Jacob Weisberg is editor-in-chief of the Slate Group. He recently penned a column in the Financial Times, “Washington’s Appetite for Self-Destruction” that has to be one of the most brazen examples of elitist effrontery that anyone has ever openly displayed. His views are so distasteful that you almost have to give him credit for having the courage to reveal them. The Wall Street Journal’s “Best of the Web” parsed his little diatribe recently, but allow me to extend their analysis a bit further, from the Weisberg article:
It is difficult to remember a more dismal moment in American politics. The debt ceiling crisis and the agreement that ended it point to deep dysfunction in our system. In a variety of ways, the episode portends continued short-term economic misery and long-term national decline. It is as if the US chose at the last minute not to commit financial suicide – but only out of preference for a slower, more excruciating form of self-destruction.
This view assumes that politicians determine economic outcomes, which is perhaps the most subtle of his snobbery. Politicians, and particularly, political economists, love to point to their analysis of this or that feature of the economic system as the reason for a particular economic outcome. But no particular or general feature designed and implemented by the politicians and political economists can make the individuals and households in an economy do the things that lead to aggregate economic growth unless the desire of the individuals and households to do so is already present. Political economists and the governments advised by them do not make economies grow. The individuals and households comprising economic systems make them grow or not; all a government can do is lead the economic actors to water, i.e., make the conditions for growth possible. Drinking is entirely up to them. In rich, developed economic systems with old and aging populations, no amount of politico-economic tinkering around the margins will make the old nags dragging them down spry and young again.
The crisis has, however, been clarifying in several respects. We can now say with some confidence that Washington will be doing nothing more to help the ailing economy. President Barack Obama is trying to push an employment agenda. But for the federal government to spur growth or create jobs, it has to spend additional money. The antediluvian Republicans who control Congress do not think that demand can be expanded in this way. They believe that the 2009 stimulus bill, which prevented an even worse economy over the past two years, is responsible for the current weakness. Their approach of depression economics – embedded in the debt ceiling compromise – demands that we address the risk of a double-dip recession by cutting public expenditure immediately.
“Antediluvian” is an interesting way to describe Republicans. It is a word with biblical roots, literally meaning “before the flood”, or in other words, very old. But the faction of Republican representatives who do not believe more deficit spending will help matters ($1.5 trillion or so deficits for the last two years) may be better informed than they are archaic. If the defining attribute of progressiveness is the willingness to try new ideas, then giving fiscal restraint a try might well be perceived as progressive, because doing so would certainly be something new. If deficit spending could “expand demand” as Weisberg believes, then why hasn’t it done so yet? Never mind the 2009 stimulus bill, which is just a fraction of the deficit spending of the last three years. Three trillion dollars or more (and that only includes fiscal deficits, not the monetary system deficits engineered by the Federal Reserve) has been squandered in resurrecting Keynes, yet growth has been anemic, if at all. Perhaps the Republicans are the ones that better understand the new paradigm, the one that Keynes never considered: Deficit spending might be a reasonable prescription for an economy whose population is young and growing (although such has never been empirically proved), but it does nothing but dig a deeper hole of long-run austerity for an economic system whose population has reached stasis or is growing only very slowly, and is getting older faster than it gradually expands. Ireland, Greece and Iceland, et al, are constrained to implement austerity programs, as they are each effectively insolvent; Keynesianism is not an option for them. They are suffering the immediate economic pain the US, most of the rest of Europe, and Japan have been forestalling through government profligacy. But they will be better for it in the long run. Pain delayed is not pain denied.
So instead of trying to pull out of the stall, the US economy will simply have to absorb whatever blow is coming. Some congressional Republicans are just backward, rejecting modern economics on the same basis that they reject Darwin and climate science. Others are cynical, desiring the worst possible economy as an aid to recapturing the White House and Senate in 2012. Still others simply do not believe that government action can ever be a force for good. Whatever their motivations, there is something sad about desperate Americans looking to a party that lacks any inclination to alleviate their misery.
Absorbing economic blows is exactly what is needed. Had the economic blow of failed investment banks and derivatives peddlers been absorbed by the investment banks and derivatives peddlers, the overall crash would likely have been more severe and immediate, but by now, would be over, with the possibility of realistically-sustainable economic performance on the horizon. While the developed world in its present configuration is not likely to ever sustainably again grow economically, the ride down the economic slopes need not be harrowingly steep. The developed world is rich. If it can simply negotiate the decline well enough to avoid wholesale and immediate economic oblivion, it will be doing as well as is possible.
Pretending that the prescriptions of modern economics are as well-settled scientifically as are the tenets of evolution theory is just rhetorical nonsense. Equating modern economic theory to climate science is a good deal closer to the mark. Neither realm has much of anything in the way of falsifiable hypotheses. Expressing pity for that portion of Americans that look to the Republican party to alleviate their misery is over-the-top snobbery. Perhaps these Americans have deduced that government is not capable of alleviating their misery; perhaps it is even the case that they aren’t actually miserable, but are generally happy in their own skins, preferring to rely on their own initiatives to meet the challenges of life, instead of looking to some government nanny for succor.
A second lesson is that Washington will not be doing anything to address the fiscal imbalance that threatens America’s long-term economic vitality. The deal Mr Obama and John Boehner, the Republican House speaker, tentatively agreed in early July was far from perfect, unbalanced in favour of spending cuts over revenues by a ratio of 4:1. But that $4,000bn “grand bargain” would have constituted a serious downpayment on the deficit and sent a strong signal to financial markets that our political establishment took the problem seriously.
Instead we got this week’s sad bargain – a much smaller, deferred and contingent reduction in spending projections. This sends quite a different signal: our political system cannot cope with the difference between what comes in and what goes out. The quandary is now doubly insoluble because closing that gap, by all sensible accounts, requires both higher revenues and reductions in entitlement spending. Faced with Republican intransigence on taxes, Democrats are less likely than ever to give ground on social security or Medicare.
We now also understand that the US is not going to make meaningful investments in its economic future. The conservative position that all spending is evil obliterates any distinction between investment and consumption, between the long term and the short term. The US suffers with an increasingly third-world level of infrastructure, third-tier education system and enormous gaps in the preparedness of its workforce. The debate has now ended; money to upgrade those faltering systems will not be forthcoming. And by the way, the US is not going to take on any other major problems either – immigration, tax reform or climate change, for example. It is not going to do so for the same reason it has failed at sensible economic management: because the Tea Party has a veto.
Just as “articulate” is racist code meant to put an intelligent black person in their place, “Tea Party” is now a pejorative meant to show the ignorance of the whites to whom it applies. If the Tea Party has a veto that is not constitutionally founded, i.e., they have a de facto and not de jure veto, it must be founded in political power. Weisberg would like you to believe that he loves the republic, so much so that he’d like to destroy it by not allowing a certain segment of it have a say in its operation. To blame Democratic refusal to negotiate entitlement reform on Republican intransigence at spending is a bit rich. In either case, the principles of republicanism are working more or less as intended. Just because the side one supports happens not to be winning the argument, does not mean the other side is evil or illegitimate. Deciding political issues in a republican democracy is a dialectical process sometimes taking years to resolve.
Some lessons of the crisis have added significance beyond our shores. One is that America now regards its most solemn financial obligations as flexible commitments. The problem is not just that some members of Congress were willing to contemplate national default. It was that some of them clearly desired default as an ultimate weapon against social spending. The precedent has been set for using America’s credit rating as blackmail. The issue comes up again in less than a year and a half, at which point the masochistic drama of recent weeks could be repeated with a different outcome. This is the way in which the US resembles Greece – not in its underlying creditworthiness, but in making paying its debts a political question.
In the realm of international relations, there are no solemn obligations, financial or otherwise. Repayments of debt, honoring of treaties, etc., have always been a political question. Weisberg is naive if he believes international relationships have any of the ethical foundation commonly associated with individuals within a society. The Ten Commandment prohibition against murder only applied to the killing of people within the Hebrew society to whom it was directed; killing people who didn’t belong to the society is (and was) celebrated as heroic when necessary. In international relations, as the Hebrews ancient and extant were/are well aware, the only ethic is power. So long as the US remains powerful, it can do as it pleases with its international financial obligations. China holds over a trillion dollars of US debt that the US could unilaterally make worthless. What could China do if the US defaulted? The answer at this point in history: Not much. There is another principle at work here: Owe the bank a million dollars and the bank owns you; owe the bank a trillion dollars and you own the bank. So, who do you think owns China, China or the US? In contrast, does Greece own the EU, or does the EU own Greece?
At the level of political culture, we have learnt some other sobering lessons: that compromise is dead and there is no point trying to explain complex matters to the American people. The president has tried this approach and has failed. It has been astonishing to watch Mr Obama’s sheer unwillingness to give up on his opponents after their refusal to work with him on the stimulus package, healthcare reform or the extension of the Bush tax cuts last autumn. A Congress dominated by mindless cannibals is now feasting on a supine president. But surely even he now realises there is no middle ground with antagonists whose only interest is in seeing you humiliated.
Exactly how Obama was humiliated by this debt-ceiling deal, which, as Weisberg pointed out earlier, hardly gave the Republicans all of what they wanted, is not clear. Obama could have perhaps more forcefully argued his case that reining in spending is not the thing now to do, but it’s not clear he would have had the better argument. Does Weisberg mean by saying “that compromise is dead and there is no point trying to explain complex matters to the American people” that Americans are too stupid to compromise? Assuming stupidity in one’s antagonists is never wise. It may very well be that the refusal of Obama’s opponents to compromise (they didn’t, but assuming) reflected their abidingly deep understanding of the political forces at play, and Obama’s acquiescence to some of their demands reflected his pragmatic understanding of the situation as well.
Weisberg’s article is tantamount to the rantings of an ill-tempered child, angry because it didn’t get its way. It is Weisberg, not the American people he derides, that is a cretin.