Watch public policy even for a short while and the trick becomes evident. Whether we’re talking my hometown of Tiverton, Rhode Island, (population 15,780) or the federal government, the maneuver is to claim increasing amounts of power and make sure that’s the one thing not on the table when something has to give.
Thus, we get massive government interwoven like a terrible tumor around the vital organs of our economy. When the predictable illness follows, the two operations suggested, as if in opposition, are cuts on the spending side and increases on the revenue side.
Either, we’re told, is apt to drive the patient into shock. The government can take money out of the economy through taxes, or it can stop putting money into the economy via cuts. That’s not much of a choice.
We can argue efficiencies and concoct elaborate plans that best manage pain. But no matter how many news cycles it takes the politicians to bring the public around to the preordained conclusion, the final prescription will be that more room must be made for the growth of government. And that means raising the debt ceiling.
Notice what’s not included in this description. Money is not the only measurement of government. Intrusiveness — mostly regulation — is part of the tumor, too.
The mythic “balanced solution” to the U.S. government’s fiscal cliff problem has more tools than just cuts, taxes, and debt. Hidden discreetly below the table is the complete set of power grabs that make it more difficult for Americans to work and to spend. On the sharp end are rules that hinder our efforts to make that which we’re inclined to produce; on the dull end are rules that prevent us from buying that which we’re inclined to purchase.
To see the path away from the fiscal cliff, throw a century’s worth of data on a line graph, including GDP, government debt, total stock market capitalization, consumer credit, and (of course) inflation. The numbers are apt to blur in the eyes, but the lines bring things into focus.
There lies the ascendance of the stock market. Here national debt leaves inflation behind. Here are hints of the maturation of credit cards. And there stocks disengage from the harmonious half-century of gradual slope; they race ahead and fall back and race ahead and fall back and then completely absorb two trillion dollars in debt while GDP stagnates.
But interplay and blame are not the important topics, with mere months until the next horrid decision must be made. The relevant lessons may be found in the years overseen by Presidents Reagan and Clinton.
For all the justified adulation that conservatives cast back in time to Reagan, there’s no getting around the observation that the government over which he presided bent the upward inflection point more sharply into national debt. Only because the new millennium brought even greater lurches do the ‘80s look moderate on this count.
At the same time, however, tax cuts and trimming of government regulations made it easier to engage in productive commerce. In short, the government transported wealth from future generations, and public policy allowed the debtors’ ancestors to put the new money to productive use.
Such an economy runs with a powerful engine, but it’s hard to get off.
When the Clinton administration took the wheel, a different debt became the fuel. Finance-industry deregulation allowed new instruments to capitalize the future mortgage payments of people who were unlikely to be able to make those payments. The government-sponsored Fannie Mae and Freddie Mac gave this speculative source of future wealth the security of government backing, and investors brought a corresponding amount of their own resources into the mix.
But less of the newly active money went to GDP and more to investment. When the gamble crashed in the late ’00s, government stimulus inflated the stock market back to its previous heights while productive activity effectively stagnated.
The lessons are, first, that there is more wealth in the economy than is presently counted in dollars and, second, that wealth and inflation are mobile within the economy. The solution to our current conundrum is to draw unused wealth and productivity into circulation and wean ourselves from government debt.
The closed-door negotiations concerning the cliff shouldn’t be an exchange of revenue chips for spending chips; it should be an exchange of fiscal relaxation for regulatory loosening and safety-net tightening. Raise the debt ceiling for a while, but with the conditions that neither taxes nor spending increase and that Americans are given opportunity and incentive to invest and to be economically productive by means of policy changes that aren’t typically part of this conversation.
Such a strategy will be insufficient in the long run, mainly because it does not address the larger problem of a slowing population’s addiction to acceleration. But it might just give the patient enough time to tackle life’s tougher questions.
In this case, though, the devil isn’t so much in the details as in the existential imperative of a tumor to grow.