‘Bankrupting America’

To the Editors:

Professor [Benjamin] Friedman, reviewing The Bankrupting of America [NYR, August 13], suggests I am too pessimistic and fail to make detailed proposals for improving America’s unhappy fiscal situation. He views the fiscal problem thus: “…the government spends more than it takes in.” Solving it requires “less spending, or more taxes, or both,” which means deciding “what kinds of spending and which taxes.”

His formulation sidesteps large parts of my book, which explain why raising taxes has been so difficult: The overall tax burden actually rose rather than fell through the Reagan era. Financing the deficits disrupted growth and helped to keep real median family incomes stagnant. The inadequacy of the public sector, notably for health care and education, has increasingly squeezed private incomes. Overall spending cuts, I argue, are even more difficult. The rapidly rising budget share of interest and health costs squeeze the rest of the budget. Public-sector spending, already grievously inadequate, will grow more so with current demographic trends or as decaying infrastructure weighs more and more heavily on American competitiveness. By comparison with France and Germany, the American public sector not only seems inefficient and ungenerous, it is, on the whole, a very bad deal for the middleclass taxpayer.

Arguments like these may be contested and qualified, but they should not be ignored. They do provide a more convincing explanation for our persistent fiscal failure than a simple lack of leadership or an exceptionally obdurate and short-sighted electorate.

Behind the impasse over taxes and spending are more fundamental problems of public priority, efficiency and culture. I single out three: an overextended geopolitical role that impoverishes the public sector, a flawed constitutional system that makes public policies almost invariably incoherent and profligate, and certain predominant economic and political ideas that condone and encourage increasingly obvious national failings, the deficit included.

None of these root causes is to be cured by a short list of technical improvements. We will not have any enduring defense cuts without an appropriately adjusted vision of the world and our role within it. Bouts of hegemony on the cheap never lasted during the Cold War. The prospects are even less promising if we commit ourselves to some still more ambitious New World Order.

As for the incoherence and profligate inefficiency of our constitutional arrangements, the chaos of the budgetary process is itself ample illustration. The system forces even the good people in Congress to becomes private entrepreneurs searching for clients in a political marketplace. With little central authority in Congress, not much within the administration, and none between them, coherent federal policies of any kind are rare. The final budget is thus the aggregate of innumerable private deals. The spiralling deficit is what results when they are added up. No one is in charge of the whole and no one is therefore really responsible.

The wrong-headed intellectual climate comes out in the market obsession of much of the right, or the ersatz Keynesianism that flourishes on both sides of the political spectrum. Leading economists urge presidential candidates to forget about the deficit and spend more money on infrastructure and education. The investment would be eminently desirable, but to suggest that growth will automatically pay for it is irresponsible. The real author of these ideas is not Keynes, but our own Ponzi, the famous Boston swindler. Perhaps it is time to award him a posthumous Nobel Prize.

In short, I see the budget crisis not as the sign of faulty arithmetic but as the symptom of obsolescent public ideals and practices. Every nation has its concentrated moments of crisis. A healthy nation uses them to renew its public philosophy and make long overdue changes. By bringing out deeper historical and structural causes, scholars can prepare a climate for real debates and fundamental reforms. Professor Friedman’s own Day of Reckoning was itself a major contribution. I hope my book can push public reflection still further. Once our problems are clearly understood, I am, in fact, optimistic that a nation as vital as ours can find the way out of its troubles.

David P. Calleo
The Johns Hopkins Nitze School of
Advanced International Studies
Washington, DC