The Overton Window.

Posted on June 1, 2023 by jsh54

Joe Overton (1960-2003) died young, but left a durable legacy in American practical political thought. His Dad worked for Dow Chemical, so the family ended up in Midland, Michigan. Joe got a B.S. in Electrical Engineering (Michigan Technological University). Like his Dad, he went to work for Dow Chemical, as an engineer and project manager. Later on, he earned a J.D. from Western Michigan University.[1]

Overton was a Libertarian. He went to work for the recently founded think-tank The Mackinac Center for Public Policy. The Center describes itself as “socially tolerant, economically sophisticated, desiring little government intervention in either their personal or economic affairs.” It advocates for lower taxes, less government regulation, school choice (i.e. charter schools), and right to work laws. On the other hand, it will not involve itself in socially conservative causes like abortion (ending legal abortion), marriage (i.e. marriage equality), or book-banning.

Being economically “free market” and socially liberal, this particular mix of policies fell neither within the Democratic or Republican ideological camps. In short, it couldn’t get a hearing.[2] As a part of his work, Overton worked up a brochure that explained how think-tanks could alter public attitudes toward public policies. He argued that policies were characterized in public discussion roughly on a range from “Unthinkable” to “Acceptable” to “Popular.” Only policies described as “Acceptable” got any discussion; only policies that could be discussed could become “Popular.” Anything that achieved sufficient “Popular” support could become “Policy.” This narrowed range of possibility became known as the “Overton window.”[3]

The resolution of the debt ceiling stand-off leaves the United States on course for a financial catastrophe at some point in the future.[4] With the deficit at 5 percent of Gross Domestic Product (GDP) the United States has the highest ratio of the seven largest advanced economies.[5] Total debt amounts to 97 percent of GDP; in a decade it will increase to about 115 percent. The rise in interest rates that is being used to combat inflation is expanding the weight of government debt on public finances. Those rates have increased the cost of government borrowing from a long period of near zero to five percent; the higher rates may last for a while.

How did we get into this mess? Fundamentally, the country itself is both united on some things and divided on others. It is united on the untouchability of the big drivers of government spending: Defense, Social Security, and Medicare/Medicaid. It is divided over reducing spending, or increasing taxation, or both as a solution to the problem. Clearly, this combination of policies cannot be sustained over the long term.

In short, solving our problems will require shifting or widening the “Overton window.” Neither party seems interested in doing that. It may take “the prospect of being hanged.”

[1] Reportedly “the worst law school in America.” Michael Cohen (yes that Michael Cohen) went there. See: Western Michigan University Cooley Law School – Wikipedia

[2] “Why am I short of attention?/Got a short little span of attention”—Paul Simon, “You Can Call Me Al” (1986).

[3] For two takes, see: How the Politically Unthinkable Can Become Mainstream – The New York Times (nytimes.com) and An Introduction to the Overton Window of Political Possibility – 101 Recommendations to Revitalize Michigan – Mackinac Center

[4] Greg Ip, “A Debt Deal That Doesn’t Deal With Debt,” WSJ, 1 June 2023.

[5] Britain is at 3.5 percent, Japan at about 2.5 percent; and Germany has a surplus of about 0.5 percent.

A Modern National Industrial Strategy.

Posted on May 31, 2023 by jsh54

Historians ask three essential questions. First, What happened? This question is about assembling a richly detailed Chronology of events. Second, Why did it happen? This is about Causation and historians never accept single-factor explanations for why things happened. Third, What difference did it make that it happened? This is about Consequence and, as with Causation, there is never just one result. This can be mantra-fied as either What?/Why?/So What? Or as Chronology/Causation/Consequence.

William Galston provides a good example of historical thinking in a rapid overview of the politics and economics of the last thirty years.[1]

What Happened? From 1990 through 2000, the American economy expanded rapidly and the fruits of growth received a wide distribution as real wages increased. Growing industrial productivity did not reduce the manufacturing labor force; instead it raised wages. On New Year’s Day 2001, there were about 17 million people holding down manufacturing jobs in the United States.[2] Between January 2001 and June 2009, the United States lost 5.4 million manufacturing jobs. That’s just shy of one-third of the industrial manufacturing jobs. Gone in less than a decade. American manufacturing had long been dispersed into smaller cities and rural areas. The biggest shocks were felt in areas outside the main media consumer markets.

Why did it happen? First, the Clinton Administration (1992-2000) adopted a policy mix of extending the open world market economy that had been created under American leadership after the Second World War. It would reach out from its core American, Western European, and East Asian strongholds to the lands where Marxist economics had been discredited. In practice, this meant Eastern Europe and Russia, China, and leftist governments inthe Developing World.

Second, contrary to their intent, these policies actually harmed American interests. Capitalists didn’t invest in ways that were entirely productive and efficient; industries that were essential for American national security and/or supply chains languished or were off-shored; and China, in particular, took advantage of its favored position in the World Trade Organization (WTO). The result of these policies came in a “hollow[ing] out” of American manufacturing.

Why does it matter? For one thing, these developments stimulated a “populist revolt” in the United States. This ran from the “Tea Party” dissidence within the Republican Party during the Obama Administration to Trumpism. In Democratic rhetoric, this threatens democracy.

For another thing, Jake Sullivan, President Biden’s national security adviser, has announced a new “modern national industrial strategy.” The goals of that strategy will be to strengthen the industrial foundations of national security, promote economic growth, and create a lot of well-paying jobs to replace those lost in the lost decades that began this century. The instruments will be strategic, rather than general, agreements on tariffs and trade, and subsidies. Commerce Secretary Gina Raimondo’s shepherdessing of the Biden Administration’s semi-conductor manufacturing efforts foreshadows these larger intentions.

It’s an honest piece of History. It is far from being a complete account of what happened or why it happened. It endorses, perhaps too easily, one party’s program of great consequence.

[1] William Galston, “Biden’s ‘Foreign Policy for the Middle Class’,” WSJ, 31 May 2023. The customary American blurring of middle-class and working-class is here on display.

[2] Total civilian labor force was 143 million. See: U.S. labor force 1990-2022 | Statista

Ukraine and a Larger Crisis.

Posted on May 30, 2023 by jsh54

Walter Russell Mead argues American and European aid for Ukraine is neither “a charity project,” nor a distraction from the even-more-important Indo-Pacific region.[1] Instead, it is “a golden opportunity” that we should seize “with both hands.” He spells out some of what he means and leaves it to readers to understand other parts. Not all of his argument is persuasive, but it is worth considering.

Mead argues that Putin’s war against Ukraine “has ignited a national awakening.” Post-war Ukraine, he predicts, “will be a formidable new force in Europe whose interests and outlook place it firmly in alignment with the U.S.” Maybe, but also maybe not.

He seems to be on target about the “national awakening.” Two qualifications need to be made. First, that revival began well before the Russian invasion in February 2022. The 2013-2014 “Euromaidan” grass-roots protests evicted the pro-Russian President Viktor Yanukovych.[2] Russia’s reoccupation of Crimea and its sponsorship of pro-Russian movements in the Donbas followed. Second, that revival has two fronts. In 2019, voters elected Volodymyr Zelensky as President in a revolt against the endemic corruption in post-Soviet Ukraine. Russia’s out-right invasion has diverted attention from the corruption issue, but some Ukrainian oligarchs don’t seem to have felt the same nationalist pride coursing through the veins of ordinary Ukrainians.

Mead may or may not be on target about a “formidable” post-war Ukraine. He foresees a country with a “battle-tested army” that will “join Poland, the Baltic republics, and the Scandinavian countries” in a barricade against Russian expansion.

Any future event can become the focus of present hopes and fears. So all predictions should be taken with a grain of salt. In the case of a formidable post-war Ukraine, other examples drawn from history urge caution. In 1783, the new United States emerged from the War for Independence exhausted and with its people eager to turn their attention to other pressing concerns. After the Second World War, the British people voted for domestic reforms, rather than the preservation of empire. Defense spending fell sharply. “Battle-tested armies” shrank mightily in both cases.

Ukraine’s army largely consists of patriotic volunteers who rushed to the colors when Russia attacked. They’re going to want to go back to civilian life when the war ends. Americans estimate Ukrainian military casualties at 20,000 killed and 130,000 wounded; civilian deaths are estimated above 40,000.[3] Much of the country has been physically devastated into the bargain. Bouncing back from such losses will not be easy.

How will this redound to the benefit of the West elsewhere? In two ways. First, an exhausted, perhaps even defeated Russia will be no useful partner to Xi Jinping. Mead argues that the Eastern bloc in NATO and the European Union will resist any post-war (or wartime, come to that) appeasement of Russia by the Western Europeans.

A defeat for Russia will revive the credibility of an American alliance, eroded by decades of mismanagement. South Korea, Taiwan, Japan, and countries in Southeast Asia may all take heart in facing the Chinese danger. Americans shouldn’t take a victory lap. We’re just starting.

[1] Walter Russell Mead, “Putin’s War Is America’s Opportunity,” WSJ, 30 May 2023.

[2] See: “Winter on Fire: Ukraine’s Fight for Freedom” (dir. Evgeny Afineevsky, 2015). Excellent documentary.

[3] See: Casualties of the Russo-Ukrainian War – Wikipedia

One Man One Vote, One Man One Tax Rate.

Posted on May 5, 2023 by jsh54

There are about 180 million taxpayers in the United States. At the national level, the United States has a highly progressive income tax.[1] Who pays what share of taxes?

About 43 percent of taxpayers earn less than $50,000 a year. That’s a little north of 72.5 million people. Their share of the total income is 10.5 percent. They pay -4.8 percent of the income tax. That is, through one tax “credit” or another, they get a “refund” check from the IRS. The median income—half above, half below—is just a hair under $50,000 a year.

About 27 percent of taxpayers earn between $50,000 and $100,000 a year. They account for about 18.6 percent of total income. They pay 6.3 percent of the income tax.

About 20 percent of taxpayers earn between $100,000 and $200,000 a year. They account for 26.6 percent of total income. They pay 19.8 percent of the income tax.

About 10 percent of taxpayers earn more than $200,000. Their share of the total income is 44.3 percent. They pay 78.7 percent of the income tax. Those earning $1 million or more receive 16.1 percent of total income. They pay 39 percent of the taxes. There are about 900,000 taxpayers in this group. That’s about 0.5 percent of the taxpaying population.

Several different things are going on around progressive tax rates and the debt ceiling.

First, the United States also has a highly “progressive” distribution of income. It is even more “progressive” than is the tax system. About 70 percent of taxpayers account for 29.1 percent of total income. About 30 percent of taxpayers account for 70.9 percent of income. As Willy Sutton said, “That’s where the money is.”

Second, taxation and spending are explicitly a transfer from the few rich to the many not-rich. According to one author, “Democrats have a huge advantage (63 percent) with voters earning less than $15,000 per year. This advantage carries forward for individuals earning up to $50,000 per year, and then turns in the Republicans’ favor — with just 36 percent of individuals earning more than $200,000 per year supporting Democrats. Interestingly, the median household income in the United States is $49,777 — right near the point where the Democratic advantage disappears and the Republicans take over.” Moreover, “About half of Democrats express satisfaction with their personal financial situation, compared with 61 percent of Republicans and 52 percent of Independents.”[2] Democratic voters may respond enthusiastically to government action to address their dissatisfaction.

Third, the rich don’t see this transfer system as legitimate beyond a now-uncertain point. From the 1930s through the 1960s, the American economy was dominated by well-established industries whose entrepreneurial founders had long since handed over control to professional managers. These companies were highly-unionized. The American economy felt little foreign competition. Content with their trust funds, sinecures, and charities, the “owners” had gone off to Harvard and Palm Beach. Then came the upheavals of the 1970s and the rise of many new entrepreneurs building new industries. They had earned, not inherited, their money. They wanted to keep it. Since the Reagan era, they have been fighting back to good effect. Democrats now pine for the “Good Old Days.”[3] Complexity and nuance are lost in this ugly fight.

[1] Laura Saunders, “It’s Tax Time. Here’s Who Paid the Most,” WSJ, 15-16 April 2023.

[2] See: Economic Demographics of Democrats & Liberals – Politics & Debt

[3] Walter Russell Mead, “”Progressives’ Want to Go Back to the 1950s,” WSJ, 2 May 2023. Who doesn’t?

Tell the Truth as You See It 1

Posted on May 1, 2023 by jsh54

The Christian apologist C.S. Lewis says “Try to tell the truth as you see it.” OK, here goes.

I think that Donald Trump is an appalling human being. I voted against him in 2016 because I believed him unfit to be president, even in comparison to the lamentable Hillary Clinton. I voted against him in 2020 specifically because of his abuse of the Vindman brothers. “Support the troops.” I’m going to vote against him in 2024, if that becomes necessary, because of 6 January 2021.

I think that Donald Trump was a far more consequential—even “better”—president than Joe Biden, Barack Obama, George W. Bush,[1] or Bill Clinton. More consequential–and even “better”–than would have been Hillary Clinton.[2]

Trump recognized the reality of massive unrestricted immigration through the Southern border. He recognized—and tried to act on—the failure of the North Korea policy of previous administrations. He took real action to deal with the Chinese challenge. He recognized the uselessness of the NATO allies. He halted the flood of government by bureaucratic rule-writing and executive orders. All Trump’s policies on these matters were good things. Many of them have been maintained by the Biden administration.

I think that there is a good way to reduce poverty.[3]

Stay in school, even if it’s a lousy one. Don’t disrupt class. You can learn something even in a deficient school system.[4]

Graduate from high school, then get some more education. The four-year college residential education is over-valued by American society. Community colleges and trade schools are fine. Students can live at home and commute, pay lower tuition, not pay for dorms and dining halls, and work part time. Costs a lot less and it isn’t on a four-year schedule.

Get a job, any job. Work is better than charity or crime. Hundreds of millions of people—immigrant and native-born, black and white and read all over, knew this in the past and still know it today.

Work hard. At some point, you may get a promotion or a pay raise.

Don’t get married until you have steady work.

Don’t have kids until you’re married. Condoms are $1 each at CVS/Walgreens/RiteAid. For many decades, they worked for most people who were determined to avoid an unwanted pregnancy. “But men don’t like using rubbers.” You never heard the expression “I got the pussy, so I make the rules”?

We should stop paying people to be poor. It’s a capitalist economy. If you create a market for something, someone will fill it.

[1] Trump may not be more “consequential” than George W. Bush. The invasion of Iraq is the gift that just keeps on giving. Kind of like an antibiotic-resistant flesh-eating infection. Trump was certainly a better president than Bush. Equally certainly not a better man. Such are the paradoxes of life.

[2] Never mind breaking the “glass ceiling.” We’ve already had one woman president. Her name was Edith Wilson. We’re likely to have another. Her name is Dr. Jill Biden. “Jill Biden and the Inner Circle.” Sounds like a band.

[3] Juan William’s prescription, lightly amended.

[4] See Maya Angelou, I Know Why the Caged Bird Sings (1969) for proof.

Defeating Trump for the Republican Nomination.

Posted on April 29, 2023 by jsh54

Frank Luntz is an important, sometimes controversial Republican pollster and focus group leader.[1] Recently, he shared his thoughts on a post-Trump Republican presidential candidate.[2]

Luntz offers a bald assessment of elements of the American political scene. On the one hand, “many Trump supporters” are people who were “knocked down, got back up and are now helping others to do the same.” On the other hand, there is the country’s political elite: “politicians, political hacks, lobbyists, and out-of-touch elites who have ignored, forgotten and betrayed the people they represent.” Trump was originally “elected to destroy” this existing political order. Now, in the eyes of this large minority of the core Trump constituency, he has become part of the problem.

According to Luntz, about a third of Trump voters “prioritize the character of the country and the people who run it.” Doubtless any Democrat will scoff at this statement. However, these voters are estranged from Trump himself, but not from his policies.

How can Republican rivals win over these voters? (No Democrat ever will, although a bunch of the Trump base voters are former Democrats.)

First, the successful contestant will be someone “who champions Mr. Trump’s agenda but with decency, civility, and a commitment to personal responsibility and accountability.” People reject President Trump’s boorish, bullying behavior even as they continue to support policies like actually confronting China. During and after his presidency, Trump provided many examples of self-indulgence, irresponsibility, and hypocrisy. Reminding voters of these faults, while celebrating the many real achievements of his administration[3] can win over voters.

Second, a candidate should have some kind of track record of actually putting conservative policies into practice. That argues for a governor, rather than a senator. Luntz isn’t playing favorites here. Nikki Haley, Asa Hutchinson, and Ron DeSantis all have this credential.

Third, be aware that many Trump supporters are older people worried about the future of their children and grandchildren. Candidates need to talk clearly about solving current problems with grave future implications. Here, the national debt gets a lot more traction than does climate change.

Fourth, a candidate will have to win over Republican-leaning independents, not drive them into the Democratic camp.

Fifth, if candidates are seeking campaign endorsements, those endorsements should come from “the average farmer, small business owner and veteran.” They most definitely should not come from the “famous and powerful.” None of the Trump base respects these people. (The same is probably true of many Democrats.) Nor should they, sad to say.

[1] On Luntz, see: Frank Luntz – Wikipedia For televised appearance where you can get a sense of his reasoning, see: Frank I. Luntz | C-SPAN.org

[2] Frank Luntz, “How to Make Trump Go Away,” NYT, 10 April 2023.

[3] Slamming tariffs on China, harassing its major corporations, recognizing that the long campaign to change North Korea’s pursuit of nuclear weapons had failed, insisting upon the importance of mass illegal immigration, treating the NATO allies as the free-riders that they have long been, halting the flood of government by Executive orders, Executive agreements, and bureaucratic rule-writing, and launching “Operation Warp Speed” to rapidly produce Covid vaccines for those who wanted them. You could watch “Dopesick” for insight into why some did not.

Sudan.

Posted on April 28, 2023 by jsh54

The once great Ottoman Empire went into a prolonged decline. Rulers of peripheral territories attempted to make themselves functionally independent. The most successful of these hustlers was Muhammad Ali, nominally the governor of Egypt.[1] Among his other ventures, he launched an Egyptian conquest of the neighboring Muslim states south along the Nile. That territory is called Sudan. After his death, this “khedivate” went into decline, the British occupied Egypt to safeguard their own interest in the Suez Canal,[2] and an Islamist rebellion in Sudan got out of hand (from the Anglo-Egyptian perspective).[3] Afterward, things cooked along very unhappily until Britain’s retreat from empire after the Second World War. Over Egyptian protests, Sudan got its independence in 1956.

Independent Sudan has not had a happy history. For one thing, hardly anyone had any notion of “democracy.” There have been half a dozen military coups d’etat, but the reality is that two dictators ruled the country, one from 1969 to 1985 and the other from 1989 to 2019. Army officers have entrenched themselves as the key government institution, raking in wealth along the way. They aren’t much inclined to surrender their advantages. Under external pressure they have been willing to make occasional cosmetic gestures toward a “democratic transition.”

For another thing, British rule had papered over the conflicts between Arabs and non-Arabs, Muslims and non-Muslims, Arab Muslims dominated the North, non-Arabs occupied the western territory of Darfur, and the South is peopled by Christians and Animists. Between 1955 and 1972, and then again between 1983 and 2005, civil war pitted North against South. Overlapping this struggle, between 2004 and—to be honest—the present, the Khartoum government has waged war in the western territory of Darfur. The North-South war ended with the creation of the new country of South Sudan in 2011. Both conflicts were deadly in an extreme. Huge numbers of refugees fled the conflict.

Under very heavy pressure, the Muslim military leaders agreed to surrender territory to rebels as part of “peace processes.” As is the case with “democratic transition,” the soldiers don’ttake these commitments seriously over the long run. In both cases, they are just waiting for some other crisis in some other far-away place to divert the attention of foreign meddlers.

At the end of 2018, an internal economic crisis led to huge demonstrations in the streets of Khartoum. In April 2019, the soldiers tossed overboard the long-ruling dictator, Omar al-Bashir; in Summer 2019, they struck a deal with civilian opponents of the government. Since then, Western governments, especially the United States, have been supporting a democratic transition. Earlier in April 2023, two different factions of the soldiers fell out over who would actually rule.

Is “Democracy” something that can be established in any culture?[4] The answer to that question rests with the choices of the “men with guns.” Whether Washington likes it or not.

[1] On this fascinating, complicated man, see: Muhammad Ali Pasha – Wikipedia

[2] On their other activities, see: The Perils of Adventure 2 | waroftheworldblog

[3] The movie “Khartoum” (dir. Basil Dearden, 1966) manages to make the whole thing dull. The several versions of “The Four Feathers: (dir. Zoltan Korda, 1939; dir. Shekhar Kapur, 2002) are rather better movies without throwing more light on the subject. See Rudyard Kipling, “Fuzzy Wuzzy.” Fuzzy-Wuzzy by Rudyard Kipling (poetry.com)

[4] Walter Russell Mead, “In Sudan, Another ‘Democracy’ Push Fails,” WSJ, 25 April 2023, is seething.

Bipolarization.

Posted on April 24, 2023 by jsh54

What is an “urban” area? The U.S. Census Bureau defines an “urban” area as either “Urban” (with a population of at least 50,000 people) or as an “Urban-Cluster” (with a population of 2,000—49,999). The Office of Management and Budget (OMB) labels anything between 10,000 and 49,999 people as Micro-Urban, but categorizes it as rural. What then is a “rural” area? Any place with fewer than 2,000 to 10,000 people, depending on the definition used.[1] So, not just wheat fields as far as the eye can see. Small towns and small cities as well.

As late as the 1990s, rural and urban voting patterns in presidential elections were pretty close. No more. More and more, rural areas have been voting Republican and many urban areas have been voting Democratic. In 2020, the urban-Democratic versus rural Republican gap reached 15 percent in the Northeast, 18 percent in the South, 20 percent in the West, and 22 percent in the Midwest.[2]

Why did this divergence occur? According to one interpretation, the decline in industry hit big cities first. They adapted as best they could, often shifting their economic base to newly-developing sectors of the economy. From 2000 on, the manufacturing decline hit small towns and small cities. Very often, these places were in some sense “company towns.” The decline of Bethlehem Steel devastated the whole Lehigh Valley. They had a very difficult time adapting to rapid change. The contrast is highlighted by the different rates of job creation since 2000 in urban versus rural areas. Virtually all (94 percent) of the new jobs created have been in urban areas; virtually none (6 percent) has been in rural areas. With no jobs in home towns, many kids got BAs and moved to big cities. As a result, some forty-one percent of rural counties have suffered population declines.

Rural areas became cultural “backwaters” as well as economic ones. That is, the people often clung to traditional values and political positions. They didn’t have all sorts of new opportunities popping up before their very eyes. Nothing to encourage changing their thinking. Meanwhile, urban areas often moved on to new positions. Those new positions held no appeal for those left behind. Many of them seem to have responded by wanting to be left alone as well.

That hasn’t happened. Instead, urban Democrats have sought to nationalize their policy preferences. Climate-change, education, immigration, guns, crime policy, religion, abortion, gender identity, and racial policies all seemed—and seem today–like they are being crammed down the throats of rural voters.

Those voters are rebelling against what they see as an attack on themselves. In 2016, Donald Trump won the presidency on a platform of enraging liberal elites as much as anything else. In 2020, Trump won 43 percent of the urban vote and 63 percent of the rural vote. This rebellion isn’t just ignorance, racism and resentment, much as Democrats want to believe. There is an element of Psychology that deals with “Self-Determination Theory” (SDT). According to one proponent of SDT, “people need to experience themselves as the causal source and origin of their behavior rather than feeling controlled and determined by external forces.”[3]

[1] Federal Office of Rural Health Policy (FORHP) Data Files | HRSA

[2] William Galston, “What Drives Political Polarization?” WSJ, 19 April 2023.

[3] Kenneth M. Sheldon, Freely Determined: What the New Psychology of the Self Teaches Us About How to Live (2022), quoted by Julian Baggini, WSJ, 5 December 2022. This is a welcome insight, although not a new one.

Talk is Cheap and You Get What You Pay For.

Posted on April 19, 2023 by jsh54

The Cold War formed the long, final phase of a struggle against aggressive tyrannies that ran from 1914 to 1990. In 1990 the United States and the other Western democracies emerged triumphant from the Cold War with the Soviet Union. The long era of wars and rumors of wars exerted a profound effect on the societies involved. In the United States it helped create a national-security state that absorbed an uncommon share of national resources. It also defined American foreign policy as a grand, foggy abstraction: the defense and promotion of Democracy. In the aftermath of the victory parades, the question arose of what to do with victory?

One school of thought urged a redirection of resources to address pressing domestic problems. It might be thought of as “Nation-Building at Home.” A rival school of thought urged the promotion of Democracy in the remaining benighted parts of the world. This might be thought of as “Finish the Job.” One way of reconciling the rivals lay in shifting resources away from the national-security state toward domestic needs, on the one hand, and emphasizing the rhetorical promotion of democracy, backed by the use of targeted economic sanctions.

In 1975, Defense spending equaled about 5.75 percent of GDP during the Carter Administration. It rose as high as 7 percent of GDP during the Reagan Administration; fell to about 3.5 percent during the Clinton Administration; rose to about 5 percent of GDP in the George W. Bush Administration, and declined to about 3.75 percent of GDP by 2020.[1] It has been a bit of a roller-coaster ride, with upsurges during the final phase of the struggle against the “Evil Empire” and the “War on Terror.” These were interspersed with periods of claiming a “peace dividend.” The rhetorical promotion of democracy has been exemplified by the work of the National Endowment for Democracy (NED).[2] Russia, China, India, Venezuela, Iran, Egypt, Thailand, and Malaysia have all objected to or criticized the NED for being, as one critic phrased it, a “CIA soft power front” organization. More directly, the Obama Administration supported the “Arab Spring” and the overthrow of Egyptian dictator Hosni Mubarak with a lot of talk, some of it behind the scenes. The United States has also deployed targeted economic sanctions, to no obvious great effect.[3]

There are variations to this basic pattern. The Bush II Administration’s invasion of Iraq and the Obama Administration’s bombing Libyan dictator Muamar Khadafy out of power constituted attempts to promote democracy by the more traditional avenue of military force.[4] Neither experience had a happy outcome. President Biden’s vilification of the villainous Crown Prince of Saudi Arabia has not been accompanied by economic sanctions. That’s because the Saudis are better positioned to impose economic sanctions on the United States than reverse.

Has the rhetorical approach worked? In the eyes of some it has only alienated allies needed by the United States, regardless of their political system. “What we get from China is an airport. What we get from the United States is a lecture.”[5]

But we’ve always been preachy. People put up with it because we were also scary.

[1] See: Budget Basics: National Defense (pgpf.org)

[2] See: National Endowment for Democracy – Wikipedia

[3] See: United States sanctions – Wikipedia

[4] Well, it worked with Germany and Japan.

[5] Quoted in Walter Russell Mead, “Scolding Isn’t a Foreign Policy,” WSJ, 19 April 2023.

Goring the Ox.

Posted on April 17, 2023 by jsh54

The Democrats created a “brand” based on Tax–Spend–Elect. Eventually, the Republicans created their own “brand” based on Tax-cut—Spend—Elect. That is one of the dynamic forces at work on American public finance. A second dynamic force is the movement of the Baby Boom from the work force into retirement age. That movement increases the number of people using Social Security and Medicare.[1]

In 2000, when Bill Clinton left the White House, these factors had not gotten out of hand. At that point, government debt amounted to 32.7 percent of Gross Domestic Product (GDP). It stayed pretty much at this level until the onset of the financial crisis and the “Great Recession.” By late 2009, the debt amounted to 52.3 percent of GDP.[2] Ten years on, after the Obama Administration and the first half of the first Trump Administration, the ratio of debt to GDP reached 79.2 percent in 2019. Then, during 2020, 2021, and 2022, the response to Covid, drove the debt up to 97 percent of GDP.

Further movement along this trajectory is anticipated by the Congressional Budget Office (CBO) in its projections for 2022-2033. This appears int three different ways. First, the CBO projects that the debt itself will rise from $24.3 trillion to $46.4 trillion. That is, the debt will almost double in ten years. Second, the debt-to-GDP ratio will rise from 97 percent to 118 percent. Third, annual interest payments on the debt will rise from $475 billion to $1.4 trillion.

On the one hand, the United States has entered what looks to be a period of higher interest rates. Partly, this stems from the fight against inflation. The duration of that period is uncertain. On the other hand, sustaining a large debt will require the government to make sure that there are buyers for its bonds. This means offering higher interest rates. Higher rates, in turn, tend to slow down the economy.

“There’s evidence that the U.S. government has reached” [the point at which] “debt restricts [its] choices and threatens [its] solvency.”[3] What is to be done? Recommended solutions abound. Among them is the following.

The parties need to agree to hold the debt-to-GDP ratio to the current level (97 percent) instead of allowing it to rise to 118 percent. This will save about a third of the projected increase in the debt. But what to cut to hit this target?

Asked why he robbed banks, Willy Sutton said “That’s where the money is.” Social Security, Medicare and Medicaid, and Defense amount to about two-thirds of federal spending. That’s where the money is. Again, the parties would need to agree. But the proposed solution says nothing about Defense or Medicare and Medicaid. It focuses on Social Security.

Ideally, until it’s your ox or my ox that is getting gored, the cuts should not be distributed symmetrically between all income. Pretty much leave the lower income groups alone while laying more of the burden on the upper income groups. Again, the parties would have to agree.

The proposal illustrates the complexity—and the political risks–of the task before us.

[1] Eventually, all the geezers will croak and be succeeded by a series of numerically smaller generations. Being among the Baby Boomers myself, I tend to forget the exact labels and definitions of those generations.

[2] This wasn’t especially threatening. The debt-to-GDP ratio had been at 46.8 percent. It was then pushed down to 32 percent by four successive years of budget surpluses.

[3] William Galston, “How the U.S. Can Prevent a Debt Spiral,” WSJ, 22 February 2023.