American Futures: The Shortcomings of the Governing Class

American Futures: The Shortcomings of the Governing Class

If tomorrow the GOP agreed to everything in the agenda that Barack Obama laid out in his February State of the Union address, the progress in dealing with the dramatic changes in the economic prospects of most Americans would be close to zero.

Americans’ perception of the future bounces between two contradictory visions. One is that the country is drifting toward decline. Polls report widespread belief that the younger generation of Americans will be worse off than their parents, that U.S. influence in the world is weakening, and that our governing institutions are incompetent and corrupt. At the same time, a majority thinks that although the country may be going to hell, they and their families will prosper.

According to a Pew survey, 63 percent of Americans think that forty years from now the standard of living of the average family will not improve, with 36 percent thinking it will get even worse. At the same time, 64 percent are optimistic that they personally and their families will be better off. Indeed, like the citizens of Lake Wobegon, over 70 percent of Americans believe that their income is above average. This perceived disconnect between one’s personal fate and one’s country’s surely helps explain the low level of public outrage in this post-crash era of high unemployment and falling wages.

Our national culture has long encouraged us to overattribute economic success to individual talents, rather than the state of the surrounding economy. The Great Depression was an important reality check, of course, and the New Deal’s Keynesian paradigm gave Americans a more balanced view of how the world actually worked. The lesson was that economic downturns were not Acts of God, like hurricanes, but more like plane crashes that could be prevented by government regulation. So your living standards depended on what you did at the polling place as well as what you did at the workplace. But the election of Ronald Reagan turned back the ideological clock. Government became the cause of your problems, not the solution. With a little effort, you could be an island of individual prosperity in a rising sea of economic turmoil.

The result has been to rationalize public complacency. Today, it is not simply conservative Republicans who have come to accept the limited role of the state but liberal Democrats as well. On every major issue that will affect the future of American living standards—health care, education, global competitiveness, income distribution—the proposals championed by the progressive part of our two-party system fall embarrassingly short of what is needed. If tomorrow the GOP agreed to everything in the agenda that Barack Obama laid out in his February State of the Union address, the progress in dealing with the dramatic changes in the economic prospects of most Americans would be close to zero.

Al Gore’s politics are mainstream liberal Democrat; Stockman’s are a synthesis of the Wall Street/Tea Party alliance that now dominates the Republican Party. Each reflects the intellectual condition of the parties they represent. The Democrats are more clear-eyed about the problems and timid about the solutions. Republicans are more confused about the problems but self-confident that they know what to do. It is a time, as Yeats put it, when “The best lack all conviction, while the worst are full of passionate intensity.”

Al Gore’s The Future is earnest and full of useful facts, with the prose style of a corporate consultant. He builds his argument by extrapolating six trends that he contends will determine the future. These overlapping global forces boil down to accelerated globalization, technological change, and environmental threats to living standards—and perhaps life itself. None of them will be news to most readers. But neither was the issue of global warming before Gore made his justly celebrated film, An Inconvenient Truth. What made that documentary work so well was the careful presentation of a few easy-to-understand charts.

Unfortunately, his new book is nowhere near as lean. Gore announces from the start that it is “data-driven.” Yet the book is not so much data-driven as it is data-riven. Each of his six determinants of our future is introduced with a series of flow charts shaped like tangled spaghetti studded with snippets of scientific jargon and references to historical, and pre-historical, moments. The point is that everything—for starters, the derivatives market, genetically modified food, and the melting of the Greenland ice sheet—is connected to everything else.

So it is, and Gore is right to stress this simple but important point. But his determination to impress us with his fact-based objectivity (158 of the book’s 533 pages—not including the index—are source notes) too often complicates and obscures the obvious.

This is a shame. Gore is making some extremely important connections, such as the one between the corporate greed that dominates our politics, the globalization that has produced inequality and widening class divisions, and the dark sides of unregulated technologies such as fracking, 3D printing (which can manufacture guns at home), and the production of toxic chemicals.

The book is also important because Al Gore wrote it. Gore, who was the point man for Bill Clinton’s Reaganite free trade agenda, now concludes that opponents they both denounced as “luddites” were right; in a globalized market, automation may well be a net destroyer of job opportunities. Gore was also heavily involved in the Clinton era drive to privatize government, which he now criticizes as undercutting democracy by “the encroachment of big money into the democratic process.” That his somewhat sanctimonious style prevents him from acknowledging his own past errors should not obscure the importance of this concession.

If tomorrow the GOP agreed to everything in the agenda that Barack Obama laid out in his February State of the Union address, the progress in dealing with the dramatic changes in the economic prospects of most Americans would be close to zero.

Gore is reflecting the gradual ideological shift in the intellectual climate of mainstream liberalism forced by the collapse of the Reaganite model. Centrist liberals now accept analyses that a few years ago they dismissed as out-of-date New Deal thinking—including the fact of middle-class wage stagnation, the benefits of unions, and the importance of domestic government policies. Gore’s comment on the tension between capitalism and democracy a few short years ago would have come only from the marginalized left:

When communism disappeared as an ideological competitor and democratic capitalism became the ideology of choice throughout most of the world, the internal tensions between the democratic sphere and the capitalist sphere reappeared. As economic globalization accelerated, the imperative of business was relentlessly pursued by multinational corporations.

The book’s last section, “So What Do We Do Now?” is a series of mushy admonitions to an unspecified “us.” Thus, we should democratize the Internet, but not let elites and special interests dominate it “with agendas that are inconsistent with the public interest.” We should invigorate online journalism. We should factor the cost of pollution into our GDP. We should make agriculture, forestry, and fishing sustainable. We should advance technological development while preserving human values.

Of course we should. But our only instrument for doing these things is an accountable federal government with the capacity and size to prepare people to deal with a new era in which the economic cushions that have protected them have been deflated. Although Gore obviously thinks that government is important, he cannot bring himself to explain its role, other than to address one problem at a time. His insistence that everything is connected clearly implies we must address problems in a more structural way. Yet the word “planning” is strangely missing from this long book about how we should collectively shape our future.

In the current political climate, Big Government is a non-starter. So Gore backs off and resolves the dilemma by declaring himself an “optimist,” asserting his patriotic faith that responsible voters and enlightened leaders will eventually do the right thing. Thus, the book leaves us adrift. We are, no doubt, better informed about the probable catastrophes that lie ahead than we were when we picked it up. But we are no closer to a strategy for avoiding them.

His book is sprawling, repetitious, and shrill. Even more than Gore, Stockman insists that he is a moralist, denouncing financial sin in high places and low, and demanding that the nation repent or face economic perdition. He uses intemperate language to demonstrate his credentials as a modern Savonarola. His villains are stupid, corrupt, and—worst of all—“statist,” a favorite Tea Party epithet liberally sprinkled throughout the book.

The word “planning” is strangely missing from Gore’s long book about how we should collectively shape our future.

Stockman brings some questionable personal baggage to the fire and brimstone. He is somewhat of a serially reformed sinner, recanting only after having enjoyed the fruits of what he later denounces as iniquity. As Ronald Reagan’s budget director, he presided over a doubling of the national debt, and then publicly confessed that Reagan’s professions of fiscal conservatism were fake. Now, after having made tens of millions using other people’s money in leveraged buyouts, he rails against Wall Street’s profligate abuse of credit. Still, the sins of the messenger should not necessarily condemn the message.

The Great Satans of Stockman’s current jeremiad are Franklin Roosevelt and John Maynard Keynes, whom he accuses of using the 1930s depression as an excuse to unleash a pernicious crony capitalism that is the seat of almost all of America’s troubles. His central theme is that by weaning the dollar off the gold standard (a move finalized by Richard Nixon) and establishing the federal government as the spender of last resort in economic downturns, the New Deal destroyed the market discipline that is the source of capitalism’s moral and economic power.

Among the results are banks too big to fail, the growth of a bloated and dangerous military-industrial complex, and the chronic and increasingly unsustainable subsidizing of the wealthy and middle classes with tax breaks, Social Security, and deposit insurance.

The core of Stockman’s economic argument is nonsense. He thinks Keynes’s original sin was the observation that if no one spends, no one works. As such he is fixated on savings as virtually the only thing that matters. His revision of the history of the Great Depression holds that it would have ended quickly had Roosevelt just let the markets adjust by themselves. This forces him into the incredible comment that Second World War spending was not the source of the recovery; the United States, he writes, “saved its way out of the Depression.”

Stockman’s attack on Keynes is strategic. If spending defines the economy, a drop in private consumption and investment requires an increase from somewhere else to compensate and prevent rising unemployment. That somewhere else is government. Drill into Stockman’s logic and you will find not an argument over economics, but a rationalization of the maldistribution of income and wealth. In the Keynesian, spending-driven narrative, the most important characters are worker-consumers. In Stockman’s savings-driven narrative, the rich—who save more—are the protagonists.

Stockman’s tirade, however, is bipartisan. He slams Reagan and Nixon (especially) as well as Clinton and Obama, Milton Friedman as well as Keynes, Arthur Laffer as well as Paul Krugman. He oozes particular contempt for Alan Greenspan, whom he charges with abandoning Ayn Rand to pander to Wall Street “fast-money speculators and trading robots” by providing cheap money and turning the Federal Reserve into a machine for enriching the 1 percent.

With so many targets, it is not surprising that Stockman has hit a few on the nose. One is the Achilles heel of liberal Keynesianism: the idea that macroeconomic growth is a permanent solution to class conflict. Stockman is dead wrong about Keynes’s insights. But he is right that those insights allowed liberals to tolerate and justify a bloated military budget and an approach to social welfare that requires large bribes to business in order to make incremental improvements in programs for health, education, and housing. The result has been a net upward redistribution of income and wealth and a parasitic army of bipartisan lobbyists, fixers, and swindlers who dominate our democratic government.

Stockman’s attack on the Republican establishment for selling out free market principles will resonate with Tea Party libertarians and could well become one of their sacred texts. And his call for a wealth tax and a breakup of the largest banks will appeal to Occupy Wall Street activists.

In a sense, he is a born-again Andrew Mellon, Herbert Hoover’s treasury secretary who famously advised that the government do nothing to combat the depression and let the market drive wages and prices so low that there would be no place to go but up.

But for all his populist take-no-prisoners attacks on hypocrisy, Stockman is ultimately selling snake oil. He poses as a champion of Main Street but his proposals amount to recreating a twenty-first-century version of the era in which robber barons tyrannized small business, farmers, and workers. He wants a return to the gold standard, a balanced budget amendment, and the abolition of Social Security, Medicare, the minimum wage, and the income tax.

Stockman’s future would likely be worse for most Americans than the nineteenth century was, when they were at least shielded by geography and protectionism. In Stockman’s brave new world, workers would be locked into brutal global competition for investment and jobs.

Unlike Gore, however, Stockman harbors no illusions that the country will accept his medicine; the people are too weak and the leaders too corrupt. So he sees a prolonged unresolved struggle between liberals who want to spend more and conservatives who want to tax less, with the country’s deteriorating economic power hidden by the temporary willingness of China and others to finance our debt. At some point, sooner he thinks rather than later, we will have another, bigger crash.

Summarizing his book in a recent New York Times op-ed, Stockman concluded: “If this sounds like advice to get out of the markets and hide out in cash, it is.”

I don’t give investment advice. Neither do I take it. And for all I know, given his Wall Street past, Stockman is buying when he’s telling the rest of us to sell. But although Al Gore’s view on how the world should work is closer to mine, on the question of whose future we are more likely to live in, I’m afraid the nod goes to Stockman.

Jeff Faux is the founder and now Distinguished Fellow of the Economic Policy Institute. His latest book is The Servant Economy.