Politics & Polity: Our Rodney King* Moment

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Politics & Polity:

Our Rodney King* Moment

David Brooks:

“Yet I confess, watching all this, I feel again why I’m no longer spiritually attached to the Democratic Party. The essence of America is energy — the vibrancy of the market, the mobility of the people and the disruptive creativity of the entrepreneurs. This vibrancy grew up accidentally, out of a cocktail of religious fervor and material abundance, but it was nurtured by choice. It was nurtured by our founders, who created national capital markets to disrupt the ossifying grip of the agricultural landholders. It was nurtured by 19th-century Republicans who built the railroads and the land-grant colleges to weave free markets across great distances. It was nurtured by Progressives who broke the stultifying grip of the trusts.

“The Democratic Party, as it revealed of itself over the past year, does not seem to be up to that coming challenge (neither is the Republican Party). This country is in the position of a free-spending family careening toward bankruptcy that at the last moment announced that it was giving a gigantic new gift to charity. You admire the act of generosity, but you wish they had sold a few of the Mercedes to pay for it.”


Thomas Friedman:

“My definition of broken is simple. It is a system in which Republicans will be voted out for doing the right thing (raising taxes when needed) and Democrats will be voted out for doing the right thing (cutting services when needed). When your political system punishes lawmakers for the doing the right things, it is broken. That is why we need political innovation that takes America’s disempowered radical center and enables it to act in proportion to its true size, unconstrained by the two parties, interest groups and orthodoxies that have tied our politics in knots.”


…worse, far worse than it looks….

The US government is nearly bankrupt. The conventional wisdom, that governments can’t bankrupt themselves because they can always print new money, has been exposed as a delusional fantasy, akin to the notion that drug addiction can always be cured with more drugs.


“…the debt held by the public with current tax policies extended would soar to 90% of GDP by 2020, Mr. Elmendorf (CBO Director) said, making the U.S. public debt load one of the world’s highest.

“The U.S. is entering unfamiliar territory in its level of public debt,” said Mr. Elmendorf. “It will be larger over the next decade than it’s been in half a century… and also unfamiliar by the standards of other developed countries.” The choice is not whether to change course from current policy, he noted, but “how quickly and in what way.” President Barack Obama has already declared a spending freeze on discretionary, nonessential outlays, but that only amounts to roughly 17% of total spending. Much of the rest of federal spending is for entitlement programs including Social Security, Medicare and Medicaid, defense spending and interest payments on the federal debt.”



“…the Fed has to handle the historically large fiscal deficit. By and large, government spending diverts money to unproductive recipients, making the economy more susceptible to inflation. And the deficit is so large that bond investors may yet choke on Treasury debt, forcing longer-term interest rates up. Confronted with that, an accommodative Fed might hold down its short-term rate, which could also stoke inflation.”



“Investor Confidence

“Bernanke said the deficit might affect monetary policy if it causes investors to lose confidence in the government’s ability to achieve fiscal balance.

‘Interest rates might rise because of a lack of confidence by creditors in the long-term fiscal stability of the government,’ and “high interest rates tend to slow the economy,” he said.’



“Demand at this week’s 2-year and 5-year note auctions was also lukewarm, which has raised speculation that a long-awaited boycott of U.S. debt could be near.

‘The message from the bond market to Washington is loud and clear,” said Mike Larson, an interest rate analyst at Weiss Research. Get your fiscal house in order or we’ll force you to do so.’

“Many analysts have been predicting that investors will eventually begin demanding higher yields, given the flood of Treasurys that has come to market over the last several months and the risks tied to the swelling U.S. budget deficit.”

Yet we are suffering a perfect storm of delusion and denial (purposeful or pathological).

Five distinct elements of our current situation are being ignored as if they didn’t exist:

We have passed the Keynesian breaking point - that juncture in the economic fabric where it is still rationally defensible to spend created or borrowed money to reverse an economic downturn.
Existing defined benefit entitlements cannot be sustained and new ones cannot be funded.
The free enterprise job-creation machine does not function under excessive loads, a condition that will soon be reached. [Private jobs will be our only effective means to restored prosperity.]
The global economy has so dramatically expanded the fiscal, financial and trade environment that the entire US domestic economy is but a single corporate player among many others, one full capable of going bust without aid or bailout.
The sheer scale of the rapidly expanding borrowing binge of the US government faces its catastrophic tipping point -- much closer than any major politician is willing to publicly recognize.

The toxicrats and the procrasticans (with their enablers, the moderati) have been manipulated (all too willingly) by predatory financial elites selling permanent prosperity through permanent borrowing. For the last 30 years, faux prosperity bubbles (most recently, the dot com and real estate securities booms) temporarily masked the severity of the festering fiscal and economic crisis.

The off-the-books indebtedness of the federal government, the so-called structural deficit has been ignored, because, in the words of one economist “we just owe it to ourselves”. But the dirty little secret is that the federal government hasn’t been able to function for decades without outsourcing our indebtedness to foreign investors like, say, the Chinese. Even minor foreign participation in financing US government operations is dangerous. If next week, for example, all foreign lending dried up, the federal government’s operations would grind to a brutal halt. The other dirty little secret: hat there is no escape from debt repayment. Monetizing the debt means creating more money to pay for it. Two consequences immediately materialize: rampant inflation and the inability to borrow more.

As federal borrowing grew without any real attempt to repay, our leaders and their handlers kicked disaster down the road. The next bubble to shatter will be the Great American Deficit Scheme itself.

If that bubble deflates in a relatively brief period, say within only two of three fiscal years, it will be a catastrophic event. If it happens even more quickly, it is capable of bringing down the social order. We then may be forced to relive the last days of the Weimar Republic. [http://en.wikipedia.org/wiki/Weimar_Republic#Economic_problems]

Our present circumstance has recently been described as a crisis in polity and civility as if Rodney King* had been promoted to chief political science guru.

An electoral uprising against president and congress is the predictable consequence of a policy coup by the elite left. An angry division in the electorate is a natural response.

The underlying financial crisis presents on the threat-scale of a world war. This demands a searching, honest policy dialogue aimed at prevention. But a real constructive dialogue will remain out of reach until we reach agreement on three threshold conditions:

(a) a common baseline moral framework rooted or congruent with the constitution;

(b) a common commitment to the realistic pursuit of the optimum social order instead of the holy pursuit of social Unobtainium – pursuit of that class of Utopian constructs that seeks to re-engineer human nature always ends badly;

(c) …shared honesty and (at least minimal) candor.

Ideological true believers do not actually dialogue with opponents. They practice strategic listening, misdirection, demands and walkouts. Mr. Obama’s recent treatment of the Israeli Prime Minister – the president walking out of the room during their discussions – is a good example.

The snub marked a fresh low in US-Israeli relations…. The Israeli prime minister arrived at the White House on Tuesday evening…. Over the previous two days, he had been feted by senior Republicans and greeted warmly by members of Congress.

But Mr Obama … immediately presented Mr Netanyahu with a list of 13 demands designed both to the end the feud with his administration and to build Palestinian confidence ahead of the resumption of peace talks. Key among those demands was a previously-made call to halt all new settlement construction in east Jerusalem.

When the Israeli prime minister stalled, Mr .Obama rose from his seat declaring: “I’m going to the residential wing to have dinner with Michelle and the girls.”

As he left, Mr Netanyahu was told to consider the error of his ways. “I’m still around,” Mr Obama is quoted by Israel’s Yediot Ahronot newspaper as having said. “Let me know if there is anything new.”


The same event was described in several other accounts.


Ideology is to dialogue as deafness is to orchestra conducting.

Years ago, a political analyst named Daniel Bell proclaimed “The End of Ideology” in 1960 (http://en.wikipedia.org/wiki/The_End_of_Ideology), much as Francis Fukuyama declared in 1992 “The End of History.” (http://en.wikipedia.org/wiki/The_End_of_History_and_the_Last_Man).

Of course, neither history nor the role of ideologues has actually ended. The irony escapes me here only because irony requires detachment. The history we are compelled to live through at the moment is painful. An outmoded ideology of the left has arisen like a vampire at midnight from its coffin, captured the presidency and both chambers of the legislative branch, utterly shattering – for the moment – any common constitutionally rooted moral framework, embracing divisive Utopian social projects financed by Madoff style accounting tricks, and selling them with an astonishing departure from former standards of honesty and candor.

I fear we will be forced to wait until the current set of leaders has been replaced and hope that the next set will be able to engage in a reasonable dialogue.


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