Can America Undo Its Purple Compromise?

If something can’t go on forever, Herb Stein instructed us, it won’t. The relief that bad arrangements will not get eternally worse yields once more to alarm, however, when we contemplate how they will stop going on forever. With ample warning before we face mortal peril, and sufficient reservoirs of probity, good will, and intelligence to meet the challenges? Or, as Hemingway wrote, gradually and then suddenly? If it’s the latter, and a gathering storm breaks fiercely, we’ll have bracing opportunities to find out what we’re made of, and may not like what we learn.

“We are broke,” Michael Greve states. Why? Because, “Our operative consensus is to have a big transfer state, and not pay for it.” The effort to satisfy those contradictory desires might go on forever if someone were to discover the policy formula guaranteeing permanent and rapidly growing prosperity. Greve shows how unlikely it is that the government will find and activate that elusive 5% growth button.

Even if he’s wrong, there’s good reason to fear that if the economy builds a 5% levee the polity will just come up with a 6% flood. We humans adroitly use scant and equivocal evidence to convince ourselves that the most congenial interpretation of events is also the most plausible and durable. The defining feature of every bubble is a broad consensus that it’s not a bubble, but the dawn of a new epoch supplanting scarcity with plenty, and lots of it. We happily interpreted just a couple years of the dot-com boom as an all-clear signal to make our transfer state bigger and tax ourselves more lightly to pay for it, before anyone thought hard about whether OvenMitts.com’s business model really justified a stock price 600 times earnings.

“Sooner or later,” Greve advises, the consensus demanding big transfers and disproportionately small taxes “will break one way or the other.” A house divided against itself cannot pay for maintenance. He argues that this contradiction is not a fiscal problem that could be solved by the discovery of more money lying around, but a political problem caused by our chronic, long-term proclivity to demand more from the government than we are prepared to surrender to it. Moreover, this bad habit is not just any old political problem, one we can expect to muddle through the way we have muddled through others, but a constitutional crisis. It calls into question whether the form of the republic, our governmental architecture, and its substance, the people’s convictions about what they’re entitled and obligated to, conduce to the American experiment’s perpetuation or its disintegration.

Our purple compromise, giving blue-staters the social welfare programs they refuse to diminish and red-staters the tax burden they refuse to increase, is untenable. One of the reasons Greve is wise to frame this as a constitutional dilemma is the way questions of governmental competence and social cohesion are bound up in ostensibly fiscal issues. Democrats believe that there’s nothing wrong with our transfer state that couldn’t be solved by adequate revenues. Things were going along fine, in their view, until Howard Jarvis and Ronald Reagan beguiled the people into believing that taxes they had theretofore been willing to pay, in order to enjoy the government benefactions they had been theretofore happy to accept, could be slashed without affecting the benefactions in ways anyone would notice. Things will be fine again, Democrats argue, if we come to our senses, repudiate conservative anti-tax ideology, and restore a fiscally sound transfer state by recommitting to providing it an adequate revenue stream.

That movie suffers from a gaping hole in its plot: If Americans had long displayed the common sense and common decency to align the tax burdens they accepted with the public benefits they expected, and were justifiably satisfied with the resulting policy configuration, how did the preposterous, malicious idea the two could be decoupled ever get taken seriously, much less come to dominate politics at every level? Democrats can only ascribe this bitter, incomprehensible setback to the malevolent cynicism of anti-tax, anti-government Republican politicians and apparatchiks. They discovered how easily sensible, honorable voters could be induced to behave fecklessly and shamefully, and then exploited this knowledge with startling indifference to the resulting fiscal disorder and human suffering.

The last place to look for the guilty party is in a mirror, which is why Democrats have paid so little attention to an obvious alternative theory of the case. By the late 1970s a sizeable number of citizens were amenable to calls to cut Club America’s dues because they were increasingly convinced they had been paying exorbitant amounts while receiving shoddy benefits and imperious attitudes from the hired staff. If America is going to offer K-Mart public benefits – schools that don’t teach; streets that aren’t safe; infrastructure that’s poorly planned, constructed, and maintained – it will at some point become politically impossible to advocate a Neiman Marcus tax code. The social pathologies and governmental imbecilities of the 1960s and ’70s were a predicate for the tax revolt, as voters who despaired of aligning the benefits and burdens of citizenship by improving government’s performance decided the only other way to restore proportionality was by cutting taxes.

The Democratic Party has become the party of government in two senses. It defends: 1) the government’s capacity and duty to solve problems and improve the nation’s quality of life, and 2) the competence, sincerity, and desert of government employees and clients. Democrats are most complacent when they blandly assume these two missions are in perfect harmony. Their tranquility is disturbed when they are forced, as in the recent Chicago school strike, to confront evidence that the missions are at cross-purposes. The public will not trust the government to solve problems or perform basic functions if it cannot trust government to hold itself to rigorous standards, using its resources efficiently and effectively.

This position, which the city’s Democratic mayor embraced, was rejected strenuously by the teachers union, one of the party’s core constituencies. The mayor appealed to the public’s awareness of the kind of data Greve presents, showing that per-pupil expenditures, adjusted for inflation, have soared while student performance has languished. The teachers have a great deal of self-interest motivating them to dispute or disregard such evidence, but a more commendable argument, as well. It is that the schools – and many other public institutions doing less and less with more and more – have not lost the capacity to function, but are being assigned an increasing number of problems more severe and complex than they were built to handle.

Thus, teachers forced to devote most of their day to keeping order among children who have acquired, on mean streets and in random, dysfunctional homes, an ethic that prizes self-assertion but disparages self-control, rightly resent becoming the villains in the story of an educational system that has lost the capacity to educate. By the same token, however, citizens who strive to keep their lives and families intact, to raise respectable and respectful children, feel less and less solidarity with those who disregard those obligations. They chafe at the accusation that they’re greedy or mean for opposing taxes and government programs intended to help those who are so much better at harming than helping themselves.

Greve, then, is right to contend that we face a small-c constitutional crisis. As in the 1780s, we confront the question of whether and how we can govern ourselves. Can we devise and sustain institutions that enable the government to govern while obliging it to control itself? And can we embrace and preserve the ethos of individual self-control and self-respect on which collective self-government rests? The house always wins, as they say in Las Vegas. For 225 years America has defied the odds that saw all of history’s previous republics implode. Sadly, the list of things that can and won’t go on forever includes winning streaks.


The Debt Trap, Part (1)

President Obama didn’t discuss the nation’s massive, swelling debt in his State of the Union address. Mitch Daniels did, and good for him: the flood of red ink really is the Niagara. Our accelerating drift toard the cliff, moreover, entails not only fiscal and economic but also institutional and constitutional consequences of grave import. State and local debts are a comparatively small tributary to the great stream, but they illustrate the point. State and local debts are composed of about upwards of $4 trillion in unfunded pension obligations; upwards of a half-trillion in other pension benefit obligations (mostly for health benefits), also unfunded; and about $2.9 trillion in municipal (state and local bonds). These debts will not be paid (at least not in real dollars), because they cannot be paid. The question is how and to whom our federal system is going to administer the haircut—and what changes it is likely to undergo in the process. Today’s post deals with the background causes and conditions of state debt; tomorrow’s, with federal bailouts; Monday’s, with fiscal federalism’s future. (It’s not the EU. It’s Argentina.) Read more