Clearly, we have reached the economic equivalent of the collapse of Communism. The government entitlements that fuel the power of the Democratic Party have become, in the now fashionable term, unsustainable.
In the short term, the Democrats may indeed win elections by appealing to voters’ fear that the Republicans will take away the programs to which they have become hopelessly addicted. But in the long run, the Democratic Party’s appeal of providing people with more and more “free” goodies will hit the brick wall of bancruptcy and debt.
Historian Walter Russell Mead explains how we and the Europeans got into this situation:
…Jumping the shark, as many readers know, is an expression from the wonderful world of TV. When the original premise of a show has gone stale, producers try to recapture audience interest by putting familiar characters in outlandish settings where strange things happen to them — notoriously, when Fonzie literally jumped over a shark as Happy Days moved into its sunset years. When something jumps the shark, the death spiral has become irretrievable; the show has nowhere to go but down.
The progressive ideal of the last 100 years is reaching that point. In its day the progressive ideal was a revolutionary and even a noble one. A bureaucratic and professional elite would mediate social conflict between rich and poor, improving the lives of the poor while engineering the best possible administrative solutions to pressing social problems. Keynesian macroeconomic management would ensure lasting prosperity; progressive taxation would spread the benefits of prosperity as widely as possible. Levels of education would rise as more and more Americans spent more and more years in school.
Progressivism held out the hope that capitalism, democracy and history itself could all be tamed by competent professional management. Victorian capitalism had been brutal, disruptive, competitive. Society became more unequal even as living standards gradually rose. Democracy was irresistible, but the masses were uneducated. The modern progressive era was born at times of great violence and upheaval. World War One, the Russian Revolution, the Great Depression, the rise of fascism, World War Two, the invention of nuclear weapons and the start of the Cold War: it was against this background that progressives sought to turn modern life into something safe and tame.
I cannot blame four generations of progressive intellectuals for trying to make life a little less brutal and unpredictable, nor should we overlook the successes they had. Nevertheless, the Fonz has left the building; the progressive paradigm today can no longer serve as the basis for sound national policy…
[Let] us look at the stages of life in a progressive government program.
In the first stage of a government program, there’s a terrible social problem that has people wringing their hands. Not enough kids are going to college. Middle class families can’t get home mortgages. The river keeps flooding the town. Sick old people who have worked all their lives are eating cat food in the hobo jungle.
The government offers a solution that will fix the problem at a relatively modest cost. It is the hero cutting the heroine loose from the railroad tracks as the train approaches. It is the Lone Ranger riding into town to fix the bad guys. The government program in this early stage is the Great White Hope: once we get it up and running, people believe, life is going to get better.
Often it does, and a well established and functioning government program makes itself very popular in the next phase. Retirees are cashing Social Security checks, and the cost to those still working is very low. More creditworthy families are building homes because federal market makers are enabling banks to lend more; more homes make for more construction jobs. Life is getting better — and as most people count them the benefits clearly outweigh the costs. In this second stage of life, the Great White Hope becomes the Great White Father in Washington, benignly scattering benefits among an adoring population.
The government program addresses the need it was intended to fill, and the citizens look to their representatives with gratitude and affection. Farmers pocket their subsidy checks, poor parents use their food stamps to feed the kids, first time homeowners get low rate mortgages for pennies down, and old people bask in the glow of Medicare. All is well.
Unfortunately the cycle continues.
In the third stage, the law of diminishing returns sets in. The Army Corps of Engineers has built all the really useful flood control dams, but there is a large bureaucracy committed to building more — and there is a large private sector lobby of dam construction firms that want new business. Perversely, as the value of new projects diminishes, the political forces pushing new projects grow stronger. Bureaucrats rewrite the guidelines, cost-benefit analysts start fudging the numbers to make bad projects look good, and the dam lobby pressures Congress to keep that money flowing regardless of those whiners and complainers mewling about environmental problems and other drawbacks.
At this point the program enters the third stage of life: it is now a Great White Elephant. It is a large and expensive program that does less and less good at a higher and higher cost. Fannie Mae stops helping creditworthy borrowers get affordable mortgages through simple and straightforward processes. Federal housing policy becomes increasingly complex as new layers and levels of subsidy and promotion are tacked on. As the incentives become increasingly misaligned, the country begins to over invest in housing; consumers start buying more house than they need because government support makes housing an attractive investment.
The Elephant process takes place in many ways. Health care programs become inflated with bells and whistles; programs originally intended to provide basic medical care gradually swell into huge and expensive monstrosities. Shouldn’t chiropractic care be covered? Psychiatric care? Acupuncture? And since government is paying for the care shouldn’t it regulate who provides the care through licensing procedures? Costs go up, procedures become more complex; efforts to control costs lead to more red tape.
As life expectancy exploded in the last sixty years, Social Security has morphed from a modest little program aimed at helping people get through the last few years of life with a little bit of dignity into the idea that twenty years of healthy ease should be a social entitlement. Medicare covers more and more treatments for more and more people over longer and longer stretches of time.
Little by little, mission creep sets in. A powerful cluster of interests organizes around the government program. The real estate lobby looks for ways to extend Fannie Mae’s guarantees to more people. Programs and subsidies become steadily more complex, less comprehensible. Successive waves of ‘reform’ generally make things worse as the special interests focus with increasing power and skill on warping the programs to meet their needs and goals.
The fourth stage of life comes when the Great White Elephant morphs into a Great White Shark: a man-eating terror of the deep that ruthlessly attacks anyone who gets in its way. At this stage the government program has moved beyond being wasteful and has become unsustainable…