The Choice: Social Solidarity (and Deficit Spending) or Social Fragmentation

Posted on May 15, 2011


We, and in particular our government officials, are facing a stark choice in the weeks, months and years to come:  either continue investing in a shared American civilization or engage in a ill-thought-out campaign to withdraw our support from such a common society-wide enterprise with a likely catastrophic outcome.  Over the border to the North and across the Atlantic, a muted version of this conflict is being played out though with a somewhat less stark choice between civilization and chaos.  This is not simply an abstract ethical or spiritual crossroads but one that involves dollars and cents.  There is however a connection between the inner moral and cognitive side of this monumental choice and material investments in infrastructure, capital goods. and service provision.

The immediate occasion for this choice are political and cultural conflicts surrounding public and private debt and how we evaluate and handle our current and future debts.  There are threats by Republicans in Congress not to vote for to raise the debt ceiling of the government, with potential for catastrophic effects for the world economy, while drastic cuts in government programs are demanded.  Republican leaders in Congress have endorsed “the Ryan Plan” that would gut social programs while extending tax cuts for the rich, all in the name of fiscal austerity.  Rep. Ryan’s plan would hardly cut public debt because of its extremely generous tax cuts for the wealthy.

The trend in the last two years is for those on the political Right to make government debt and spending the scapegoat for all that ails the economy and society more generally.  This conveniently distracts the public from the most obvious causes of our current economic woes including the role of large political donors to Republicans and Democrats (primarily the financial industry) in bringing down the economy in 2007-2008.  The current campaign for fiscal austerity is part of the Right’s longer-standing political program to gut social welfare programs, always citing “government spending” as the phantom that haunts our economy and society more generally.   Bond markets, the ultimate “judges” of the solvency of governments, however are showing no diminished appetite for US government debt, even as a crisis in public debt is being declared by these “Very Serious People” among the Republicans, Democrats and in the media.

The real trajectory of public debt and government spending shows that public debt has risen for a host of reasons that are not cited by the critics of spending.  US public debt has gone up because of defense spending initiated in large part by Republican Administrations, and in particular the last Bush Administration. The last few months of the Bush and Obama Administrations have increased deficit spending as a means to compensate for the effects of the financial crash of 2008 which was caused by a huge credit and debt bubble in the private sector.  Our public spending overall is on an upward trajectory because of the incredibly expensive profit-driven medical system that has been built in the United States, as well as increases in medical spending overall due to technological innovation and an aging population.  Making public debt the scapegoat at this moment in time is a deeply irresponsible political move that distracts from a whole host of real factors that both require spending now and also inflate spending now and most importantly in the future.

Deficit spending, and the concomitant public debt it incurs in bond obligations, is a critical tool of the US government, used by almost every Presidential Administration in recent memory, to respond to some perceived or real social or economic need, often when other financial means, such as sufficient tax revenue or private sector initiative or capability, are lacking.   The mania for tax cuts on the Right since the Reagan administration, has forced the federal government to use more deficit spending and to incur more debt, as the government attempts to address both perceived and real needs that no other agency will address.  It then seems to be a very profound irony then that the proponents of fiscal austerity are often exactly those that advocate lowering taxes and government revenue!

The irony is however not really irony, as the ultimate target of many of these politicians and political operatives is not so much a concern about debt and “spending” in general but cutting a large swath of government programs that do not fit the moral and cognitive universe of the Right, as well as cutting taxes, particularly on businesses and the wealthy.  The fallback position of these politicians and pundits is that the private sector will step in and provide services more efficiently than public institutions.  They conveniently leave out of the discussion that private investment only occurs where there is an opportunity to make a profit; many of the services that government offers are in areas of endeavor where profits are either impossible to make or where a profit-making enterprise would substantially degrade the quality of and/or increase the price of the service being offered.  Delivery of medical services and provision of basic health insurance are examples sectors where a system based on profit-making almost always raises costs.  Often, certain types of business in high risk sectors like energy and transport only become profitable when government provides guarantees or other incentives or boundary conditions which enable that endeavor to proceed and generate profit for private actors in the first place.

The uproar manufactured around public debt is even more shockingly immoral when we consider its timing and those who are manufacturing the uproar.  It was not during the bailouts of the financial system in 2008-2009, with costs totaling by some estimates in excess of $4.7 trillion, that the issue of public debt was raised.  Only after the federal government’s rescue of the major financial players, but not of the lowly homeowners with underwater mortgages, were put in motion, that a full-scale campaign counseling fiscal austerity took place.  By appearances, this campaign was an effort to head off or dampen any efforts by the federal government to help ordinary people via deficit spending, after the rich and powerful had already been saved by the government.  Pete Peterson, the Wall Street billionaire and chief architect of the discourse of fiscal austerity and cutting social welfare, has shown himself to have a differential interest in cutting the welfare state rather than cutting corporate welfare, despite professions to the contrary.

Our government is now ringed by challenges that will have far ranging effects for the American people:  massive long-term unemployment, competition for economic leadership and resources from around the world, climate change, depletion of fossil fuels, an aging population, and rising health care costs.  While the radical Republican Right would have the American people believe that private enterprise and unregulated markets will solve any and all problems, there is scant support for their professed blind faith in “markets”:  markets recognize short-term or, in some limited cases, medium term profitability but tend to punish long-term investment horizons.   CEOs are pressed to show profitability to financial markets in every quarter, making large-scale investments increasingly unattractive.  As our society has become more complex and there has been a need for a solid natural and social scientific basis for many decisions, the federal government has been the source of much of the basic research and data collection that enables our society to function and advance, funded either by tax revenue or via deficit spending and bond issue.

With deficit spending the only means to fund the necessary range of government initiatives to address these challenges, as our government has already been starved of tax revenue and the economy is still fragile, we are faced with a choice between addressing problems that will not by themselves “go away” or ignoring these problems and risking their almost inevitable exacerbation.  The latter choice is the default position for Republican political leaders and their sponsors who see no problem in creating an atmosphere of crisis to push through cuts in programs that they feel stand in the way of their plans to cut taxes and privatize vital services.  Some “more”  revenue should be coming to government in the form of taxes on financial transactions and re-instituting the tax levels of the 1990’s but the same politicians who protest deficit spending vehemently oppose taxes that in particular effect the wealthiest.   The deficit scare has become something of an “old trick” over the last several decades:  the journalist Naomi Klein in her famous book “The Shock Doctrine” has documented how multiple times, various conservative elites have used political or military “shocks” and crisis to push through a long-term but unpopular agenda of making government serve narrow corporate or ideologically “right-wing” interests and cutting taxes on the wealthy.

The laughably romanticized view of business leaders and entrepreneurs and the comically villainous views of government and government functions that one finds in the writings of Ayn Rand are unfortunately the staple of current Right wing policy and even “independent” views in the United States. Rand’s “natural aristocracy” of capitalists is a mirror image of Soviet agitprop that promoted almost exactly the reverse: heroic workers versus dastardly capitalists.  Almost everyone is a “parasite” upon the marvelous creativity of heroic individualists in novels such as Atlas Shrugged.  Popular with the current Right wing, the theory of supply side or “trickle down” economics, where taxes are cut on business and upper income groups to stimulate investment and “job creation”, is based more on Rand’s novelistic license rather than social science findings.  Business leaders and the wealthy will be showered with tax cuts in the hopes that they will use their miraculous creativity to create new industries out of whole cloth.  While this vision is terribly flattering to business leaders and the wealthy, some of whom are the patrons of the political Right, the reality of job creation depends much more upon the ability and willingness of ordinary people to buy goods and services than is admitted in this Randian supply-side vision.

Even more alarming and perhaps influential on the leaders of the Right are the apocalyptic attitudes of these heroes of Rand’s novels, who see the option of social withdrawal and destruction as viable alternatives.  Similarly the Tea Party and leaders of the Republicans in the US Congress seem to feel as though it is their mission and in the best interests of their constituents to dismantle government and the economy rather than to refashion it via careful attention to the reality of the world.  Various efforts to defund government, to slash programs without consideration of the consequences, and now the threat not to raise the debt limit, which will have catastrophic impacts on the US and world economies, are signs of the millenarian tendencies within the current Republic right-wing.  The arrogance of the Right’s apres moi le deluge (after me, the floods) attitude has been lost on most mainstream media commentators so far.

Fundamentally, it appears as though the political Right does not comprehend how to keep an American civilization functional and thriving or refuses, simply for its own strategic political gain, to do what needs to be done to keep our complex society in motion.  The Right too casually dismisses the functions of government, including the vital mechanism of deficit financing of government, in its narrow efforts to hold onto and gain more political power for what it believes might (temporarily) benefit the few and the privileged.   The social support and service functions of government, in funding education, health care, help for the needy, for veterans, arts, and scientific research are treated as expendable or easily replaceable by private initiative when this has almost never been the case.   The Right does not recognize that it and its political patrons benefit almost equally from these functions as do its political opponents in the Center and on the Left.  Furthermore the Right does not seem to understand that these functions cannot simply be excised or easily replaced by other institutions.

I wish it were the case that these views were concentrated only in the fanatical core of the Republican Party, the Tea Party and associated activists but this 30 year long campaign of the political Right has created a penumbra of disaffection with government in the broader population and has pulled in Democrats as well.  President Obama’s rather limp and passionless defenses of government as well as attitude of compromise with the radical Republican Right have strengthened the latter to a point where it dominates Washington’s policy agenda despite Democratic control of both the Senate and the Presidency.   Obama’s health care bill, in content a “moderate Republican” offering modeled on Republican Mitt Romney’s Massachusetts healthcare reform, provided fuel for Republicans to mischaracterize the bill without offering the Democratic base much to applaud.

As government has not sufficiently and clearly demonstrated its ability to help ordinary people in a time of great need, disaffection grows and the Right’s strategy of social disinvestment has found fertile ground with some who have given up on government’s ability to hold America together.  The discourse of self-reliance has always had great appeal in America and the Right’s discourse triggers reflexive agreement even as people ask government to “keep its hands off of my Medicare”.  President Obama has been seen to endorse these views himself, comparing the government currently to a family in hard times that needs to cut its budget.  Furthermore a media consensus among “Very Serious People” that budget “discipline” is sensible reinforces these views.

Despite these headwinds, we are faced now with a choice: to ask our government representatives to recognize the realities of our situation and to continue to invest in the joint American enterprise or to allow a process of social splintering and decay to continue.  This means continuing deficit spending to support vital social services on the federal and state levels and vital investment programs to pull us out of the lingering Great Recession.  States who cannot spend on deficit are now slashing services because of the inability of Washington elites to respond to this crisis.  The false deficit crisis is having its intended effect of laming the government.

Furthermore we must ask the wealthiest to pay their share for the stability and cohesive society that enables them to be part of something bigger than themselves.  To be a rich person in Mexico, for instance, is fraught with dangers that the wealthy in America are almost immune from, such as kidnapping.  A functioning social system is part of what makes wealth enjoyable, and funding government through a progressive tax system is the way that has worked for the last 100 years to enable the emergence of a stable middle class and a comfortable environment for the wealthy to enjoy their lives. Even the bond markets, the supposed “opponents” of social spending, are willing to lend us money at low rates.

We are not the self-sufficient individuals that the Right’s propaganda and various American myths suggest; we depend upon each other and upon a functioning government to keep our society and our lives livable or even prosperous.  We will not all simply retire to self-sufficiency to our private farms or estates or, like Robinson Crusoe, provide for ourselves on a tropical island paradise.  Or, as previously explained, will the tumble of market forces produce the stability and services which our society requires to function well.

The alternative to a government that is “an insurance company with an army” is a society that looks more like “Mad Max” than like a free market utopia.  Increasing income inequality will continue to hollow out the middle class, as more people slip into poverty.  Violence will most probably rise as people see the system as irredeemably rigged against them.  The government will have no way to cushion the inevitable cycles in the market economy, leading to steeper crashes and more frenzied booms.

What is required of us now is a commitment to social solidarity and a functioning, service-providing government, which means in our weakened economic state, a commitment to spend on deficit to prevent the formation of a “lost generation” and build the energy and transport infrastructure for the 21st Century economy.