The Culture War Over Our Fiscal Crisis

The Culture War Over Our Fiscal Crisis, by Lewis Andrews.

Ever since the fight over who rightfully won the 2000 presidential election, which to many seems like when normal political bickering escalated into something different, the national debt has grown fourfold from $5.5 trillion to almost $22 trillion … [When unfunded liabilites are included, US federal debt is now aorund …] an astonishing $1 million per taxpayer.

The connection between fiscal stress and political polarization is not hard to understand, once we remember that most democratic elections are vote buying exercises. Those on the left are usually more blatant, offering voters some new or enhanced entitlement. But the right has its own expensive priorities and often feels compelled to counter with a leaner version of the Democratic agenda. Both parties claim they can fully pay for their respective promises but ultimately they always end up charging much of it to future generations. …

The left favors power as its political currency, the right prefers competency:

Those who have become dependent on government largesse or who have bet their retirement security on public pensions or who simply lack the skills to prosper are quite naturally attracted to redistributionist ideologies.

Those who already pay most of the income taxes (as well as those who aspire to someday be similarly well-off) prefer for government to raise needed revenue by incentivizing work and investment. …

This is an inevitable future, perhaps soon:

History tells us that the only socially acceptable way for governments to manage unsupportable debt is by spreading the pain as broadly as possible, forcing every interest group — bondholders, taxpayers, recipients of public programs, government employees — to take a hit. That’s not because this approach is fair, but because shared sacrifice is the only way to stop a verbal civil war from becoming a real one.

The central banks will almost certainly do this by inflating the currency towards oblivion, thus “inflating away” the debt. Debtors win, lenders lose, the economy turns to quicksand for a period.

Wheelbarrow of money in 1920s Germany

Things will go wrong, perhaps badly. The German inflation of 1923 was so iniquitous and harsh that it left a lot of society seething — with awful consequences 20 years later.

hat-tip Stephen Neil