The sad, dangerous lessons of America's budget standoff.
I’ve been thinking in recent days about doctrines of national decline. The fact that at the eleventh hour the U.S. Senate managed to paddle the canoe of state away from the thunderous cataract of default is hardly a sign that the United States has preserved its global standing. For one thing, Americans will find themselves witnessing the same melodrama in three months unless Congress agrees on a long-term fiscal plan, which seems, to put it gently, damn unlikely. For another, Americans have been stumbling in a fog of their own devising for the last generation or so. The end is not nigh; but the decline is.
The United States is exhibiting extremely idiosyncratic symptoms of great-power decline. Take the classic account of the subject, Paul Kennedy’s The Rise and Fall of the Great Powers. Kennedy describes a syndrome, which afflicted the Roman Empire, imperial Spain, and Victorian England, among others, in which regional or global aspirations outstrip national capacities. Writing in 1987, Kennedy projected the United States as the latest victim of "imperial overstretch," because "the sum total of the United States’ global interests and obligations is nowadays far larger than the country’s power to defend them simultaneously."
That feels like the wrong diagnosis. First of all, unrestrained defense spending in the aftermath of 9/11 has not come close to bankrupting the United States, though it has certainly squandered precious resources. Second, Americans have contracted a severe case of indigestion from President George W. Bush’s vain attempt to swallow significant portions of the Middle East; they are now spitting out the remnants. Empire is an unnatural condition for the United States, and withdrawal to its continental fortress is an almost inevitable response to fears of overstretch. If anything, it is the new national suspicion of engagement, the mood of sullen disenchantment, that marks the country’s decline. Americans don’t want to shoulder the burdens of global leadership; they want the world, along with its demands, to go away.
We need a word more like "understretch" to describe the national condition. The problem does not lie with too-muchness abroad but with too-littleness at home. And the source of the problem is not an overambitious state but an implacable hostility to the operations of the state. Kennedy also writes that while America’s laissez-faire culture and economy make it better able to adjust to rapid change than are more dirigiste societies, doing so "depends upon the existence of a national leadership which can understand the larger processes at work in the world today." The deliberations of Congress — not just in recent days but in recent years — vividly show the danger of wrongheaded leadership.
The near default, the shutdown of the government, the sequestration of budget funds — these are just the latest symptoms of a political, but also psychological, disease. The leadership of the Republican Party — and not just the Tea Party faction — believes that the federal government is bad. It has believed that at least since Newt Gingrich overthrew the party’s moderate leadership in 1994. In 2012, Mitt Romney, a Republican centrist, ran for president on a platform that would have reduced federal spending to 20 percent of GDP, 2 percentage points lower than it was during the time of small-government apostle Ronald Reagan — even though Medicare costs were a small fraction then of what they are today. (Matt Miller of the Washington Post has long been an eloquent voice on this madness, as for example here.) To accommodate deep tax cuts, Romney would have eliminated much of the federal government beyond the Pentagon. That is now the orthodoxy of one of America’s two political parties.
Meanwhile, the United States is falling behind in crucial areas where it led not long ago. The national store of human capital is diminishing as average rates of literacy and numerical understanding plummet in comparison with rates in other countries, as a recent OECD report demonstrated. A smaller percentage of Americans now both attend and graduate from college than in many Western countries. Crumbling infrastructure increases transaction costs; just compare the trip to JFK airport to the commute to almost any other global airport. The United States still leads the world in spending on research and development, but China has closed much of a formerly immense gap, and many countries now spend more as a percentage of GDP.
The United States is losing its position of global leadership because it is refusing to make investments that its competitors are making. In this regard, congressional Republicans may have lost the battle, but they’ve won the war. President Barack Obama agreed to accept the massive tax cuts his predecessor instituted in order to conclude a budget deal in 2011; since then, he has played on the Republican side of the field. Obama has never found, and perhaps will never find, the language needed to convince Americans that they cannot offer decent prospects to their children without a drastic change in priorities.
The best nibble at the edges, while the worst play with fire. In This Time Is Different: Eight Centuries of Financial Folly, economists Kenneth Rogoff and Carmen Reinhart catalog more than 70 cases of default on domestic debt over the last two centuries. On average, they note, in the year of default, inflation runs at 170 percent and the economy shrinks by 4 percent. In other words, default is so appalling a prospect that countries do it only when the economy is near collapse. And many of those countries, the authors note, are kleptocracies. The United States, by contrast, has a growing economy and no shortage of fiscal resources. No democratically unaccountable class was forcing the action. Washington came within a whisper of default on a whim: Political figures who do not believe in the government were delighted to throw a spanner in the works. Maybe they just wanted to see what would happen.
Great powers of the past have fallen behind when they failed to keep up with technological progress, as happened to 15th-century China; others have succumbed to invasion or disease. America faces none of these problems. The United States is a dynamic country that continues to attract immigrants and thus to grow and renew itself. It offers a unique scope to individual achievement. These great strengths certainly place a floor on any possible decline; perhaps they even argue that the United States can survive self-inflicted wounds that would doom a lesser nation. But another way of putting it is that America is posing a very dire test of its own powers of resilience.
If it’s not disease or invasion, then, what is it? Historian Edward Gibbon argued that Rome ultimately fell for moral reasons — because an ethos of patriotism and civic virtue gave way to selfishness and apathy (and lost out to the otherworldly focus of Christianity). Americans from the time of George Washington have worried that citizens would sink into a Roman torpor. That hasn’t quite happened either; Americans remain wedded to their republican virtues. Yet they don’t believe in the United States as an ongoing national project as they once did. Perhaps extreme inequality has loosened the strong stays of shared purpose so that we are predisposed to believe that virtue resides only in the individual, not in the community or collective. Thus, we redistribute resources to the individual, which of course only reinforces inequality. We respond to leaders who address us as separate, indissoluble atoms. Gibbon, who distrusted democracy, would probably say that Americans have become too individualistic.
I would say, instead, that there is a fine balance between the profound laissez-faire impulse that has made American the home of political and economic freedom, and the sense of shared citizenship that has fostered great collective efforts in the past — and that the country seems to have lost that balance. I would like to think that this latest brush with disaster will help right that balance — but I don’t believe it. Things will have to get worse before they get better.