DAVID MALPASS: PUSHING BACK: A GOVERNMENT -CENTERED SOCIETY
http://www.forbes.com/forbes/2012/0521/current-events-debt-pushing-back-government-centered-society.html
Pushing BackA Government-Centered Society
We’ve come to a critical juncture in our history. The federal government is buying trillions of dollars of its own debt and plans to spend $47 trillion over the next decade in the belief that such expenditures will motivate the private sector to hire more workers.
By its nature government wants a bigger mission, more workers and pensions, and a greater scope for intrusions into people’s lives. It wants ever more taxes on income, consumption, property and wealth. It believes in the Orwellian view that taxes equal fairness more than it believes in growth.
The November election may come down to whether voters feel strongly about government’s increasingly dominant role in the day-to-day functioning of our society. As Republican presidential candidate Mitt Romney puts it, President Obama “has spent the last four years laying the foundation for a new government-centered society.”
The federal government’s debt is now 105% of GDP, having doubled its share since the end of the Reagan Administration. Debt is projected to top 120% of GDP within the decade, greased higher by a fake debt limit—which should be repealed and replaced—and an eerie absence of any cabinet meetings to control spending.
We know the issue well. Washington gets bigger, richer and more intrusive every year and is so powerful and self- contained that it runs without any budget. The hottest economic news, gossip and party invitations come from Washington. Businessmen spend more and more of their time trying to curry Washington’s favor—the most profitable corporate investments nowadays are in lobbyists, not research or worker training. A core purpose of the Declaration of Independence was to define the relationship between individuals and their government, which was to play a supporting role. But in recent years government has become deeply controlling.
Annual federal spending has grown from President Carter’s $500 billion to a staggering $3.8 trillion now, which is more than any European nation’s entire GDP. To expend that much money requires a Byzantium—millions of square feet of office space, billions in worker pay and benefits, conflicting laws and regulations, and mountains of contracts.
The result is a self-promoting government-incentive structure that is antithetical to the liberty so cherished by our Founding Fathers. Mr. Romney is right. Such a government “dispenses the benefits, borrows what it cannot take and consumes a greater and greater share of the economy.”
The mission creep is all-pervasive. The 2009 federal stimulus law funneled $860 billion in federal debt through government coffers in a mad search for shovel-ready projects, passing a portion on to state and local governments to sustain their bureaucracies and keeping much of the rest in Washington. Per capita spending has jumped from $8,000 during the Bush 43 presidency to $11,400 in 2011.
One of the most troubling expansions of government-centered power is the Federal Reserve’s. After the 2008 Lehman Brothers bankruptcy crisis the Fed’s mission took a quantum leap, adding Fed-induced economic growth to its mandate for full employment and price stability. Ditching the 1951 Fed- Treasury accord ending government control of bond yields, the Fed selected and purchased trillions of dollars in long-duration bonds and mortgages. Washington now controls long-term bond yields, promises low interest rates years into the future, makes bets on trillions of dollars in bonds, dominates the home-mortgage market and regulates myriad aspects of banking and investing in the U.S. and abroad.
Paralleling Washington’s expansion, capital cities across Europe dominate their societies, driven by an overwhelming self-interest in a bigger mission. Athens, Rome, Madrid, Paris and now Tokyo are demanding tax increases and hounding their central banks to buy even more of their national debt. Yet across the industrialized world, demographics have soured, making promised services and pension payments unsupportable. As the cash and growth run out, governments are demanding more power on the claim that they can fairly divvy up what’s left.
The issue is whether we want society to be government-centered, with finances, liberties and decisions controlled in the capital. The inevitable outcome is slower growth, fewer jobs and less liberty. The alternative vision—to explicitly reduce the mission, funding, office space and power of almost every aspect of central government—requires responsible citizenry but goes directly against the government’s grain.
David Malpass, global economist, president of Encima Global LLC; Paul Johnson, eminent British historian and author; Amity Shlaes, Director, the 4% Growth Project, and Lee Kuan Yew, former Prime Minister of Singaporte, rotate in writing this column. To see past current events columns, visit www.Forbes.com/currentevents
Comments are closed.
