Upheaval To Reinvent U.S. Politics :David Malpass
“THE SYSTEM IS RIGGED.” That’s the angry outcry from many Americans as we rush headlong toward the November election. Milton Friedman defined a worthy goal for a society seeking equal opportunity: There should be no arbitrary obstacles blocking people from realizing their ambitions. The angry public sees government overreach as precisely that—an arbitrary obstacle that thwarts their ambitions.
This column has advocated a sweeping government upheaval that would rewrite federal rules in order to limit Washington’s power and redirect it toward growth, security and higher middle-class incomes. Every government department needs to be reinvented and, in most cases, downsized through strong cabinet leadership and oversight. Interactions with Congress need to be transformed. Hundreds of “independent agencies” need to be disbanded or reacquainted with the practice of checks and balances.
Washington hates the idea of an upheaval. The current system is entrenched because it works well for those on the inside, the people who control the outcomes while achieving wealth and status for themselves. Many politicians and former government officials make large fortunes, which is reflected in the capital region’s having the highest per capita income in the nation. This is wrong.
MISGUIDED POWER
The reasons for this bonanza are clear and demand an upheaval. Washington will soon be spending $4 trillion per year, heading toward $5 trillion, yet it doesn’t have a working budget process or limits on spending and taxation. Instead, power is arbitrary and nearly absolute, a recipe for corruption, mistakes and inequality.
For example, the combined wisdom of the Pentagon, Congress and the White House has spent $1 trillion on an F-35 fighter jet that doesn’t meet defense needs, while lobbyists pay richly for the access needed to guide the procurement process. On the international front too much power has been vested in multilateral organizations that work against American values and interests. The IMF regularly imposes austerity on poor people, lowering incomes while increasing government power. The UN is divisive and incompetent, whether in dealing with human rights, women’s safety or North Korean missiles terrorizing the Pacific.
The recently disclosed Panama Papers show the extent of government corruption worldwide—often taking place under the noses of U.S.-funded watchdogs. Washington’s political establishment seems unable to cut a single program. In 2015 crony capitalism mysteriously resurrected the Export-Import Bank after it had been shuttered for cause as an unnecessary apparatus of corporate subsidies and government power contributing to inequality.
On the domestic front people see government choosing winners and losers rather than working toward equality of opportunity. The anger in the electorate is understandable and energized, as proved by the huge voter turnout in the primaries.
The Federal Reserve has been one of the biggest winners in the Washington power game. Assets and liabilities are up 450% from 2008. In 2016 the Fed will approve $14 billion in interest payments to banks—and it has unlimited power to pay more if it so chooses. Fueling inequality, the Fed is maintaining a $4.4 trillion bond portfolio, rewarding sophisticated corporate and government borrowers at the expense of savers. Cheap credit is practically unlimited for the elite but tightly controlled for small borrowers and average home buyers.
The Fed’s regulatory power has burgeoned to the point that it has trouble keeping track. During a Feb. 10 hearing, Fed Chair Janet Yellen was asked whether the Fed had approved the budget of the fast-growing Consumer Financial Protection Bureau, which operates inside the Fed and is exempt from any congressional appropriations limit. Yellen said she’d have to check.
Paying for government is one of the biggest obstacles to prosperity for most Americans, and there’s the sense that government is out of control.
The challenge is to inspire the nation toward a shakeout of the political system and then manage the changes well enough to improve it. The debt limit might provide an opportunity. Political insiders suspended the debt limit in 2015 to grease their reelection skids, but the suspension runs out in March 2017. By then the national debt will be nearly $20 trillion and climbing fast. Restraint on spending, debt and power within a system that thrives on excess will take a well-guided upheaval.
http://www.forbes.com/
David Malpass is president of Encima Global, an economic research and consulting firm serving institutional investors and corporate clients. Formerly Bear Stearns’ chief economist,
A frequent public speaker and television guest, Mr. Malpass authors a Current Events column in Forbes magazine, and his opinion pieces appear regularly in the Wall Street Journal. He sits on the boards of the New Mountain Finance Corp (NYSE ticker NMFC), UBS Funds, and the Gary Klinsky Children’s Center, and is a past director of the Economic Club of New York, the Council of the Americas and the National Committee on U.S.-China Relations.
From 1984-1993, Mr. Malpass held senior economic appointments during the Reagan and Bush Administrations. He was Deputy Assistant Treasury Secretary for Developing Nations, a Deputy Assistant Secretary of State and Senior Analyst for Taxes and Trade at the Senate Budget Committee.
From 1984-1993, Mr. Malpass held senior economic appointments during the Reagan and Bush Administrations. He was Deputy Assistant Treasury Secretary for Developing Nations, a Deputy Assistant Secretary of State and Senior Analyst for Taxes and Trade at the Senate Budget Committee.
Comments are closed.
