Why the Republicans Should Just Cave
First, a parable.
You’re cruising along in your car, at just under the speed limit and having the time of your life, and suddenly you realise that you’re careering into a brick wall. After briefly being paralysed by fear, a vigorous debate breaks out between the passengers in the back seat. One has a daring plan (let’s call it the stimulus theory of accelerative crash avoidance) in which by hitting the accelerator as fast as possible you can break the light speed barrier and emerge unscathed on the other side of the wall through a process of quantum tunnelling. Naturally you’re somewhat sceptical, but this impassioned back-seat driver produces with remarkable speed voluminous complicated looking equations backing up his theory and swears blind that it is supported by all scientific authorities as well as instructors in the most prestigious driving schools.
However, the other passenger has a slightly different take, specifically he says that ‘uh that’s insane; hit the brakes, now!” But the expert in crash avoidance theory is not at all deterred and advances a range of compelling arguments against the “hit the brakes” theory. Specifically he says that it is ‘reactionary’, ‘the driving of the past’ and constitutes ‘looking back not looking forward’. Sensing that perhaps he needs something with a bit more bite to it he moves on to more striking claims, braking is ‘selfish’ he claims, you only want to do it because you hate the poor and you’ve been bribed by corporate lobbyists. Finally, he sticks the boot in: ‘did I mention braking may be a wee bit racist?’
Naturally, you don’t want to be a racist, so you push down as hard as you can on the accelerator and hope for the best, but the second passenger hasn’t quite finished making his case. “WHAT THE HELL IS WRONG WITH YOU MANIACS, HIT THE BRAKES!” he screams. You ignore him as long as you can, but, with the wall getting closer, something about his argument seems to make sense and, gripped by fear, you finally, belatedly push down on the brakes … but not by too much of course, you’re still a little worried by the racism argument and want to transition towards the braking strategy without too much opprobrium from your public.
And, of course, it’s far too late.
However, amidst the wreckage of shattered glass and limbs one victim of the crash finds some remarkable solace in his final moments. “I told you that braking wouldn’t work you fool and, look, I was right!”
Now, assuming that you have the breath left for a rejoinder you might make the obvious point that if he had just shut up and let you get on with braking then this whole thing could have been avoided. That seems plausible, but what if in a curious sense he was right? It was certainly too late to start braking when you did, but what if it was too late even before you hit the accelerator? Worse, perhaps it was still too late even at the beginning?
And that, basically, is our situation today. It’s too late. The U.S. federal government will default, most governments, actually, will default and either not long before or after that their currencies will be repackaged and sold by some enterprising fellow as value-brand toilet paper. After the TARP and Spendulus monstrosities the scale of cuts necessary is so far beyond the scale of the politically acceptable that you might as well try to solve America’s fiscal problems by mining for diamonds on Pluto. The Paul Ryan plan, if passed, would be just the start of what is necessary and, as events have made perfectly clear, there’s no way even that’s going to get through. But before we blame Bush and Obama for everything, even in 1999 the long-term obligations of the U.S. government were too much to make fiscal salvation any more than an outside bet.
So what should genuine conservatives in America and around the world do? I suggest nothing. Let Obama and every Pied Piper who promises the moon on a stick for free have his way, let them spend and borrow and tax and spend and spend and spend exactly as much as they want for as long as they want. Meanwhile, explain patiently and clearly that this will lead to disaster. Keep moderate conservatives and ‘free-market’ print-maniacs like Bernanke at arms-length and argue clearly that there is absolutely no justification whatsoever for any stimulus, any bailout, any quantitative easing, any interest-rate cut, none of it. Simply say that everything that western governments have done since the recession is wrong -morally as well as economically- and, moreover, that the whole system is wrong and that without total 100% reversal there’s nothing useful to be done.
The alternative to this isn’t saving the system; that can’t be done. The alternative is to institute some completely inadequate last-minute spending cuts and monetary discipline that will simply give the spendaholics somewhere to pin the blame. This is not hypothetical. One debt-ridden European country after has another has introduced emergency ‘austerity’ measures with predictably unimpressive results, ‘proving’ to the usual suspects that austerity doesn’t work and giving Keynesians in less immediately imperilled countries ammunition.
The collapse of an economy is an enormously unpleasant proposition, but it is not Armageddon. Once the epic mal-investments of the decades-long boom have been liquidised, we won’t have forgotten our technical knowledge, we won’t have lost our productive capacity and our infrastructure won’t simply have disappeared. Our level of prosperity will be, for sure, much lower than it is now, but all the ingredients necessary for long term sustainable growth will be there if we use them correctly. For this to happen, however, we need general acceptance of certain principles. There’s no such thing as a free lunch, a loan must come from 100% real savings, sustainable investment requires the deferral of consumption, money isn’t worth something just because the government say so, the government can’t borrow its way to riches any more than anyone else. None of these principles are hard, indeed it is only through ‘education’ that we managed to convince ourselves that they are untrue. With every school of economic thought except for the Austrian and the Marxist (and theirs’ already discredited enough) finally and totally discredited by the coming doom, they should re-assert themselves naturally. Unless, that is, the snake-oil salesman find some excuse. As far as I can see, the only effect that the heroic tea-party crusade to slash Federal spending from epically insane to a bit less epically insane can have is to give them precisely such an excuse.
So don’t let them have it.