A number of my regulars have asked me why I don’t blog about politics as much as I used to.
Fundamentally, it’s because I think the value of political persuasion is decreasing fast. Political persuasion matters most when when policy options are relatively open and unconstrained by objective conditions that politics cannot alter. It matters less when policy options are more constrained, and not at all when there are no choices left.
The political system I have been criticizing all my adult life is fast approaching the point of “no choices left”. And not just in the U.S., either; the same problems of political overcommitment and structural insolvency are playing out in advanced nations all over the planet.
Politics as we know it has had a structural problem for a long time; the self-destructive interest-group scramble that Mancur Olson identified in The Logic of Collective Action continually makes parasitic demands beyond the capacity of the underlying economy to supply, and the difference has to be papered over by massive government borrowing.
This is all very well until, as Margaret Thatcher put it about socialism, “you run out of other peoples’ money.” The system is reaching that point now. Bond investors are figuring out that the debt load has become impossible and are increasingly refusing to either purchase new debt or roll over existing paper. The muni and state-bond market in the U.S. is near-moribund, and the threat of sovereign debt default is tearing the Euro zone apart. U.S Treasuries increasingly look like Wile E. Coyote running in midair; they’ll keep selling only as long as nobody actually looks down.
I described the underlying structural problem in Some Iron Laws of political Economics. I laid out more of the logic in Timing the Entitlements Crash. I described the near-term fiscal consequences in Other Peoples’ Money and Social Security and the Fiscal Event Horizon – and it’s at this point a minor miracle that my prediction of a T-bond debt-rating downgrade hasn’t already come true. Goddess knows what kind of pressure the Feds are putting on the ratings agencies.
Insolvency is no longer a sporadic problem, it’s become pervasive at all levels of government everywhere. This is why the recent brouhaha in Wisconsin was so surreal. The public-employee unions weren’t just rearranging the deck chairs on a sinking Titanic, they were fighting to preserve their right to bore more holes in the hull.
When these are the objective conditions, what point is there in arguing that the whole system is corrupt and that middle-class entitlements have to go on the scrap-heap along with every other big-government program? It’s going to happen anyway soon enough. A year ago the U.S. government was only taking in a third of what it needed to cover annual outlays; today it’s so much worse that individual monthly deficits are larger than the entire Bush administration’s. The money’s all gone. Our options are closing down to default or hyperinflation.
It’s going to get ugly out there. A lot of old people are either not going to get their pensions and Social Security at all or get them in hyperinflated dollars that won’t be worth anything. Anyone else dependent on government transfer payments will be similarly screwed. Urban poor, farmers, veterans, the list goes on. Imagine the backlash when that really hits – when it sinks in that the promises were lies, the bubble has popped, the Ponzi scheme is over.
And if you’re prone to schadenfreude, you’ll at least have this consolation: at least here in the U.S. we have favorable demographics with a productive age cohort that will keep rising until 2050. Elsewhere, notably in Europe and Japan, the crash will be far, far worse.
There’s a not a lot of point in arguing about the aftermath, either. Whatever survives the worldwide crash in government finances is going to look like austere, minimalist night-watchman states simply because they will no longer be able to borrow the money to spend at anywhere near today’s levels.
Reality is about to smash the dreams of the world’s collectivists like the hammer of an angry god. They won’t even have the right categories to think about a world in which government is not defined and legitimized by its ability to hand out goodies and entitlements like so much addictive candy.
So…Argue about politics? Not me, not much. What would the point be, anymore?