Smick, the economic consultant, suggests America’s debt crisis is merely part of a growing global phenomenon reflected in an ominous statistic—the world’s public and private debt exceeds “an incredible 300 percent” of global GDP. He says some money managers see this as part of a three-phase “ugly, downward, global mark-to-market in asset prices.” The first phase was the 1990s Asian debt crisis, in which interest rates soared, equity markets fell, banks failed and currencies collapsed. The second phase is happening now in Europe. The third phase will come when it hits the United States. Already, U.S. public debt exceeds 70 percent of the economy—up from just 40 percent in 2008. As the Wall Street Journal writes, “This isn’t as high as Italy or Greece, but it’s rising fast toward the 90% level that begins to debilitate an economy.” With the national debt projected to hit $16.6 trillion this year, that ominous percentage looms.

As columnist Robert J. Samuelson writes, “We Americans fool ourselves if we ignore the parallels between Europe’s problems and our own.” Europe, he explains, faces a crisis of the welfare state, “which has grown too large to be easily supported economically. People can’t live with it—and can’t live without it. The American predicament is little different.”

Samuelson says we are shifting from “giveaway politics” to “takeaway politics.” He points out that from 1960–2010, the share of federal spending dedicated to “payments to individuals” (entitlements, food stamps, etc.) increased from 26 percent to 66 percent. During that time, the tax burden remained relatively stable, increasing from 17.8 percent of GDP to 18.5 percent. How was this possible? Consistently strong economic growth and plenty of young people in the population to support the elderly. It also helped that military spending declined to today’s 20 percent of federal outlays from 52 percent in 1960. That long postwar era was a grand time for citizens who wanted largesse from their government and for politicians who loved giving it to them.

Those days are gone. America doesn’t dominate the world economy as it once did, and the old growth rates aren’t returning anytime soon, particularly with the country’s crushing public debt and traumatized business sector. With baby boomers retiring over the next eighteen years, demographics are no longer favorable. And the transfer of spending from defense to nondefense has largely taken place already—and might have to be reversed depending upon global events. As Samuelson writes, the old governing formula of giveaway politics no longer works, “and politicians face the opposite: taking away—reducing benefits or raising taxes significantly—to prevent government deficits from destabilizing the economy.”

THIS REPRESENTS a major shift in American society, stark evidence of a crumbling Old Order. Yet many in America cling to the old days, holding fast to the status quo as if that could somehow forestall the decline of that heady postwar era when abundance was the norm and a general consensus prevailed over the role of government. The big questions in today’s era of transformational politics are, first, what will replace the Old Order; and second, how much civic instability will attend the transition from old to new.

To understand this, it helps to consider the fault-line domestic issues that have rippled through American history from the beginning. The question of government’s role in society has been at the heart of American politics forever, and an effort to trace this ongoing debate offers insight into what’s happening today.

The debate began with the Federalist Party of George Washington and Alexander Hamilton, which harbored an elitist regard for concentrated federal power. That spawned a countermovement led by Thomas Jefferson, who brought forth new political catchphrases: small government, strict construction of the Constitution, states’ rights, reduced taxes and less intrusion into the lives of citizens. Jefferson’s administration, writes historian Joyce Appleby, spoke for “the rational, self-improving, independent individual who could be counted on to take care of himself and his family provided that intrusive institutions did not interfere.”

Jefferson eliminated internal taxes, cut the size of government, reduced the national debt and sold federal lands at modest prices to foster a growing yeoman class that would build up the nation from below, thus obviating the need for elites to build it from above. His Democratic-Republican Party dominated American politics for the next twenty-four years, but eventually it split into two factions that would become Andrew Jackson’s Democratic Party and the Whig Party of Kentucky’s Henry Clay. Clay wanted federal power in Washington brought to bear boldly on behalf of domestic prosperity. His “American System” included calls for big federal public-works projects; high tariffs to protect manufacturers; support for the magisterial public-private Second Bank of the United States; and federal land sales at high prices to generate federal dollars and hence federal power.

Jackson opposed all this. He believed concentrated governmental power always leads to corruption and abuse. To prevent that, he said, the country must maintain a diffusion of power, keeping it as close to the people as possible. If it were spread out through the polity, it couldn’t be directed toward special favors and privileges for those well-positioned few who always managed to get their hands on such governmental resources. This sentiment was reflected in a message he sent to Congress in vetoing legislation to foster a big federal road project. The people, he said, had a right to expect a “prudent system of expenditure” that would allow the government to “pay the debts of the Union, and authorize the reduction of every tax to as low a point as . . . our national safety and independence will allow.” In principle, he said, he didn’t oppose federal fund transfers to the states for internal improvements decided by them—but never while there was a national debt and never for direct federal projects that went beyond defense and national benefit.

The problem, he explained, was that such expenditures would lead inevitably to “a corrupting influence upon elections” by giving people a sense that their votes could purchase beneficial governmental favors to “make navigable their neighboring creek or river, bring commerce to their doors, and increase the value of their property.” This, he warned, would prove “fatal to just legislation” and the “purity of public men.” (It’s fun to speculate on what the blunt-spoken Jackson would say about today’s congressional earmarks.)

It’s difficult in our time to conceive that Jackson’s ethos largely dominated the country’s political discourse for nearly a century. But in the Republic’s early decades, the central concern was concentrated federal power, and that political sentiment carried forward in large measure until FDR. Abraham Lincoln, in waging his war against Southern secession, vested greater power than ever in the federal government, but he did so in ways designed to ensure that this power concentration didn’t linger beyond the war. Then, at the beginning of the twentieth century, more and more Americans perceived that the industrial era was spawning major problems that required national solutions. The first big initiatives came from the Republican Party, which had become the party of industrialization but also of a slow, progressive awakening.

Theodore Roosevelt was the first to shape the concepts of progressivism into a successful governing philosophy, resurrecting for the new century the politics of Henry Clay—the idea that certain concentrations of federal power were necessary to maintain the country’s prosperity and ensure the well-being of its people. His initiatives included his trust-busting efforts, creation of the Interstate Commerce Commission, and legislation to foster safety in the country’s food supply and drugs. Further such initiatives were pursued by Roosevelt’s successor, William Howard Taft, and by Democrat Woodrow Wilson when he became president in 1913. Still, these were carefully calibrated concentrations of power, and the Jackson sensibility still held considerable sway in American politics.

Then came the Great Depression. In his book on those years, The Crisis of the Old Order, Arthur Schlesinger Jr. makes clear it was a crisis of capitalism. The grand years of the twenties, of unfettered and seemingly unbounded capitalist success, had come crashing down, and a view took hold that a new order would have to emerge. But nobody knew what it might look like, and many foresaw—even advocated—socialism or even Russian-style communism. One leading humanist thinker of the day, Irving Babbitt, speculated that the country might need “the American equivalent of a Mussolini . . . to save us from the equivalent of a Lenin.”

Franklin Roosevelt harbored no such thoughts. The change he had in mind fit within the tradition of American political discourse. But he methodically set about to craft a new order based on a massive new concentration of power in Washington. He viewed a powerful federal government as a necessary agent of economic renewal, but he also saw this power consolidation as a positive good in itself. Thus, he was to leave behind a thoroughly entrenched federal establishment. The Jackson-Clay tension that had animated political discourse through most of American history suddenly tilted heavily toward Clay’s view and then stretched far beyond anything seriously contemplated before.

Image: Pullquote: Many in America cling to the old days, holding fast to the status quo as if that could somehow forestall the decline of that heady postwar era when abundance was the normEssay Types: Essay