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Wednesday, August 22, 2012

Are We Doomed?

Victor Davis Hanson
Seeking a politician with the guts to say, “Stop!”

Sometimes societies find themselves in pernicious cycles in which the perceived medicine seems worse than the known disease. The Roman satirist Juvenal lamented the ill effects of free food and free entertainment for the masses (“bread and circuses”) in part because he knew there was no remedy for the pathology in sight — and thus only a slow decline toward fiscal insolvency or riots were on the horizon. Any Roman emperor bold enough to rein in the Praetorian Guard, charge the mob for grain, and curb gladiatorial shows would earn a usurper marching on Rome from the provinces. So most did not.

When Ronald Reagan sought to end the so-called misery index, he knew that higher interest rates, tax cuts, and efforts to prune entitlements would in the short term lead to higher unemployment, more deficits, slower growth — and growing unpopularity. His recovery came just in time for the 1984 election; just a year earlier Reagan had been demonized as a heartless bastard who had strangled the economy for the benefit of the rich.

We are currently mired in the slowest recovery from any recession in our modern history — and we face the same circular dilemma. A good argument could be made that President Obama’s gargantuan new health-care initiative, federal takeovers of businesses and failed subsidization of green industries, vastly expanded food stamps, unemployment insurance, and disability insurance, and “You didn’t build that business” boilerplate have ossified the private sector. Many businesses have plenty of cash, but their owners are terrified to risk much of it in hiring, buying, or expanding. This results in fewer jobs and slower growth — and again, in this squirrel cage of an economy, yet more need for entitlements.

How to break the cycle of less money coming in, ensuring more money going out? Curbing entitlement spending is critical if we are to rein in debt and foster initiative, but in the short term such sobriety will raise howls of protest from those who are hurting and the legions invested in administering their entitlements. Business incentives are needed to spur growth, but may spike for a time our already unsustainable deficits. Vast new investments in energy production could create real wealth and millions of jobs — but not without eliciting environmental hysteria. Raising interest rates slightly would restore some of the dollar’s value and allow savers to earn something more than the present pittance on their deposits — but it would anger those who are already deeply indebted.

The federalization of the private sector, the constant talk of higher taxes, the demonization of the entrepreneur, and the war against the gas and oil industries seem to ensure an ossified economy that guarantees, in turn, a need for more entitlements that, in turn again, only raise the deficit and slow down the economy further — in a self-perpetuating cycle that cannot be stopped and yet cannot go on. And yet it can go on for a while longer on borrowed money to the benefit of those invested in receiving from big government.

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