Green Room

Are the Dems Doomed?

posted at 9:10 am on June 22, 2012 by

That is the question Jonah Goldberg asks after reading Jay Cost’s recent essay for National Affairs titled “The Politics of Loss.” It is an insightful essay; you should read it all because even this extended excerpt does not fully do it justice:

For generations after World War II, both parties agreed implicitly upon a great American share-out: The fantastic growth of the American economy gave politicians in both parties the enviable task of deciding how the annual surplus would be divided, meaning that everybody could be a winner. Republicans could cut taxes and dabble in generous social-welfare benefits; Democrats could distribute generous social-welfare benefits and dabble in tax cuts; both parties could push for an overpowering military; and all the while the annual budget deficit stayed more or less within a tolerable range. It was a true win-win, with political disagreements largely fought over which side would win more.

***

In our time, however, this balance has been upset not only by the severity of the most recent recession, but also by the weakness of the recoveries that have followed the downturns of the past decade. Evidence would suggest that the great American growth machine is sputtering, with forecasts auguring middling growth next year (around 2%), essentially continuing the unimpressive trend of the past decade. And this economic torpor strikes at the worst possible moment: The Baby Boomers — an outsized generation that came about because of the post-war era’s unparalleled prosperity — are now starting to collect on the generous promises that politicians made when they were just children.

The days when lawmakers could give to some Americans without shortchanging others are over; the politics of deciding who loses what, and when and how, is upon us. Neither party yet fully understands the implications of this shift, which means both parties risk being caught unprepared when the economic slowdown forces profound changes in American politics. The great American share-out is coming to an end — and, with it, the rules and norms of our politics that several generations have taken for granted.

Jonah sees the politics of loss as more of a threat to the Democrats:

[T]here’s a key difference between the parties. The Democrats tend to be more traditionally coalitional: If everyone sticks together, everyone gets paid. In the age of austerity, however, zero-sum politics become more of the norm. When one constituency’s victory is another’s loss, the payoff for solidarity diminishes.

However, Jay’s essay presents a more pessimistic outlook:

Popular support for a right-leaning economic agenda depends upon the belief that the free market generates broad prosperity in the long term. In other words, when the average person believes that he is better off in an unfettered market, he will support conservatives — even if a few of his fellow citizens are enjoying unequal shares of the national surplus.

***

When prosperity is lacking, however, liberal Democrats have the upper hand.

Thus, Jay urges “a relentless, unapologetic growth agenda, promoted on the campaign trail and adopted in Washington should Republicans win in 2012.”

Although I have previously addressed the politics of loss, I have yet to be persuaded of either perspective. Although I agree with Jonah that a true fiscal crisis will split the client groups of the Democratic party, the author of The Tyranny of Clichés certainly knows the direction of history is not inevitable. A fiscal crisis would also pose problems for the GOP. For example, Medicare is one of our largest unfunded liabilities and seniors are currently a GOP-leaning demographic. If the GOP cannot achieve entitlement reform before the moment of crisis, the party would be faced with the sort of hard choices that usually cause politicians of any party to make bad policy. Moreover, the current politics of the Eurozone suggest that if the left can fool people into believing the so-called “balanced approach” to debt is actually cutting spending, we could become trapped in the economic quicksand Jay fears.

What surprises me most about Jay’s essay is that in looking for solutions, he did not link the themes of his essay to those of his terrific new book, Spoiled Rotten. In his book, Jay details the history of the Democratic Party, concluding that it has become so captured by its client groups that it is no longer capable of governing in the general public interest. In 1992, Jonathan Rauch coined a term for this: “demosclerosis.” Riffing on Mancur Olson’s The Rise and Decline of Nations, Rauch argued:

Economically speaking, entrenched interest groups slow the adoption of new technology and ideas by clinging to the status quo. They distort the economy, and so reduce its efficiency, by locking out competition and locking in subsidies. As they grow, they suck more of society’s top talent into the redistribution industry. All in all, the economic costs can be very large. ***

The other kind of effect is on government. The accretion of interest groups, and the rise of bickering over scarce resources, Olson feared, can “make societies ungovernable.”

Now the theory’s darker implications come into view. “The logic of the argument implies that countries that have had democratic freedom of organization without upheaval or invasion the longest will suffer the most from growth-repressing organizations and combinations,” Olson wrote. If he is right, then the piling up of entrenched interest groups, each clinging to some favorable deal or subsidy, is an inevitable process as democracies age.

However, occasionally some cataclysmic event — war, perhaps, or revolution — may sweep away an existing government and, with it, the countless cozy arrangements that are protected by interest groups.

Is America headed toward a cataclysm? At the New Criterion, James Piereson considers the possibility:

What, then, is likely to happen? The United States will lurch forward for a few years yet, borrowing still more money to finance our public programs and putting off, for a time, any serious measures to address the problems of spending and debt until some event intervenes to force our hand. The United States has placed itself in a position in which it is vulnerable to any number of unforeseen and uncontrollable events. The bond markets could revolt against increasing levels of debt. Interest rates could rise to ruinous levels. A major bank or two might fail, precipitating a new financial crisis. A war or revolution in the Middle East could cause a spike in oil prices. Terrorists might strike again. We could face a new recession before we have fully recovered from the last one. Europe could go into recession as a result of its own debt crisis, thereby curbing the demand for American exports. Because the United States is already skating on thin ice with little room to maneuver, any or all of these events would bring the current system to a point of crisis where Congress would have to slash spending and renegotiate promises it has made. At this point the United States would enter uncharted political territory.

This would be the ultimate challenge for a political regime organized around public spending and debt. It would immediately lead to a highly charged political situation in which incumbents are voted out of office, interest groups battle to protect their pieces of the budget, and the political parties struggle to keep their electoral coalitions intact. As this process unfolds, Americans may then witness the kinds of events not seen in this country since the 1930s or, even, the 1850s and 1860s: protesters invading the U.S. Capitol, politicians refusing to leave office after they have lost elections, defiance of the Supreme Court, the emergence of new leaders, and, possibly, the formation of new political parties. All of this can be expected from a process in which an entrenched system of politics withers and dies and a new one is gradually organized to take its place.

This level of political turmoil ought to be avoidable. As Jay suggests, a relentless focus on economic growth is crucial. However, conservatives and libertarians need to be more creative in how they think and argue about promoting economic growth. It’s not all about tax cuts. Debt overhang can depress economic growth for decades. Fighting demosclerosis promotes economic growth. The reform and restriction of public-sector unionism (a key factor of demosclerosis) promotes economic growth. The exposure and elimination of crony capitalism promotes economic growth. The right needs to present a unified theory based on the link between economic growth and small-r republicanism.

Jay is also correct in insisting that the emphasis on growth be part of Republican campaigns, although I differ slightly with his reasoning. Jay argues it is important to make a growth agenda part of campaigns so that the GOP has a “mandate” to enact it once in government. In an era of increasing political polarization, it is less clear to me that any party or president will be able to claim a “mandate” to do particular things. Barack Obama campaigned on healthcare, but he ended up with a plan more like Hillary Clinton’s — and even then only because a financial crisis helped sweep sufficient numbers of Democrats into Congress, not because there was any public mandate to enact Obamacare. Nevertheless, campaigns tend to be the most teachable moments in politics, the moments when those who pay little attention to politics pay attention. Moreover, campaign coverage is ultimately driven mostly by the candidates; outside elections, the political environment rests more within the control of cultural, journalistic, and educational institutions controlled by the left. Campaigns at least present the opportunity for the right to make its case with less of a filter than usual.

Are the Dems doomed? To be sure, the politics of loss would present more immediate challenges to the client coalition driving the Democratic Party. Nevertheless, the left retains institutional advantages that would allow them to spin the failure of their “balanced approach” to the debt as a failure of basic principles of fiscal responsibility. The Dems will only lose if the right consistently makes the case that what Walter Russell Mead calls the Blue Social Model is failing not only because it is running out of money, but also because it is a major reason we are running out of money.

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Looking at the crisis in Greece and the way the politicians on the left there have acted, it’s clear that given the moment of decision to face up to the realities of overspending to the point that cuts have to be made a choices have to be selected, the liberals will not make that choice — they would rather kick the can down the road all the way to default and/or anarchy than to admit that their big government model is a failure.

Over here, the ideal situation for the left would be: Let the Republicans be forced to make the cuts, and if they don’t have their desired effects fast enough (which is what happened in 1982, when the results of Reagan’s reforms kicked in too late to save some GOPers in the midterm elections), rush in as the left has in Greece and (to a lesser extent) France, and basically tell the people they can have ice cream for free forever. The one advantage the U.S. has is that thanks to profligate states like California and Illinois, voters may get a chance to see a small-scale version of the problem first, and those in the 48 other states aren’t going to be too fond of shoveling money to the Land of Lincoln or the Golden State so they can keep spending like drunken sailors on their state programs and workers.

jon1979 on June 22, 2012 at 9:35 AM

There is a logical flaw in the CBOs estimates and it is that they assume that by the time government expenditures hit 34% of the economy, the economy will not have already collapsed or that our system of government will not have been overthrown. It’s sort of like looking at your car’s tachometer and thinking ‘At the rate the RPMs are increasing, if I don’t change gears, the engine will be turning at over 20,000rpm in two minutes.’ Only it won’t. The engine will have blown up long before that, scattering parts and oil all over the road.

potkas7 on June 22, 2012 at 9:38 AM

Not as long as the American “Press” has a say about it.

clippermiami on June 22, 2012 at 10:23 AM

Ultimately, everything we are going through right now is part of the transition being made between the old order of the twentieth century, and that which will emerge in the twenty-first century. Yes, we’ve been in the twenty-first for a while, but holdover institutions are persistent until some crisis brings them down. World War I brought down the system of empires that characterized the nineteenth century, and poked that first hole in American isolationism.

Historically, this era may be called the Thatcher Crisis, named for Margaret Thatcher’s quip about socialism eventually running out of other peoples’ money. The social-democratic system that emerged from the twentieth century has met John Galt. For decades, other nations have relentlessly criticized Americans for our more austere ways of government, and our willingness to maintain a Pax Americana. But ultimately, these nations had been able to raid their military budgets to pay for Ministers of Silly Walks because the American economy has undergirded the West, and the American military has kept them safe. All of these could be relied on until November of 2008. With America electing the same kinds of leaders who have plagued Europe, American and other businesses got more conservative with investment. Ayn Rand got one thing wrong: There is no John Galt. There is no organizing force behind capital strikes. Nobody a government can bribe or punish. Capital strikes are completely uncontrollable and spontaneous. Only a return to good policy can end a capital strike.

The temporary loss from the capital strike caused enough of a crisis that leaders and electorates started to look closely enough at the balance sheets to figure out something awful: that even when the undeclared capital strike is over, there will still not be enough left in the private sector to continue to fund the social-democratic Blue Model. Even getting rid of 0bama will not resolve the Thatcher Crisis. There needs to be true reform. No more Ministers of Silly Walks.

Sekhmet on June 22, 2012 at 10:24 AM

The Dems may seem to be the most immediate loser in this, but the Pubbies will lose as well. Crony Capitalism is endemic to both parties and the welfare state has fed the poor as well the “capitalists.” The fall may destroy the Dems, but it may well do the same to the Pubs too.

Not that the Dems don’t need to be destroyed.

Quartermaster on June 22, 2012 at 12:39 PM

Ayn Rand got one thing wrong: There is no John Galt. There is no organizing force behind capital strikes. Nobody a government can bribe or punish. Capital strikes are completely uncontrollable and spontaneous. Only a return to good policy can end a capital strike.
Sekhmet on June 22, 2012 at 10:24 AM

I disagree: the government has a powerful weapon against capital strikes. It’s called a wealth or asset tax. Any individual or company sitting on capital ‘on strike’ can be forced to put it ‘to work for the common good’ (per the government’s approval) or hand it over via the wealth/asset tax. If the leftists get enough power here, and things get bad enough, the phrase “at a certain point you’ve made enough money” (income tax) will become “you can only KEEP so much money” (wealth tax).

Marcola on June 22, 2012 at 1:33 PM

First of all, remember that Obama won by only a 7 point margin in 2008.

crosspatch on June 22, 2012 at 11:04 PM

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Allahpundit on June 23, 2012 at 4:28 PM