Samuelson and Dionne: The Politics of Denial
The Washington Post carried two op-ed pieces last week that framed in a curious way the nature of the presidential campaign that has been gaining intensity in recent weeks and will continue to do so through most of 2012. One was by E.J. Dionne Jr., one of the paper’s mainstay liberal columnists. Its title: “Obama: The conservative in 2012.” The other, entitled “A country in denial about its fiscal future,” was produced by the well-known economics writer and regular Post columnist Robert J. Samuelson.
Samuelson paints a stark picture of the economic cataclysm facing America and of the inability or unwillingness of the political establishment to deal with it. The country, he suggests, is approaching one of those rare inflection points that completely alter the direction of the nation and the terms of its governance. And, if the country’s political class continues to ignore this reality, the current era could be “abruptly ended by a severe economic or financial crisis that wrenches control from elected leaders.”
The problem is the country’s growing mountain of debt, the legacy of more than sixty years of “giveaway politics”—the inexorable trend of politicians distributing more and more benefits to more and more people without expanding tax collections. This remarkable historical period, rare in human history, was possible, first, because of powerful economic growth after World War II and, later, by declining military spending in the post-Cold War period.
Samuelson points out that in 2010, federal spending for “payments to individuals” (Social Security, food stamps, Medicare and the like) soared to 66 percent of the budget from just 26 percent in 1960. Yet the tax burden increased hardly at all in comparison—to 18.5 percent of GDP in 2007 from 17.8 percent in 1960. Meanwhile, however, the share of the federal budget dedicated to military spending dropped to 20 percent today from 52 percent in 1960.
Taken together, this dynamic allowed the government to boost payments to individuals extensively while employing relatively modest budget deficits to bridge the gap between expanding giveaway policies and the intake of taxation. “But now,” writes Samuelson, “this favorable arithmetic has collapsed” under the weight of some major national challenges, notably slower economic growth, an aging population with big claims on federal payment programs and exploding health-care costs (now approaching 26 percent of federal spending and climbing).
“The trouble,” writes Samuelson, “is that, while the economics of giveaway policies have changed, the politics haven’t.” Both Democrats and Republicans refuse to look squarely into this looming crisis, clinging as they do to ongoing spending programs (Democrats) and low taxation (Republicans). But ultimately the giveaway ethos will have to give way to a takeaway outlook; otherwise the country is headed to a reckoning akin to past crises that redefined the nation and set it upon new directions. “Political leaders,” writes Samuelson, “assume that financial markets won’t ever choke on U.S. debt and force higher interest rates, stiff spending cuts and tax increases.” That is a very bad bet.
In other words, the fundamental underpinning of the American political system of the past sixty years is in progressive deterioration. The status quo can’t hold. A new brand of politics will have to emerge for a new era.