Good Fiscal Policy versus Bloody Awful Fiscal Policy

The USA, as well as most developed countries, is now faced with a chronic and worsening fiscal problem: the national debt has been rapidly growing as a percentage of the gross domestic product. This is an unsustainable trend and it must be remedied by some combination of revenue enhancement and spending cuts.

In the political arena and in the media that report on it many aspects of this problem are being vigorously debated but there is a near silence concerning the central issue. One notable exception to this silence is in a New York Times op-ed column by Nicholas Kristoff, who cites Timothy Noah of Slate:

"The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in an excellent series on inequality, the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana."

There are many important details to be considered but the central issue of solutions to our fiscal problem is just this: does it increase or decrease the concentration of wealth? This will determine the kind of nation the USA is to be.

The political parties have long made a game of this in dealing with the issue that is of central importance to them: winning the next election. The centrist Democrats have pandered to their base by always advocating increased social programs, while the rightist Republicans have pandered to their base by always advocating decreased taxes. The natural consequence of this has been alternating decreases in taxes and increases in benefits. Sure, there have been instances in which government has been forced to increase taxes or to decrease benefits but these are exceptions to the long term trend.

How do the political parties stand on the obvious need to increase taxes and reduce social programs? True to form. of course. The Democrats want solutions that will tend to decrease the concentration of wealth while the Republicans want solutions that will clearly increase the concentration of wealth.

The Republicans have an important advantage in this: their base has much more money for political persuasion, including corporate money, and that is available at all times. Money is incredibly effective in buying professional services, for example, pr spinners and intellectuals, media groups, lobbyists, legal firms, elected politicians, back room politicians, and even thugs.

The Democrats have a larger electoral base, including organized labor, some intellectuals, some politicians and some media (mostly internet). They are almost always outspent during political campaigns and it is harder for them to maintain focused popular enthusiasm for a long term struggle, particularly when compromises are necessary.

The question for independent minded people is, above all, what kind of nation do they want the USA to become? In this, opinions are divided but I believe that the Democrats, warts and all, are on the side of the angels. Less concentration of wealth means less misery, more social mobility, better education, better health care, more equality of opportunity, and a more productive nation. More concentration of wealth means more corporate control of government and, inevitably, serfdom or violent resistance.

Friedrich Hayek, in "The Road to Serfdom", wrote that government control of the means of production will lead to serfdom, but it is clear that plutocratic control of government can have a similar effect. We stand at a cusp of history.