A spectre is haunting Europe, and America — the spectre of Keynesianism finally gone nuts. What began, not very innocently, as a suggestion that governments should run deficits in bad times, and surpluses in good times, gradually “evolved.” In the next phase, governments tried to balance at least the operating account during the best of times. In phase three, governments ran deficits by habit during the good times, but much bigger “stimulus” deficits during the bad times. We are now entering phase four.
Canadians tend to feel smug about this, for we look south at a fiscal catastrophe that had nothing to do with us. For the last generation, we have been trying to claw our way back to budgetary conditions before Pierre Trudeau broke the bank. This had once seemed a small price to pay for his “just society” (or “just watch me”). Surely it was worth mortgaging our children’s future, and that of their children, and children’s children, for the transient privilege of being governed by such a man. (I can still hear the erotic screams of the women, from the 1968 general election, as Trudeau passed by.)
By about 1984, we had had enough. Michael Wilson balanced the operating account, then Paul Martin balanced the overall budget, and today Jim Flaherty tries to keep the federal debt “shrinking” in proportion to national income. (Of course, the debt itself grows and grows.)
We feel smug because we are watching President Barack Obama do for the United States what Prime Minister Trudeau did for us — although in their case, on top of what Obama’s predecessors did. The U.S. national debt now exceeds $12.3 trillion in a $14.2 trillion economy, and the U.S. government is now piling it on with unprecedented new deficits. The U. S. Treasury’s borrowing requirement is, as it were, coming up against the Great Wall of China.
Little things, such as the heart of the U.S. space program, are being gutted to make way for metastasizing social security entitlements and debt service payments that will soon swamp the entire federal budget — thus requiring the elimination of more little things such as the army, navy and air force. At some point the entitlements simply can’t be paid, without hyperinflation.
I am not exaggerating. The American debt is now at levels that ring bells at the International Monetary Fund. And as the world’s biggest debtor rapidly accelerates its borrowing, the fiscal carrying capacity of the rest of the planet comes into question.
There are two large reasons why we cannot afford to be smug, up here. The first is that after adding the “entitlement” heritage of our provincial governments to the federal debt load, our position is not much better. The second is that even if it were much better, the tsunami coming from south of the border will anyway sweep all our dikes away.
The Obama administration’s f inancial projections are extremely optimistic, yet even if they all come true, the U.S. debt will continue to grow unsustainably. The kind of alarm falsely placed in “ global warming” would more usefully be directed towards the remarkable cooling effect this will have, as all our fiscal and demographic trends converge. For this is a predictable future; an issue where the numbers correspond to real things, not to mere speculation.
We can already see where the U.S. is headed, because Iceland and Greece are showing the way. Both have now passed a point of no return, and both are being followed down that plughole by Britain and several other European countries that will probably precede the U.S. into outright bankruptcy. The State of California also gives some clues.
While an optimist would say that we are witnessing the final demise of the welfare state, and good riddance, a pessimist would observe that everything must go down with it. Moreover, as we have seen from the history of Germany and other countries, fiscal catastrophe accentuates every latent threat to public order.
For our governments have created vast bureaucracies, employing immense numbers whose livelihoods depend entirely (whether they realize it or not) upon the capacity of profit-earning people to pay constantly increasing taxes.
It should have been grasped, decades ago, that the constant transfer of resources from the productive to the unproductive must eventually tip the ship. And when it does, real people go over the side, who get angry when they are thrown in the water. There are consequences to that anger.
The idea that we can spend our way out of a debt crisis — or what I called above, “Keynesianism gone nuts” — has already been rejected by the Tea Party movement in the U.S., and has always been rejected by voters of conservative tendency. They know what’s wrong with the present order, and have an important teaching function to the rest of the electorate, which doesn’t get it yet.
But more urgently, we are in need of a positive conception of how to rebuild economy and society, when Nanny State collapses under her own weight. For yelling “run!” is only a short-term solution.
- Robin Hoodism is on the rise - Sunday January 2, 2011 at 9:35 am
- Taking on the Reformation - Wednesday December 29, 2010 at 8:53 am
- The miserly Canadian - Wednesday December 22, 2010 at 5:23 am
