chose to destroy the Savings and Loans. We chose to void the usury laws. We chose to repeal Glass-Steagall. We chose to let the younger generation finance college education through student loans, which cannot be discharged in bankruptcy. We chose to “reform” bankruptcy, so home owners cannot use bankruptcy courts as an avenue to negotiate with holders of their mortgage.
I’m not sure that having a payday lender on the corner, charging 400% interest, is a reflection on the character of the spendthrifts availing themselves of the “service” or, rather, a failing of politics.
Our tax system doesn’t collect anything from even the largest and most profitable of business corporations. High earners are exempted at the margin from Social Security taxes (~15% for most people). The income tax rate for hedge fund managers — the most highly paid “workers” in the history of modern civilization — is a cool 15%.
Then, we wonder why “we” cannot “afford” Social Security, even though it is fully funded for twenty years into the future or more.
We wonder why our major business corporations are run by irresponsible sociopaths, and we see, everywhere, a pervasive scam-economy of easy credit and draconian penalties for misfortune. We wring our hands over the abstraction of growing “inequality” of incomes, but, then, blame, not the multimillionaire banksters for a global financial crisis, but the poor and the struggling middle-class, for trying to take advantage of the few, fraudulent opportunities still left to them.
You wrote: “The Economist has essentially turned into a vehicle for right-wing agitprop”
This is the same publication that has become a virtual bathroom wall for anyone wanting to slander Israel.
You’re not allowed to publish April Fool’s jokes on April 3rd.
On a cultural level, we’ve been aggressively raising up a generation of cocksure know-nothings, people who just know they’re special and valuable but who haven’t done anything to justify their self-image. This perfectly reflects our economics as well, as the parents of that generation of those who are so highly esteemed just for being felt that they deserved whatever government could give them without having to do the hard work of paying for it.
Here’s what’s really ironic: As we made more and more information more readily available we’ve actually gotten dumber and dumber.
We wonder why our major business corporations are run by irresponsible sociopaths, and we see, everywhere, a pervasive scam-economy of easy credit and draconian penalties for misfortune. We wring our hands over the abstraction of growing “inequality” of incomes, but, then, blame, not the multimillionaire banksters for a global financial crisis, but the poor and the struggling middle-class, for trying to take advantage of the few, fraudulent opportunities still left to them.
Mind you, this is the We, not “we”, as this “we” sees a contradiction in We wring our hands over the abstraction of growing “inequality” of incomes, but, then, blame, not the multimillionaire banksters for a global financial crisis, but the poor and the struggling middle-class. This we who is typing this comment sees the growing power of corporations and the rich and the increasingly nasty class war waged against those who are not rich. This We also sees more and more power grabs on both sides. This we is also glad - at this time, at larger scales - that there are so many guns in this country so there can be something said against the rising plutocracy; however, this we also sees propaganda everywhere in a divided society and wonders if it will happen.
So this “we” dissents against the We, as this we doesn’t see it as italicized.
I’m another “we” that dissents against the collective “We”, save for my votes for Carter, Clinton & Obama I didn’t vote for any of the b*st*rds who enabled the wholesale looting which has occurred since the 1980s. In addition it was these low tax rates on the wealthy that enabled all the looting in the first place - one might be a bit less inclined to take home $1B if one was taxed at 75% of that haul. & speaking of hedge funds, do you know the top 25 managers took home a total of $22.07B in 2010? While paying a maximum tax rate of only 15% as their loot was deemed to be capital gains? How can anyone who claims to abhor budget deficits approve of this monstrous outrage?
http://wonkroom.thinkprogress.org/2011/04/01/hedge-fund-inequality/
Both parties in America attempt to serve the most powerful demographic in America: Senior citizens. They are a wealthy and growing bloc that has the highest voter frequency in America. Both parties voted for Medicare part D. The Republicans ran a successful campaign in 2010 based on preventing cuts to Medicare. Paul Ryan’s budget roadmap makes no changes for those over 55. We essentially have two parties who refuse to make any cuts for programs towards seniors. Thus we have two parties gleeful to enact a transfer a wealth from the young to the old.
Benny, you might consider the possibility that Medicare part D was designed to benefit pharmaceutical companies.
Bruce,
You may consider that for all the saber rattling about deficits and socialized medicine no Republican or Tea Partier is proposing to repeal Medicare part D. Likewise no Democrat is making such claims. A huge, unfunded increase in entitlements that helped balloon the Bush deficits. And no one seems to want to repeal it.
Benny Lava writes: Both parties voted for Medicare part D.
Er, huh?
House of Representatives, final vote results for roll call 669 (On Agreeing to the Conference Report, Medicare Prescription Drug, Improvement, and Modernization Act) 22 November 2003:
Republicans: Yea 204, Nay 25
Democrats: Yea 16, Nay 189
Independent: Nay 1
Senate, final vote results on the Motion (Motion To Waive CBA RE: H. R. 1 - Conference Report ) 24 November 2003:
Republicans: Yea 49, Nay 2
Democrats: Yea 11, Nay 37
Independent: Yea 1
The Democrats voted against Medicare Part D by overwhelming margins in both the House and Senate. The Republicans voted for Medicare Part D by overwhelming margins in both the House and Senate.
Dang J, I’ve been served.