Do We Want More of the Same?

 

Most of the time on this blog I address what I consider to be our country’s two biggest fiscal and economic problems: 1) economic growth which, at 2% per year for the past seven years, is too slow to create enough new jobs and higher wages for middle- and lower-income workers and 2) massive and rapidly growing debt, now at 75% of GDP, the highest since the end of WWII.
But from time to time I take a broader look such as:

  • James Piereson’s contention that the New Deal liberal consensus has broken down and we are headed for America’s Fourth Revolution.
  • Yuval Levin’s argument that both progressives and conservatives are stuck with a mid-twentieth century nostalgia to which it is impossible to return.
  • Senator Mike Lee’s (R, Utah) belief that Congress is itself responsible for its shrinking powers vis-à-vis the President and the Supreme Court.

Along this line, Yuval Levin and Ramesh Ponnuru have a powerful essay in the latest issue of the National Review saying that “Mainstream liberals now advance a vision of American government that is increasingly contemptuous of our system’s democratic character and seeks to break through the restraints of the constitutional system in pursuit of their policy ends.”

capture64This vision is advanced in three key ways:

  • Executive unilateralism, for example, by President Obama with respect to status of illegal immigrants, various suspensions and waivers in the implementation of the Affordable Care Act, and net neutrality regulations.
  • The administrative state referring to the tangle of regulatory agencies that populate the executive branch. These agencies issue thousands of regulations per year which, given the vagueness of major legislation, means that the agencies legislate through their rules. Examples are the immense power of the Environmental Protection Agency and the implementation of the Dodd-Frank financial-regulatory reforms.
  • Liberal judicial philosophy understands the courts to be in the business of advancing what is properly understood as a legislative agenda. For example, two Supreme Court cases, a health-care related case (King vs Burwell) and a same-sex-marriage case (Obergefell vs Hodges) turned out this way.

Conclude Messrs. Levin and Ponnuru: “That the constitution makes the work of progressive ideologues frustrating is not an excuse for ignoring and subverting it. Arguments for doing so amount to unprincipled excuses for lawlessness.”

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How Will America Solve Its Biggest Problems?

 

As I repeat over and over again, our two biggest national problems, in my opinion, are slow economic growth (only 2.1% annual increases in GDP for the past seven years) and massive public debt (now 74% of GDP, the highest it has been since right after WWII).
Capture11Are these problems being addressed by our political system?

  • Our 2016 presidential race is clearly touching on them to some extent. The “Sandernistas” think that the Obama economic policies are not progressive enough and need to be doubled down on. Middle-income “Trumpsters” are revolting against the stagnant and falling wage growth of the past fifteen years.
  • The political scientist James Piereson thinks that the Democratic-welfare regime, in place since 1932, has now run its course and will necessarily be superseded by America’s Fourth Revolution which is imminent.
  • The social scientist Yuval Levin thinks that our “Fractured Republic” can heal itself peacefully if the left is willing to accept a less centralized, more federalist, governmental approach to solving economic and fiscal problems and the right is willing to accept that modern America is highly diverse and individualistic and where a significant degree of cultural fracturing, family breakdown and estrangement from tradition are inevitable.

My own opinion is that our huge and rapidly growing public debt (on which we pay interest) is unsustainable and will lead to another crisis much worse than the Great Recession of 2008-2009 unless it is curtailed. Without an adequate response in the meantime, the new crisis will occur when interest rates inevitably rise significantly and therefore lead to huge increases in interest payments on our larger and larger accumulated debt.
To avoid such a calamity we need to do a much better job of controlling federal spending.  It would also help to speed up economic growth in order to increase tax revenue.  Furthermore, faster growth would create more jobs and better paying jobs.  This would take much of the steam out of the appeal of populist candidates such as Bernie Sanders and Donald Trump.
I can’t foresee exactly how we will be forced to change course but it’s going to happen fairly soon.

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The Fractured Republic II. Where Do We Go From Here?

 

I normally take what I consider to be a straightforward non-ideological approach to solving our country’s major problems. But in my last post, “The Fractured Republic,” I consider a larger framework constructed by the writer, Yuval Levin, who argues that both conservatives and progressives are stuck in nostalgia for a mid-twentieth century way of life to which it is impossible to return. As Mr. Levin points out, the last 100 years of American life have seen a consistent pattern of

  • Drawing together and then pulling apart. Three particular aspects of this phenomenon are pictured in the three charts below concerning immigration, political polarization and income inequality.
    Capture14
    Capture16Capture15
  • Midcentury America straddling two broad trends: a consolidated society actively combatting some of its least attractive downsides like institutional racism, sexism, cultural conformity and a dearth of economic freedom.
  • A diffuse and still diffusing democracy. The problems we face today are the price of progress. In liberating many individuals from oppressive social constraints, we have unmoored them from their communities, work and faith. In accepting a profusion of options, we have unraveled the established institutions of an earlier era.
  • Hollowing out of the middle layers of American society has resulted from the diffusing and polarization of our national life. Solutions need to involve a recovery of these middle layers by means that are consistent with diffusion, diversity and decentralization.

These four conclusions about the current state of our society point towards an agenda for renewal:

  • The left will have to accept that the modern U.S. economy is decentralized, with diminished union power, higher income inequality, where cultural and economic pressures work against class mobility and large, centralized federal programs are a poor fit.
  • The right will have to accept that modern American society is highly diverse, individualistic, dynamic and deconsolidated where a significant degree of cultural fracturing, family breakdown and estrangement from tradition and religion is a fact of life.

Conclusion: Very succinctly, American social and economic progress in the future will require conservatives to accept ever expanding cultural pluralism (e.g. gay marriage and transgender rights) and progressives to accept a greater degree of economic freedom and decentralization.

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The Fractured Republic

 

As readers of this blog will recognize, most of the time I write about what I consider to be America’s two major fiscal and economic problems at the present time: the slow growth of our economy (only 2.1% per year for the past seven years) and our massive and rapidly growing national debt (the public debt, on which we pay interest, is now 74% of GDP, highest since the end of WWII).
Every once in a while, I step back and take a broader view.  For example, last summer I reported on a new book by James Piereson, “Shattered Consensus: the Rise and Decline of America’s Postwar Political Order” which makes a strong case that only a new revolution, the fourth in our history, will suffice to turn our troubling fiscal and economic situation around.
Capture11Today I report on a book by Yuval Levin, of the Ethics and Public Policy Center, “The Fractured Republic,” which sees our current political paralysis as a result of nostalgia for the cohesive and unified America which emerged from the Great Depression and WWII.
Partisans on both sides of the political wars, both conservatives and progressives, want a reversal of some portion of the great changes in American life which have defined the postwar years, perhaps because American society has now achieved such a “perilous mix of over-centralization and hyper-individualism.”
“Progressives treasure the social liberation, cultural diversification, and expressive individualism of our time, but lament the economic dislocation and the rise of inequality and fragmentation. … Conservatives celebrate the economic liberalization, dynamism and prosperity, but lament the social instability, moral disorder, cultural breakdown and weakening of fundamental institutions and traditions.”
Mr. Levin sees a possible way out of our current conundrum which need not involve the revolution which Mr. Piereson foresees.  Basically he argues for a modernized politics of “subsidiarity,” a movement towards decentralization in our public affairs.
Stay tuned for more details!

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After Donald Trump

 

It looks more and more likely that Hillary Clinton will be our next President. She is almost certain to be the Democratic nominee and unlikely to be indicted for mishandling classified information.  If Donald Trump is the Republican nominee, she will trounce him because his negatives are much worse than hers.  If Mr. Trump is denied the Republican nomination, he is likely to run as an independent candidate and take votes away from the Republican nominee, thereby also electing Mrs. Clinton.
Capture0What happens then?  The Republicans will regroup by broadening their base to better appeal to Mr. Trump’s constituency of disaffected white working class voters.  Yuval Levin, editor of National Affairs, has visualized what policies a reconstituted conservative party might want to embrace to replace the no longer affordable progressive model:

  • Healthcare: a new approach would liberate insurers and providers to offer many different models of coverage and care and empower consumers to choose between them.
  • K-12 Education: a new approach would allow parents to make choices for their children and reshape the educational system around their preferences.
  • Welfare: a new system would empower local problem solvers to mix resources, advice, experience and moral leadership in a process of bottom-up experimentation.
  • Higher Education: a new model would no longer reinforce a cycle of rising tuition and declining value with inflationary federal loans. Rather it would open up accreditation to allow for more options and offer aid to the needy which rewards high value rather than high prices.
  • Cultural Issues: moral traditionalists should emphasize building cohesive and attractive subcultures, offering alternatives to the chaos of the mainstream permissive society.
  • Diminished Opportunity for the Working Class: Improvements to Trade Adjustment Assistance and Job Retraining programs (wage insurance?) will have to be embraced.

Conclusion. The disruption caused by Donald Trump could lead to a new and more broadly based Republican Party better equipped to address the emerging problems of the 21st century.

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Beyond ObamaCare: Where Do We Go From Here?

Last Sunday’s Washington Post has an Op Ed column by Jon Kingsdale, “Beyond Healthcare.gov, Obamacare’s Other Challenges” which describes the many challenges confronting ObamaCare besides just the website problems and the millions of individual policies which will be cancelled for not meeting the minimum requirements of the Affordable Care Act.  Based on his experience setting up the Massachusetts Health Insurance Exchange from 2006-2010, there will  be huge problems in getting enrollment, billing and premium collections working smoothly for such a large government program.  For example, an estimated 27% of those who will be eligible for tax credits under the ACA do not have checking accounts.  How will their monthly premiums be paid and tracked for these people if they’re late?
Considering all of the problems involved in the implementation of ObamaCare, and the fact that it does not really reform our current very costly healthcare system but rather just extends it to cover more people, it makes much sense to move toward real healthcare reform, which will control costs.
A column in today’s Wall Street Journal by Ramesh Ponnuru and Yuval Levin, “A Conservative Alternative to ObamaCare”, lays out several basic features which should be included in a sensible, market oriented approach to healthcare reform.   The principles are:

  • A flat and universal tax credit for coverage which applies to everyone and not just for employer provided healthcare.  The (refundable) credit would be roughly the amount necessary for catastrophic coverage.
  • Medicaid could be converted into a means-based addition to this tax credit.
  • Everyone with continuous coverage (which would be provided by the tax credit) would be protected from price spikes or cancellations if they get sick.  This provides a strong incentive to buy and retain coverage without the need for a mandate.

A market oriented healthcare system like this is not only preferable to all of the mandates and restrictions of Obamacare, it also improves our current system by both expanding coverage to more people as well as controlling costs by giving health consumers (all of us) a much bigger stake in purchasing healthcare.
The United States spends 18% of GDP on healthcare, twice as much as any other country in the world.  Our fiscal stability and future prosperity depend on getting this huge and growing cost under control.  The ObamaCare fiasco provides an excellent opportunity to get started on doing this.