Today's musing minute - some big picture observations

 

Some big picture thinking. Feeling very sad and frustrated and trying to figure out why.

There is a certain grieving process that comes with the realization that valuable wisdom has been lost. 

One does not have to believe naively in the good old days to realize that there was a time in America, not so long ago, when most people understood in basic terms how markets worked. Millions flocked to this country to pursue the opportunities available from largely free markets. There was a basic understanding, an adult understanding, that the way out of poverty was through the enhancement of individual abilities. Hence the commitment to education and hard work. 

Up until the twentieth century there was a widespread suspicion of government, of its ability to “fix” social problems, and of its susceptibility to corruption and of false beliefs in its prowess. And though the size of government was creeping up throughout the nineteenth century, it was the Great Depression and FDR that really punctured this basic understanding. The events that led to this sea change were the creation of the Federal Reserve System in 1913, which precipitated the boom of the 1920’s, aggravated the bust that followed and then facilitated the accelerating growth of government that has been the lingering response to it. The widespread myth that the New Deal was the cure for the Depression and the foundation of a more solid approach to economic policy, is almost universal among Americans living today, and is part of the conventional wisdom embedded in the history textbooks used to educate our children. 

This “new economics”, supported by the “Keynesian revolution” that invented macroeconomics, became the new orthodoxy that undergirded economic policy. JFK could unselfconsciously commit to “balancing the economy” rather than worrying about “balancing the budget” and Richard Nixon could famously declare “we are all Keynesians now”. Old style fiscal responsibility was thought to have been unnecessary and actually irresponsible. A new vision for what was possible and necessary for government to do had displaced it. And with a vengeance, with a euphotic commitment by LBJ to create a “Great Society”, to banish poverty forever. 

The heady days of the civil rights era of the 1960’s heralded a massive expansion in government spending and responsibility – with three wars, the war in Vietnam (to make the world safe for Democracy), the war against poverty and the war on drugs. All three of these “wars” have been lost, but this has been admitted for only the first (America lost the Vietnam war, but won the peace as Vietnam has been conquered by the American example of free-enterprise to become one of the fastest developing countries of the region). 

The war on poverty has apparently been lost. How else to explain that some fifty years after it was declared, we have more anti-poverty programs on the books than ever? The new $2trillion relief bill is adding still more. And the war on drugs has been lost as well. The number of users and producers has increased and the costs of this “war” - monetary, emotional, social and political - are out of control. Ironically, these two wars are themselves responsible for the perpetuation of poverty where it still exists. To be sure, poverty in America and in the world, has decreased dramatically, and continues, in a non-pandemic world, to do so. But this is a result of growing world trade, in spite of welfare-state anti-poverty dependency-creating programs, debilitating crime-producing drug wars, and abysmal failures of public education, not because of them. 

A glimmer of hope came in 1980 with the election of president Ronald Reagan (and Margaret Thatcher in the UK). With all the imperfections that attended the Reagan terms, it was a time of recurrent disillusionment about the promise of big government policies. Reagan’s proclamation that the “government is the problem not the solution” resonated loudly and got him elected at a time of high unemployment and inflation that was attribted to the failure of the “new economics” and promised a return to the wisdom of an earlier period. This coincided with my own story. I was (1972-6) a Ph.D. student at the University of Chicago, thoroughly disillusioned with the performance of Keynesian economic policy and encouraged later by Reagan’s election. I naively believed that the “experiment” of the post-war period had once again shown the wisdom of classical liberal economic policy. 

I think it is true to say that the post-Reagan period of the twentieth century, dubbed the “Great Moderation”, was one, not only of sustained and stable economic growth, but was also one of relative unity and consensus among Americans at large. Of course, the usual divides regarding the proper role of government and related matters continued to energize popular and intellectual discussions. But it was, certainly relative to today, a period of peaceful public discourse to accompany the enduring prosperity being experienced. This came to an end with the recession beginning in March of 2001. The end of the Great Moderation is popularly dated as the onset of the Great Recession in late 2007, but I believe this is wrong and the economic fluctuations during the period 2001-2008 are connected. To my consternation, George Bush, the younger, articulated a return to discredited Keynesian economic policy in order to deal with the dot.com bust and the recession starting in 2001. And from that time onward it has been downhill toward an accelerating embrace of big government policies accompanied by an accelerating and deafening deterioration in abusive public discourse. 

It needs to be noted that for all the reassurances of the Reagan-Bush-Clinton period, only minor progress was made at dismantling the overbearing welfare-state apparatus that the Great Society had created. Reagan succeeded in partially reforming the tax structure, and Clinton succeeded in significantly reforming much of the welfare system by making the states responsible for them. But, perhaps, this failure to affect most of the welfare-state apparatus, was somewhat obscured by the Great Moderation. It was clear, however, that the war on poverty was not working, and, in fact, had made things worse. Poverty in America is disproportionately significant among black families. The data unambiguously show that from the mid-1960’s onwards, the financial health and security of black families has, on average, declined – by any of the common metrics one chooses! 

It was the Obama administration, succeeding the ineffectual and disruptive Bush Jr. presidency, that constituted the real beginning of a ramping up of the earlier trend toward big government macroeconomic and welfare-state programs, and, significantly, with it, the concerted attempt to demonize everything that came before that smacked of any disagreement with the Progressive turn. Obama seemed incapable of making any presidential pronouncement without alluding to, what he saw as, the deep fundamental racial, economic, gender, fissures that characterized American society. Obama, coming to power on the promise of being the eloquent unifier, turned out to be the most divisive president of the post WWII period – up to that point. We should not forget just how superciliously, subversive his pontifications were in helping to sow the seeds of the resentment, envy and victimhood, that gets worse by the day. 

Notably, Obama started reversing and now Biden is in the further process of reversing, the Clinton era achievements which dramatically reduced the welfare rolls. And we should not forget the fiasco of Obamacare that continues to plague us.

Donald Trump was not so much a perpetrator of division, though he certainly was that, as the crudest and most primitive reaction to it. He was elected by a festering anger at the “excesses” and “heresies” of the Obama administration and the promise of more and worse to come from Hillary. In that perspective, Trump was a tumultuous reactionary and temporary hiatus in the march toward the society of woke recrimination and Q’anon insanity. 

And now, the goofy Biden is dancing to the tune of the vigorously ascendant Progressives. The $2T relief bill embodies some, but by no means all, of the looming agenda. Just the other day Paul Krugman (in the increasingly woke NYT) triumphantly declared that the days of “government is the problem not the solution” are over. And, most reasonable people tragically do not have a clue as to what it really represents. And I find myself at a loss to explain it to them. They won’t do the work necessary to understand it. They see it as a hodgepodge of partly reasonable compassionate legislative initiatives, albeit partisan in motivation (but what else is new?) that reasonable people can disagree about, but not as any subversion of fundamental American principles that could do much harm. The truth is that while world trade will hopefully continue to grow, and poverty generally will continue to decline, certain elements of our population, the most vulnerable and long suffering, will have their progress inhibited, sometimes prevented, by the Progressive destruction of adult economic and social policies. They will be rendered even more dependent on the state, more patronized, facing fewer opportunities for advancement, in an economy whose growth will be stifled by high taxes and financial instability. 

This is what makes me sad and frustrated.