Chris Matthews Doesn't Get It

Discussing the Ryan Budget Plan on April 6, 2011 Chris Matthews illustrates America's big problem in the coming months and years. It's the liberal blind spot. Liberals cannot imagine an America in which the government is not paying for Medicare and the other entitlements. Here's Matthews talking with Mark Halperin and Chris Cillizza. He asks:

Why would the government stop paying the bills of Medicare patients?

He just cannot imagine it. He knows how the world works.

The government will provide the health care for seniors it has promised to provide them, or we will be out of business. The people won't elect them any more. And the government that comes along, the president who says I'm not going to pay the health care of seniors which we promised to do is in big trouble.

You see the problem here. Chris Matthews cannot imagine an America in which the government can't afford to pay for Medicare. And why should he? He's lived his entire life in a world in which the government has paid on its obligations.

But if you step out the warm glow of the present you find that governments are always reneging on their promises. Right now there are a ton of books out there that go through the history in gory detail. There is Carmen N. Reinhardt and Kenneth S. Rogoff in This Time is Different. There is John H. Wood and A History of Central Banking in Great Britain and the United States. Not to be left out is Transferring Wealth & Power from the Old to the New World: Monetary and Fiscal Institutions in the 17th through the 19th Centuries edited by Michael D. Bordo and Roberto Cortes-Conde. A more popular financial history is Niall Ferguson's The House of Rothschild.

These authors tell the story of the many, many government defaults in the past few centuries. Reinhardt and Rogoff are perhaps the most direct. When government debt payments get to about 10 percent of GDP, they argue, then chances are the government will default.

Let's look at our own governments with debt at about 120 percent of GDP (including state and local) and interest payments at about 2 percent of GDP. No problem, you say.

But suppose things change. For instance, right now in 2011 the Feds are paying $206.7 billion in interest on a debt of $15.4 trillion. That is a mere 1.34 percent interest.

Suppose that average interest rate goes up to about 7 percent in a couple of years when the debt is $17.8 trillion. Why then interest payments on the federal debt will go to $1.2 trillion. At that point we are talking about real money. But what happens if the government can only roll over its debt at 12 to 13 percent interest, as happened to Greece recently? If that happens the government will be looking at a interest bill of about $2 trillion a year crowding out Medicare at $500 billion and Medicaid at $350 billion.

I will tell you what will happen. Politicians will start making back of the envelope calculations about who they can afford to piss off. Do they piss off the government workers? The unemployed? Or to they short the geezers and fiddle around with Medicare?

I'll tell you what I think. When the government starts defaulting and people start demonstrating in the streets the politicians will figure that the geezers can go eat the paint off the walls. They will be worrying about civil unrest and riots in the inner cities. They won't be worried about seniors and their hip replacements.

You can understand the reluctance of liberals like Chris Matthews to get out of the liberal bubble, do a bit of reading, and find out what actually happens when a government defaults. It misses the point to say: "the president who says I'm not going to pay the health care of seniors which we promised to do is in big trouble." The president who says that is not saying it just because the mood takes him. He is saying it because he is already in trouble so big that the rage of 50 million seniors doesn't seem all that much of a problem.

In fact, of course, those seniors won't be angry when the balloon goes up. They will be frightened, and they will be desperately hoping against hope to retrieve something from the financial catastrophe of a government default.

Ryan Budget: The Numbers

Now that the world-famous usgovernmentspending.com has the Ryan Budget Plan up, we can look at the numbers. We've taken Table S-3 and S-4 from "The Path to Prosperity" and ginned them up at the Budget Analyst section at usgovernmentspending.com. Look at the numbers in the out-years from 2016 and 2021.

Yeah. Look at the difference in Total Outlays between the Ryan Budget and the president's budget. It starts at $617 billion for 2016 and ends up at more than a trillion dollars a year by 2021. Wow! So where does all the money come from? Half of it comes from $233 billion savings in Net Interest expense and $244 billion from repealing ObamaCare. Then comes Other Mandatory programs at $225 billion savings, and finally reforms of Medicaid at $170 billion. So really the cuts don't bite that much into the sacred programs of Medicare and Social Security. Not yet. That's because Medicare reforms don't start until the current 55 year olds retire and Ryan doesn't attempt to reform Social Security.

They say that the Ryan Budget Plan is a huge risk for the Republicans. But you have to wonder if it's all that big a deal. Nobody is going to be out of pocket for ten years except for Democrats cashing in on jobs programs and all the little programs in the budget.

But considering that the Democrats have been feasting and partying on the government dime for the last half century, maybe it's time for them to go on a diet for a while. In the interests of their own health, of course.

Rep. Ryan's Marker

Center-left blogger Mickey Kaus is probably right when he says that the Ryan Budget Plan is "near-suicidal." His line is that voters like Medicare and will feel that the Ryan replacement will offer them less security that Medicare. Maybe he is right, although I'd say that the current Medicare setup is as secure as a wad of $100 bills sitting on a bar.

But the point of the Ryan Budget Plan is not to be a blueprint for action. It is a marker. Democrats will rail against it and demagogue it and howl that it throws grandma into the street right up until the day they pass a version of it and say they invented it.

After all, we've already seen how this kind of politics works. Democrats railed against the main features of the Bush War on Terror--the Patriot Act, Guantanamo, Iraq, military tribunals--insisting they were fascist and violations of civil rights right up until the moment the Obama administration folded them into its own security policy. The fact is that Democrats have a delusional foreign policy, keyed off their lefty base, and only putting Democrats in power and forcing them to confront reality makes Democratic politicians get away from the lefty narrative and face reality.

On the welfare state we have a similar delusion, the idea that administrative bureaucracies can substitute for the safety net and the affective satisfactions of traditional social life in families, kindred, and associations. But for Democrats the problem is compounded by their electoral politics which regresses to the ancient patron-client form of political life. In Democratic politics you vote for Democrats because they "fight" for you against a cruel oppressive world, securing hard-won benefits for you against the implacable corporate power that would otherwise leave you starving and sick.

The Ryan Budget Plan would turn the corner on the patron-client form of politics and cut out the political middleman for millions of voters. It would impose a middle-class culture on the big social programs and nudge the old helpless-victim caring politician axis away from the center of political life.

Obviously Democrats will resist this plan, right up until grannies are starving in the streets from hyperinflation and a government default. Then Democrats will agree to the Ryan reforms, or son-of-Ryan reforms, or grandson-of-Ryan reforms, and the Ryan approach will suddenly shine with the illumination of liberal approval.

You can see here Ryan Budget Plan here.

Ryan's Budget Express

So now it's out, the reckless, extreme budget proposals of Rep. Paul Ryan (R-IL) and he is proposing to cut $6.2 trillion in government spending over ten years compared to the president's FY2012 budget.

On taxes, Ryan proposes a simplified tax system with a top income tax rate of 25 percent.

Of course, We'll have the numbers up on usgovernmentspending.com later today, so you can compare, function by function, the Ryan budget with the president's budget, but it looks to me that the big items are:

• Punt on Social Security. Ryan has no proposal for Social Security. He just says that "in the event Social Security is not sustainable, the President, in conjunction with the Board of Trustees, must submit a plan for restoring balance to the fund."
• Change Medicare for younger workers. "Medicare will provide a Medicare payment and a list of guaranteed coverage options from which recipients can choose a plan that best suits their needs." There will be "additional assistance" for low-income folks and those with "greater health risks".
• Block grant Medicaid and Food Stamps Medicaid will be converted into a "block grant tailored to meet each state's needs, indexed for inflation and population growth." On food assistance: "Convert... SNAP into a block grant tailored to each state's low-income population, indexed for inflation and eligibility beginning in 2015".
• Turn job programs into scholarships. "Consolidate... job-training programs into more accountable career scholarships". Also return Pell grants to pre-stimulus levels.
• Lower Tax Rates. Return taxes to 18-19 percent of GDP, and reduce top federal income tax rate on individuals and corporations to 25 percent. Remove many "tax expenditures."

It's a bold program, and we'll see what happens to the politics in the next few days.

The big takeaway is that there is no proposal on Social Security. And, as I have written, there is no need. Social Security will rise from the present 5ish percent of GDP to a 6ish percent of GDP over the next 30 years. Thus there is no playing with the Third Rail. The big problem is health care entitlements, Medicare and Medicaid, and that is where Ryan has big proposals for reform.

Kissinger (Hearts) Bismarck

In Sunday's New York Times uber-diplomat Henry Kissinger writes approvingly of Otto von Bismarck, subject of a new biography by Jonathan Steinberg. Writes Kissinger:

Bismarck is often cited as the quintessential realist, relying on power at the expense of ideals. He was, in fact, far more complicated. Power, to be useful, must be understood in its components, including its limits. By the same token, ideals must be brought, at some point, into relationship with the circumstances the leader is seeking to affect. Ignoring that balance threatens policy with either veering toward belligerence from the advocates of power or toward crusades by the idealists.

Bismarck dominated because he understood a wider range of factors relevant to international affairs — some normally identified with power, others generally classified as ideals — than any of his contemporaries.

But the point about Bismarck was the he was tragically limited, a brillient tactician that manipulated Germany onto the world stage as a misshapen hunchback, immensely powerful but uniting the world against it. He strangled the good Germany that longed for freedom and community and delivered it to a princely dynasty long past its sell-by date. When Bismarck left the stage of history there was nobody with the genius to replace him. Writes Kissinger:

Bismarck’s successor, Caprivi, pointed out the essential weakness of the Bismarckian system by saying that while Bismarck had been able to keep five balls in the air simultaneously, he (Caprivi) had difficulty controlling two.

Some of us think that was the problem with Kissinger. It's all very well to have a brilliant power manipulator running foreign policy. But what happens after he's gone? Maybe it's better to be ruled by amiable idiots rather than manipulated into an impossible position by an evil genius.

The great achievement of Bismarck was to unify Germany. But the great evil of Bismarck was to unify it with military victory, bathing the Hohenzollern princes in the glow of German excellence on the field of battle. The result was to sweep the men who could have been the Burkes, the Jeffersons, the Hamiltons off the stage and replace them with ciphers, completely lacking in the skills to put Germany at the head of Europe without scaring the pants off everyone.

The joke is on us. Today, a century after the Great War, Germany presides in avuncular fashion at the head of Europe, and its chancellor is a motherly woman, Angela Merkel. Imagine if the Germans had achieved its avuncularity in 1900 rather than 2000.

Wisconsin and Multitude

The response of our Democratic friends to the 2010 midterm elections has not been good. Democratic legislators in Wisconsin and Indiana fled the state rather than allow Republicans a quorum to pass legislation they didn't like. Now we have reports of union leaders threatening Main Street businessmen with boycotts. That's when they are not trying to stop the legislation with friendly judges and attempts to pack the state Supreme Court.

There is a simple word for this kind of behavior: Injustice, and the liberal playbook says that when the power elite does this it sets up a prerevolutionary situation. When the ruling class games the system so that it can never lose, the people have no choice but to rebel. In other words, if conservatives were doing this, liberals would be screaming about Resistance! and Liberation! and taking to the streets. But liberals seem incapable of understanding that Resistance! and Liberation! could happen to them as they become a corrupt and cynical ruling class.

In my view there are three competing world views in the United States. There is the elite liberal view, which sees the American people as a backward and unevolved people that needs to be organized and assisted by an educated elite. Then there is the conservative view, in which the American people are sturdy, inventive yeomen, building families and businesses with practical Yankee ingenuity. Finally there is the radical view, which sees the American people as an oppressed people that needs to be organized into a movement for resistance and liberation. The point here is that, if you are a liberal, every problem needs to be solved by a government program run by educated experts. If you are a conservative every problem looks like an opportunity to get the government out and return it to the private sector where entrepreneurs and civil society will soon sort it out. But if you are a radical then every problem is an occasion for a resistance movement, in which the radicals will lead the masses to victory over the capitalists and the wealthy.

Obviously, in Wisconsin, it's a bit rich for the lefties to play the radical card and pretend that the overpaid and underworked government employees they lead are in fact helpless victims of a cruel and unjust system. To a conservative it is pretty obvious that the union members we have seen on TV are the paid supporters of the liberal elite. But it's not surprising. For liberals, a problem either requires a paternalistic government program or a resistance movement. When liberals are in charge they play the avuncular and evolved philosopher king; when tossed out of office they play the community organizer.

Some liberals have come to the realization that they need to update their world view. In Multitude Michael Hardt and Antonio Negri argues that the left needs to move on from its old unitary categories of "people" "masses" and "working class." They propose the notion of "multitude." With the recent changes in the world economy it doesn't make sense to talk about workers producing things, mere material production. Today we have a more diverse "social production," not only the production of material goods but also the production of communications, relationships, and forms of life." Instead of the working class producing material goods we have the multitude cooperating to produce social goods.

In so far as the multitude is neither an identity (like the people) nor uniform (like the masses), the internal differences of the multitude must discover the common that allows them to communicate and act together. The common we share, in fact, is not so much discovered as produced.

See what is going on here? Hardt and Negri, hacking around in the thicket of their lefty jargon, are finally coming around to the argument that conservatives have been making for 250 years: with Adam Smith that there is an "invisible hand" guiding each individual into serving the whole; and with F.A. Hayek that the market economy is the result of millions of decisions by a multitude of consumers, business people, workers, buyers and sellers that could never by achieved by an administrative bureaucracy in Washington, DC or Madison, WI.

Only guess what! Hardt and Negri think that the multitude will form a new force of resistance, violent resistance that is superseding the old forms of civil unrest, guerrilla bands, and wars of liberation. The new resistance will be not be

a political body of which there is a head that commands, limbs that obey, and organs that function to support the ruler. The concept of the multitude changes this accepted truth of sovereignty. The multitude, although it remains multiple and internally different, is able to act in common and thus rule itself.

But this is exactly what conservatives say. No need for a political administrative elite of liberals--the head--telling the American people what to do. We are competent adults and perfectly capable of acting in common and ruling ourselves.

Hardt and Negri look upon social phenomena like the Seattle rioters of 1999, the anti-Bush "netroots," and the social-media coordinated March 2011 London rioters that spun off the official labor-union Alternative march as the wave of the future.

But I think they are blind to the truth. Their "netroots" are a few spoiled twenty-somethings playing at being the multitude. The real multitude contains the moderate voters that put the Republicans back in charge of the House of Representatives. It is the Tea Party that spontaneously formed a movement of resistance after the election of 2008 and now is putting steel into the spines of elected Republicans in Congress. When the liberal left responds to this movement of resistance with manipulations of the legal and political system using their pals in the government apparatus to thwart the will of the people they are setting up a pre-revolutionary situation.

The reason we have elections, and laws, and rules of procedure is so that we can have peaceful changes of government. The great question in politics for any partisan faction is this. If we defeat the current government at the ballot box will they release their grip on the levers of power and concede defeat? By their actions in Madison, Wisconsin, and their shenanigans over budget cuts in Congress our Democratic friends are telling us that they don't intend to go quietly.

In Multitude Hardt and Negri talk about "biopower" a term coined by French lefty Michel Foucault that refers to the numerous and diverse techniques the modern state have developed "for achieving the subjugations of bodies and the control of populations." In lefty discourse this malevolent power is always the corporations and the wealthy. But suppose the American people should come to decide that the malevolent power is composed of the liberals, the lefty academics, the MSM and the government employee unions that exercise "biopower" to tax them, regulate them, and control them in a profoundly unjust system? It wouldn't be the first time that a tired and incompetent dynasty completely misread the sign of the times.

Energy Smoke and Mirrors

You have to admit that President Obama is nothing if not a politician. His energy speech Wednesday promised a one-third decline in energy imports to show that he is "doing something" about high gas prices. And, according to the New York Times his speech included:

• boasting of newly approved drilling permits
• new safeguards for deepwater drilling intended to prevent repeating last year’s oil spill in the Gulf of Mexico
• not prepared to open additional public lands and waters to drilling, officials said, but will propose incentives and penalties to prod the industry to develop resources where they already have access.
• producing more electric cars, converting trucks to run on natural gas
• building new refineries to brew billions of gallons of biofuels
• increasing fuel-efficiency standards for vehicles.

In other words, nothing new. The president did seem to indicate that he proposed to criticize oil companies for record profits.

The mess in energy policy is so deep and so wide that it's hard to know where to start. That's because it is a combination of moral imperative and the prophetic. On the one hand, we don't know what the effect of, e.g., increased carbon dioxide, really is on the environment, and on the other we really don't know what the future supply of energy looks like. Everyone has an opinion, and everyone has a pet program they want to advance.

Of course, it is all rubbish. We have a well-diversified spectrum of supply. The Wall Street Journal publishes a pie chart today that shows energy distributed at petroleum 37%; natural gas 25%; coal 21%; nuclear 9% and renewable 8%. That's a pretty wide distribution. You could deal with a collapse in one of those, e.g., Peak Oil, pretty well. Don't agree? Just 500 years ago, don't forget, the energy supply was almost completely: wood 100%. In Britain, during the early industrial revolution, there was an energy crisis as the nation ran out of charcoal from wood. The solution? Coal. Pretty soon there was another crisis, this time in whale oil for lamps. The solution? drilling for oil in Pennsylvania. Then came natural gas and nuclear. There's plenty of energy, whatever happens to Peak Oil or any other hyped up crisis.

My guess is that the current liberal/environmentalist panaceas, wind and solar, will probably collapse within five years, because the size of the subsidies and corruption scandals will create a public backlash.

Then it's back to the serious energy sources: oil, gas, coal, and nuclear. There's a brilliant system that humans have devised to determine which of them to pursue. It is called the price system, backed up by sensible safety and environmental regulation.

But first, the current liberal/environmental chimera must crash and burn. That's the way of politics. You can only get something done when the system is broken. Otherwise the special interests and the crony capitalists are too strong to allow reform.