America's Real Problems

Back in the 1870s Walter Bagehot, editor of The Economist, wrote his classic book Lombard Street. It was an analysis of the Bank of England's role as guarantor of the credit system. What should the Bank do to deal with a panic in the money market? That was Bagehot's topic, after two big panics in ten years, in 1857 and 1866.

You'll be amazed to learn that his solution was not more regulation. No, he wanted stronger leadership at the Bank of England, a permanent manager rather than the rotating Governors. He wanted the Bank to realize that it had to do everything in its power to stop a panic and restore confidence, principally by lending money without limit on any good security. And he wanted the Bank to maintain a higher "banking reserve."

The foundation of the credit system, he wrote, is that most people are "sound." They maintain their assets in a prudent way, and cannot be sold out because of excessive leverage. His approach to the money market assumed that people are responsible, and that the governance of market institutions should encourage people to follow their instinct to be responsible and "sound." He thought that the soundness of the credit system was the responsibility of the credit system participants.

The contrast with our own time is palpable. Today, we don't trust the business sector to mind its own business. We believe, with certainty, that political oversight is essential to a smooth economic system. But how well does that work, in business and in the other areas of government?

Of course, political oversight means bureaucratic regulation, and effective political control of the economic sector, and the record of the last century is that the cure is worse than the disease.

Money.  Two hundred years ago, the credit system in the US was founded on a funded national debt and the government ran a surplus.  This meant that the dollar was rock solid and the government was not trying to manipulate the credit system to get out of a jam.  Today the government is always in a jam, and is always manipulating the credit system to keep its operations going.  The government regulates banks not to make them safer but to make them into useful conduits of government debt.

Education.  For two hundred years the ruling class has liked the idea of government-run education.  Maybe it had a point in the early 19th century when the people coming off the land into the city were often illiterate.  But now, in the United States, the education system spends about a trillion dollars a year to do--what exactly?  Most likely its real purpose is to indoctrinate students into the ruling class ideology.  In my view it is time to return education to the private sector, to churches, and charities.  And also revive the idea of apprenticeship--getting hands-on teenagers out of school and into the workforce.

Healthcare.  Everyone seems to think that without government nobody except the rich could afford healthcare.  I doubt it.  The vast majority of people buy food and transportation without government, why not healthcare?  The problem is that we really don't know what people want in health care, because the government so completely dominates the system that individual consumer preference is blocked out.

Work.  Used to be that workers worked for cash.  Now the government is right in the middle of the employment transaction in many different ways with regulations and taxes.  It's all meant to help the workers, to prevent exploitation and provide social benefits like unemployment and retirement.  Are we really so helpless that we need government right in the middle of everything?  And the problem is that all the taxes and regulation almost force low-skill employers just avoid the complicated and confusing formal employment sector completely, and hire people off the books.  How safe it that?

Environment.  The current top-down system assumes that ordinary people are helpless victims that cannot look after themselves.  Shouldn't we try to find environmental approaches that empower ordinary people to protect the environment?  Roger Scruton recommends a bottom-up approach based on the idea of "home." People want to protect their home.

When Walter Bagehot wrote Lombard Street he admitted that it would be impossible to change the governance of the Bank of England because people just accepted the way things were and wouldn't support any change.  In other words, people won't agree to change unless things are broken.

That's where we are with America.  There are lots of things that aren't really working, but they aren't broken.  Not yet.

Do we really have to wait to fix things until they are completely broken?

The Wages of Hate

When you are the ruling class, you get a special benefit.  You get to call the other guys nasty names, and there is not much they can do about it.



The Brits used to say, well, but we brought the rule of law to India.  Quite so, old chap.  But the Brits also conquered India and used its wealth to help fight the Napoleonic Wars.  They were such outrageous looters that Edmund Burke spent ten years trying to impeach and convict the Governor of Bengal, Warren Hastings.



The British Empire is history.  Now we have new ruling classes, and they get to put their narrative gloss on their rise to power.  For liberals, history is a progression: from helping the workers to helping African Americans to helping women to helping gays.



One of the ways you acquire the power to do all that is by demonizing the opposition.  We are the good guys that care for workers, blacks, women, gays, you say, and they are the bad guys, defending sweat-shops, Jim Crow, the patriarchy, and hate.



So, in the last couple of decades, liberals have liberally used the rhetorical device of "hate" to demonize their opponents.  If you disagree with liberals you are "divisive" and a "hater."  If you voice your disagreement, you are committing "hate speech."  And woe betide anyone that makes a liberal feel "uncomfortable."



The truth is that all politics is a contest of divisiveness.  The whole point of an election is to divide the electorate in two, with 51 percent or more on your side.  The whole point of a political movement is to mobilize people on the side of the angels, to march them to a better tomorrow.  Needless to say, anyone that resists our march to a better tomorrow is the enemy: misguided at best, evil incarnate at worst.



Our liberal friends have had the better of the name-calling business for most of the last century.  You can tell this by the moments when they were on the defensive: the Red hunting after the Bolshevik Revolution and the Sacco-Vanzetti trial; the McCarthy era; the accusations of un-patriotism during Vietnam; Bush's Patriot Act.  Whenever the liberals have been on the political defensive they have reacted as though the world was coming to an end, they have furiously objected to their marginalization, and made an event of it.



But if you are an ordinary American, you had better be careful what you say not just occasionally but all the time, especially in college and on the job.  You could easily be accused of racism or sexism, and you could lose your job or get expelled from school.



Here is how to define political power: it's the ability to define what other people are allowed to say.  Most of the time, in our time, it is liberals that get to do that.



But, of course, every ruling class eventually provokes a head of rebellion.  That goes with the nature of political power, which is to use government force to distribute money and privileges to your supporters.  People get fed up with the lies and the self-dealing and the injustice that goes with government power.  And so one day the ruling class wakes up and finds that is unpopular.



Could that be happening in 2012?  Who knows?  But one thing about the Internet and blogs and youTube.  It makes it possible for the opposition to spread the word under the radar and make fun of the ruling class.  An example is President Obama's "You didn't build that" comment.  The comment has gone viral and seems to have insulted every small businessman in the land.



Liberals have had a good run defining themselves as the good guys, defining near riots as peaceful protests, and intimidation as peaceful picketing.  And they have succeeded in defining every dissent from their orthodoxy as dangerous breaches of the peace.  Imagine if, e.g., Tea Party activists had occupied the Wisconsin State Capitol in 2011.



But eventually the rules of the game change, and the confident ruling class finds that its power is challenged.  Robespierre, the diligent price-controller, finds himself in the tumbril cart on the way to the guillotine to shouts of "Dirty Maximum!"



A new ruling class comes to power.  Among other things, they get to define the word "hate."

Beyond Mediscare

Nobody knows which way the current argument about Medicare will go.  Is Paul Ryan proposing to "end Medicare as we know it" or has President Obama already ended Medicare as we know it by cutting it by $716 billion over the next ten years?  It's a battle of the sound bites.



What disturbs me is the bigger question.  Never mind the rough and tumble of the campaign.  Let us think about the bigger questions about government and society.



Let's start with Medicare itself (I am a Medicare recipient).  The current unfunded liability for Medicare, the benefits promised beyond what will be collected by existing taxes, is $80 trillion or so.  How is such a sum of money to be found?  Who could or should be forced to pay for this?  How can this money physically be forced upon Americans without wrecking the economy?  The fact is that the $80 trillion deficit is a moral and physical maelstrom, an utter failure of the political system.  It is a blinking neon sign that millions of people are going to be cruelly taxed and/or cruelly abandoned in the next 30 years.



As for Social Security, its unfunded liability is a mere $8 trillion.  But the problem is that Social Security, the primary means of retirement for most Americans, is not a savings program.  The FICA taxes are not saved in a retirement account invested in securities that create jobs for the next generation, the generation that will work while the retired generation clips coupons.  It is money taken from a worker's paycheck and sent directly to a beneficiary.



Never mind about Medicare and Social Security.  They are huge unexploded bombs that one day will blow up if they aren't defused.  Let's talk about the real corrosion in the body politic.  You get a feeling of the problem reading Victor Davis Hanson about the hollowing out of California: the dreamland of the coastal cities and their green liberal professional class and its dreadful hell, the blitzed out Central Valley.  Government regulation has set up rigidities, from land use to wage rates to unpayable pensions, that prevent society from solving problems and adjusting to new conditions.



There is the scandal of education, utterly non-responsive to the needs of children, and utterly failing to educate the children of the poor.  There is the mess of welfare, doling out pensions to twenty-somethings.  There is the wasteland of housing, monument to "affordable housing" and government mortgage subsidies.  There is the horror of college debt, weighing down a whole generation.  There is the cratered carcass of Medicaid.  There is the fatuity of green energy, a crony capitalist swamp of subsidies and pay-for-play.  There is the maelstrom of government employee pensions.  There is the exploding problem of disability, as the ranks of the "disabled" soars towards 7 percent of the workforce.



All these programs are liberal programs, and that's the problem.  Your liberal friends have no idea that the whole thing is flushing down the toilet.  That's because the New York Times and the rest of the mainstream media carefully see no evil, hear no evil, speak no evil about the cratering welfare state.  I suspect that it is not a case of evil intent, but a case of denial.  Liberal journalists just cannot bring themselves to look reality in the face and admit that their glorious vision is a terrifying tornado that is tearing society up by its roots.



Here's an interesting problem.  Our liberal friends can't see that in the coming era it will be liberals that symbolize the cruel, oppressive ruling elite, living by injustice and looting.  How can that be, they will wail, when we are the evolved, educated people that live to right wrongs and end injustice?



Because, honey, every political ruling class ends up using its power to look after Number One, and liberals are humans too.



That's why we moderns came up with the idea of limited government.  At least limited government limits the power of government to create and perpetuate injustice.

The Missing Liberal Canon

Why don't liberals have a canon, a list of thinkers and books that liberals can go to, to learn all about liberalism?  That's what liberals like Beverly Gage have been asking lately.  And conservatives have been eager to help them out.

Actually, liberals do too have a canon.  That is what Jonah Goldberg discovered when he wrote Liberal Fascism.  He wanted to know what liberals believed and where they got it from.  His journey led him to the Progressives, people like Herbert Croly and The Promise of American Life back at the turn of the 20th century.

But the worriers have a point.  Sensible liberals don't have a set of books that every liberal is supposed to read.  Unless you call out the wilder shores of Howard Zinn and Noam Chomsky.  The reason is simple.  You don't need a canon, you don't need to study political philosophy when you are the ruling class.  Knowledge begins with a problem: why is the world so unjust?  But liberals are the ruling class. They sit in the catbird seat.  They don't have a problem, except the instrumental problem of how to pass the next comprehensive and mandatory social program.

Conservatives on the other hand do have a problem.  We cannot stand the current liberal welfare state that wants to make everyone into a compliant and obedient ward of the state.  We want something different.  So we delve into the books to find out what went wrong.  We want to know why Americans just sit there and take the welfare state without doing anything about it.  We want to know how we could change the political system so that the instrumental domination of big government bureaucracy could be changed to something less oppressive and less unjust.

So we read up on Edmund Burke.  We check out the marginal economists of 1870.  We read von Mises and Hayek.  We delve into Thomas Sowell and Michael Novak.  We check out Milton Friedman.  We read Roger Scruton, Charles Murray, George Gilder, Rodney Stark, Frederick Turner, F.S.C. Northrop.

For myself, I've deliberately looked to the left to find conservative themes.  Some lefties get that there is a problem.  There are Max Horkheimer and Theodor Adorno and their critique of instrumental reason.  There is Juergen Habermas and his attempt at solving the instrumental reason problem with the lifeworld and communicative action.  There is James C. Scott and Seeing Like a State,  my current enthusiasm.  There is even useful stuff to be learned from Michael Hardt and Antonio Negri and their wild lefty trilogy, Empire and Multitude and Commonwealth. 

Meanwhile, our liberal friends find themselves in a nasty spot, trying desperately to plug the leaks in their rusty ship.  They don't have time to read philosophical tomes.  They need to man the pumps and keep the welfare state and their power and their sinecures going for one more election cycle.

I wouldn't want to be a liberal.  Not in 2012.

Republican Voter vs. Democratic Voter

The furor over President Obama's "You Didn't Build That" riff is that it exposes the fundamental divide between the average Republican voter and the average Democratic voter.  I am not talking about elite voters here.



The average Democratic voter is what I call a "monthly pay-ment" person.  Yes, she is the kind of person that pronounces "payment" as "pay-ment."  She wants to allocate all risk and uncertainty away from her and reduce her life to a monthy payment.  We also talk about her as "living from paycheck to paycheck."  For this person anything not included in the monthly check must come like manna from heaven, because she does not think about making an investment in her future to, e.g., get a better job.  She just thinks about getting to the next paycheck.  It is this kind of voter to whom community organizers speak.



The average Republican voter thinks more strategically.  He thinks about getting a good job, marrying a pretty wife and having a couple of kids.  He thinks about saving up for a home and the kids' college education.  He thinks about saving for retirement.  He sees that the future may have its ups and downs.  That's why he listens to Dave Ramsay on the radio and keeps an emergency reserve.



You can see where the president's "you didn't build that" speech comes in.  For the paycheck-to-paycheck person the speech tells truth, for the successful business person won the lottery. Life is something that just happens to you.  It is not something you try to bend and shape.



For the rugged individualist, the speech is an insult; it denies all those years of struggle.



Now, of course, in reality we are all nothing without society.  On the other hand we are nothing without the people that strive and succeed.  The question is: how do we relate to the fact of society and the fact that we can each of us make a difference?



The Progressive movement of a century ago was based on the idea that we needed more rationalization in society.  Society needed to be designed better and run better by educated experts rather than autodidact empiricists.  But Progressives and after them liberals always needed to get elected to perform their rational wonders.  And in practice that meant appealing to people who wanted stuff from government.  So the high-flown rationalism always found itself in coalition with hard-headed street populism.  However noble your intentions, you had to appeal to the working stiff or the minority.  Thus the progressives won the working class vote with a class-warfare politics, the black vote with a racist politics, and the feminist vote with a sexist politics.  And all the while they insisted that it was the other guys who were classist, racist, sexist!



President Obama, a leftist from his early youth, ran in 2008 in a way that elided the racism, sexism, and classism of his politics.  But as soon as he got elected he rang alarm bells in the average middle class person that wanted to build lives at a distance from government.  Hence the Tea Party.



The good thing is that Obama's frank leftist governance has set up a decisive battle for 2012.  If Mitt Romney wins, he will have a mandate to roll back the excesses of a century of progressive politics.  If he loses then we have to go over the waterfall before we can change the national direction.



It ain't pretty, but what did you expect?  That life could be reduced to a monthly payment?

Ryan Enthusiasm

Rule One about US politics is that liberals don't understand conservatives.  Today's proof of that rule is that Democrats are saying that the selection of Rep. Paul Ryan (R-WI) as vice-presidential nominee shows that Mitt Romney is panicking.



So I guess that the enthusiastic crowds suddenly showing up at Romney rallies are panicked bitter clingers.



On the contrary it looks like the Ryan pick has ignited enthusiasm in the Republican base.  That will go a long way to increasing the Republican presidential vote from 60 million in November 2008 to, maybe, 70 million in 2012.



To confirm that "something" has happened with the Ryan pick, the traffic at usgovernmentspending.com is up by 80-90 percent consistently in the three days since the Ryan announcement.



Now, why are Republican voters energized by Paul Ryan?  Well there can only be one reason.  They are energized because they know that Paul Ryan is Chairman of the House Budget Committee and he is the author of the Ryan budget plan that reforms Medicare-Medicaid and brings the out-of-control budget back into balance.



Apparently Paul Ryan right now has 50 percent name recognition.  I guess that all the people that knew about him are Republicans.  But Democrats ought to know a bit about him, because they have been running ads of Paul Ryan pushing grannie in her wheel-chair off a cliff!



When you think about it, it makes sense that Republican voters and Democratic voters divide on the question of Medicare.  For Republicans, Medicare should be something that enables them to choose sensibly between health care plans to find one that meets their health care needs at the right price.  Republicans don't want to have to hack through a government bureaucracy to get health care.



For Democratic voters, Medicare is a "right," which means that it is a benefit provided by political power.  Whatever it is, it is; the people rely on the politicians to "save" their Medicare.  Republicans expect to pay for health care, and they figure that, as paying customers, they ought to be able to get the best.  Democrats just expect health care to be provided as a benefit.



Why is Ryan enthusiasm important?  Republicans stayed home in 2008.  The Republican vote was 59.9 million, down from 62 million in 2004.  My guess is that it will take 70 million to win decisively in 2012.  Obama polled 69.4 million in 2008, but I'd be surprised if he got more that 66 million this November.



With real enthusiasm in the Republican base, overflowing into the homes of their suburban neighbors, there is always the mad hope that maybe 70 million is just for starters.  We won't know until November.

Panic Friday

Oh no!  President Obama is up by over four points in the Friday morning RCP Average, by 48.4% to 44.0%.  Mitt's losing!



That seems to be the panicked reaction of the right-wing commentariat today, from here and here and here.  And of course it could be true.



Here's a awful possibility.  Perhaps when President Obama said "you didn't build that" the American people agreed with him.  Perhaps when Joe Soptic complained about Mitt Romney not caring about his cancer-riddled wife, the president reached the forelock-touching peasant in all of us, who just wants to vote for a president that "cares about people like me."



If that is so, then Mitt Romney's goose is cooked, and so is the goose of the American people.  Because we are entering the end-game of the liberal welfare state, and there is no more money.



If the game is up, you would still expect a lot of people to vote for a man who promises to make the rich pay a little more so that they can continue to receive their entitlement benefits.  The French people just voted decisively for that, and we will see what will result.  On my view, increased taxes to pay for more entitlements is just more looting, the basis of the liberal entitlement state.  When you keep the looting down to a dull roar, you can have a prosperous society.  But when you crank it up, it just hastens the day of collapse: sovereign debt default, inflation, and asset seizure.



It is still understandable that most people would like to put off the evil day when the entitlements run out, government employees get laid off, grannie goes over a cliff, and the underclass goes back to work.



But if the American people want a path out of the liberal death spiral, then they have a candidate in Mitt Romney who, by temperament, experience, and principle, will give it to them.



We humans live by hope.  That's why when Pandora opened her box, and all the evil in the world flew out, there was still Hope left behind.  But the truth about life is that everything doesn't get kissed all better and tucked in by bedtime.  The human story is a story of great achievement--and also great disasters.  Sometimes the only way forward is through the searing heat of the furnace crucible where everything gets melted down and only then recast.



Look at China.  Dynasty after dynasty has started out young and vigorous and ended up unable to pay its bills and field a decent army when the latest version of the Mongols swarms over the border.  Why?  Because the state revenue ends up getting pissed away on special interests and regime supporters rather than vital services.



Today our American experiment is in peril because the regime has promised unsustainable entitlements to millions of people.  In consequence vital services are going unfunded, the financial system is getting wrecked, and resources are getting sucked away from growth and investment into pension payments to regime supporters.



Stein's Law applies.  If a thing cannot go on forever, it will stop.  The Fram oil-filter guy is still right.  You can pay me now, or pay me later.



And people will still panic on Friday.