Monday, July 25, 2011

The Triumph of Politics

America is the only country in the world that has the luxury of creating an economic crisis when there isn't one. Ours is the only democracy with a debt ceiling, with the exception of Denmark, which raises its ceiling well in advance of when it would be reached. Economists say that our "debt crisis" is an unforced error, because people are more than willing to lend us money, at pretty good rates. This is the benefit of having a really good credit score.

And yet there are some who wish to call the credit card company to voluntarily reduce our credit limit after they just max-ed it out. This tells us that politics triumphs economics in this country. That we ended up with so much debt is a result of politics, anyway. For all the talk of budgetary restraint coming from Congress, the fact is it was Congress that authorized all the spending that has brought us to where we are. Yes, every single dime. The only way to explain a Congress which wants to spend, and indeed already has, and also wants now to cap spending, is to understand the pathologies of the budgetary process. Members of Congress have an incentive to bring the pork home, and they have done this for two centuries. They must also defer all redistributive policies to the federal government, because citizens of states are mobile and can escape the reach of state redistributive policies. The collective outcome of this is a federal government that is milked for everything it can give to the states, and on top of that, left to do the dirty redistributive (and regulatory) work that no state can do. The grand paradox is that a Constitution written to exploit jealousy and suspicion in the pursuit of liberty also ended up consolidating a bureaucracy that not even Hamilton could have imagined.

And still we continue apace. Rather than fight politics by taking it away, the libertarian ideology of Grover Norquist is an effort to fight politics with ideology. In the hope that ambition can counteract ambition, this has always been the American way. The Tea Party is deliberately trying to inflict a wound on our financial credibility, by signally to the market that we may choose to default in a roundabout way of forcing us to spend less. And yet for all the talk of "getting our house in order," presumably the whole point of doing so was to restore our financial credibility, which would be better off without a forced financial crisis in the first place.

If we are talking in circles, it is because politics is circular. It is rooted in human nature, messy, dedicated to the short term, and oblivious to the historical accumulation of short-term utility-maximization. But fissiparous politics has also been the guarantee of liberty in America. And the greatest freedom is surely the freedom to make our own mistakes.

1 comment:

Laura Stevens said...

Thanks for this, Elvin. It pretty much captures how I feel. I also appreciated the opening explanation of how our debt ceiling works. I didn't realize the U.S. was so unusual in being able to raise its ceiling ahead of time.
Laura Stevens