As 2010 unfolds, many countries are confronting a public deficit crisis of disturbing proportions. Since 2008, countless politicians have underscored that a cavalier attitude to debt on the part of Main St. and Wall St. contributed significantly to the recent financial crisis. It’s therefore ironic to observe these contemporary preachers of thrift plunging developed economies into an abyss of public liabilities.
In 2009, for example, the Obama Administration spent more money on new programs in nine months than the Clinton Administration did in eight years, thereby increasing America’s annual deficit to $1.4 trillion.
To be fair, the federal government’s annual deficit rose steadily under the Bush Administration. Indeed, this spending-pattern helped create an atmosphere which made it easier for politicians to push through the stimulus packages of late 2008 and 2009. America’s long-term annual federal deficit is now at its highest level since the early 1990s. The Office of Management and Budget presently predicts that by 2019 America’s public debt will be $18.4 trillion – approximately 148 percent of America’s GDP.
In an age when political, civic, and religious leaders endlessly invoke “intergenerational solidarity,” that’s hardly a proud legacy to bequeath our children. It’s akin to forcing them into a form of indentured servitude to us which will last long after we’ve gone to meet our maker.
A former American Vice-President once reportedly stated: “Deficits don’t matter”. Actually, they do. For one thing, much economic policy of the 2010s is going to be dominated by efforts to reduce government deficits. This assumes, of course, that our political masters have retained some lingering sense of fiscal prudence. Here the Federal government’s recent lifting of borrowing limits for financially-disgraced Fannie Mae and Freddie Mac does not inspire confidence. Nor does Congress’s quiet Christmas Eve raising of the federal debt limit to $12.394 trillion.
Deficits also matter because reducing them presents us with difficult choices. One is to raise taxes. This, however, reduces incentives to create wealth. A second is simply to inflate the deficit away. But apart from poisoning a currency, inflation discourages savings and negatively impacts those on fixed incomes: i.e., the elderly and the poor.
Another option is to reduce government expenditures. But politicians would then not have as much taxpayer money available to pay off the various interest groups that support them during elections. Unsurprisingly, they’re not so inspired by this, all protestations to the contrary.
Naturally, it’s very easy to blame politicians for the deficit nightmare confronting America and other developed countries. But one of the Bible’s most useful pieces of advice is to “remove the wooden beam from your eye first; then you will see clearly to remove the splinter from your brother’s eye” (Matthew 7:5).
It’s true that many politicians in America and Western Europe consistently vote for public expenditures not covered by revenue. But they are not in office because they inherited their positions. They hold public office because many of us vote for them.
Some of us do so because we’re happy for them to use their legislative powers to make others to pay for particular projects that we can’t or won’t pay for ourselves. It’s part of an unspoken agreement between politicians and the rest of us. We want to have our pork and eat it too.
Others vote for such political candidates because we actually want the state to take care of us rather than assume responsibility for ourselves and our families. Yet others vote for deficit-enhancing politicians because we think we can have mutually-exclusive things, such as countless entitlement programs and low taxes.
And then there are those of us who vote on the strange basis of identity-politics or emotionally-satisfying-but-content-less slogans like “Hope and Change,” while ignoring the woeful fiscal records of politicians of all parties espousing such mottos. The same politicians habitually make absurd promises to solve all our problems, and we go along with it. In short, we routinely throw our reason out the door and succumb to messianic sentiment and utopian daydreaming. That’s what adolescents do – not mature, responsible citizens.
At some point, however, the irreconcilable must be reconciled. All those promises and pork-barrels must be paid for. Neither raising taxes nor cutting expenditures are electorally-palatable solutions for most politicians. So why not run large deficits?
But in the end, out-of-control deficits matter because they tell us something about who we are, what we want, and our unwillingness to make the necessary sacrifices to achieve our goals. Ultimately, it’s not just politicians who need to be held accountable and repent for our deficit crisis. It’s us.
Latin America: After the Left
Wednesday, January 27, 2010
This week’s Acton commentary:
The left is in trouble in Latin America. Sebastián Piñera’s recent election as Chile’s first elected center-right president in decades owes much to the inability of the center-left coalition that governed Chile after 1990 to rejuvenate itself. Yet across Latin America there is, as the Washington Post’s Jackson Diel perceptively observes, a sense that the left’s decade of dominance is unraveling.
Future historians may trace the beginning of this decline to the refusal of Honduras’s Congress, Supreme Court, Administrative Law Tribunal, independent Human Rights Ombudsman, Supreme Electoral Tribunal, two main political parties, and Catholic bishops to allow ex-President Manuel Zelaya to subvert Honduras’s constitutional order “from within” Chávista-style in 2009.
In truth, however, the populist-left is wilting because their economic policies are collapsing. The most prominent example is Venezuela. Hugo Chávez’s regime was recently forced to devalue the currency, thereby undermining the purchasing power of ordinary Venezuelans’ bolivars in an already recessionary inflation-riddled economy. He is also rationing basic commodities such as electricity. (more…)
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evo morales, Honduras, hugo chavez, latin america, Populism, Rafael Correa, Sebastián Piñera
Forgive us our deficits
Saturday, January 23, 2010
This week’s Acton commentary:
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Recommended: Belloc’s Puzzling Manifesto
Wednesday, January 13, 2010
Hilaire Belloc
From Mises Daily: Belloc’s Puzzling Manifesto by Garet Garrett.
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Not so separate after all
Tuesday, January 5, 2010
The New York Times is not known to be the most reliable or informed commentator on matters religious, but a recent Times article (marred, unfortunately, by a couple of inaccuracies) highlighted that France’s claim to have separated religion from the state is only true in parts. French cities and the countryside are dotted with beautiful churches, but few realize that the state is responsible for the physical upkeep of many of them. This is a legacy of the famous (or, infamous, depending on your perspective) 1905 law - Loi du 9 décembre 1905 concernant la séparation des Églises et de l’État - in which a militantly anti-Catholic French government unilaterally abrogated the Concordat of 1801 and ended state-funding of religious groups (which meant, in overwhelmingly Catholic France, the Catholic Church).
But it didn’t quite cut all the ties. As part of the 1905 law, the French government declared that all then-existing religious buildings were the property of the state (specifically, local government), thereby legalizing the greatest theft of private property owned by a religious organization since Henry VIII’s dissolution (or, more accurately, government-sanctioned sacking, pillaging, and destruction) of the monasteries. Unlike King Henry, however, the French state allowed Catholics to keep using these places of worship and even today maintains their upkeep - something that lends itself to all sorts of mischief-making on the part of politicians.
A good example of this was highlighted in the Times article which reports that a beautiful 19th century church in the town of Gesté in the province of Anjou is scheduled for demolition because the local council has decided that it is too costly to maintain and cheaper to build a new one. But many opposing the council’s decision say that it has nothing to do with government budgets and everything to do with trying to reduce local unemployment.
Given the state of much post-1960s church architecture, it’s likely that the new church will be just as hideously ugly as most other churches (of any confession) built since 1960. The wider point, however, is that it should surely be up to the local bishop and the parish itself as to whether to renovate the church or build a new one. Instead, the choice has been made by Gesté’s local council, of whom one can safely presume a good number (even in the still very Catholic province of Anjou) are not believers or haven’t darkened a church door in several decades. Christians presumably would not expect to have a say in the building or demolition of the local Communist party headquarters, feminist collective, or Masonic temple. Yet in France if the local village atheist gets elected to the local council, he is henceforth in a position to make decisions about the fate of many houses of worship.
Such are the perils of government funding for churches – or mosques or synagogues for that matter. Inevitably, one’s independence is unjustly circumscribed.
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Not So Liberating: The Twilight of Liberation Theology
Tuesday, December 22, 2009
NRO’s Corner published my article on Pope Benedict’s recent remarks to Brazilian bishops on liberation theology:
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Commentary — Chavez: Desperate, Delusional, and Dangerous
Wednesday, November 25, 2009
It’s ironic – and tragic – that as the world celebrates the twentieth anniversary of Communism’s defeat in Europe, the comic-opera that is Hugo Chavez’s “21st century socialist” Venezuela is descending to new lows of absurdity. Beneath the buffoonery, however, there’s evidence that life in Venezuela is about to take a turn for the worse.
By buffoonery, I mean President Chavez’s decidedly weird statements of late. These include threatening war against Columbia, advising Venezuelans that it is “more socialist” to shower for only three minutes a day, telling his fellow citizens to eat less because “there are lots of fat people” in Venezuela, eulogizing convicted murderer Carlos the Jackal as “a revolutionary fighter”, defending Zimbabwean dictator Robert Mugabe as a “brother”, and wondering whether Idi Amin was so bad after all.
It’s not unusual for Latin American caudillos to say things that suggest a growing detachment from reality. The truth, however, is that for all Chavez’s eccentricities, it would be a mistake to dismiss these comments as nothing more than egomaniacal ravings. (more…)
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The Financial Crisis: What We (Still) Haven’t Learned
Thursday, November 19, 2009
It’s over a year now since the 2008 financial crisis spread havoc throughout the global economy. Dozens of books and articles have appeared to explain what went wrong. They identify culprits ranging from Wall Street financiers overleveraging assets, to ACORN lobbying policy-makers to lower mortgage standards, to politicians closely connected to government-sponsored enterprises such as Freddie Mac and Fannie Mae failing to exercise oversight of those agencies.
As time passes, armies of doctoral students will explore every nook and cranny of the 2008 meltdown. But if most governments’ policy responses to the crisis are any guide, it’s apparent that many lessons from the financial crisis are being ignored or escaping most policy-makers’ attention. Here are five of them.
Perhaps the most prominent unlearned lesson is the danger of moral hazard. The message conveyed to business by many governments’ reactions to the financial crisis is this: if you are big enough (or enjoy extensive connections with influential politicians) and behave irresponsibly, you may reasonably expect that governments will shield you from the consequences of your actions. What other message could businesses such as AIG, Citigroup, Royal Bank of Scotland, Lloyds, and Bank of America have possibly received from all the bailouts and virtual nationalizations?
A second unlearned lesson is that once you allow governments to increase their involvement in the economy to address a crisis, it is extremely difficult to wind that involvement back. Indeed, the exact opposite usually occurs.
Who today remembers the stimulus and bailout packages so heatedly debated in late-2008? They pale next to the fiscal excesses of governments in America and Britain throughout 2009. Recessions and subsequent government interventions create an atmosphere in which the hitherto implausible – such as trillion-dollar, 1900 pages-long healthcare legislation in an era of record deficits – becomes thinkable. Likewise the Bush Administration’s bailout of Chrysler and GM morphed into the Obama Administration’s virtual appropriation of the same two companies. (more…)
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Economic Liberalism and its Discontents
Monday, November 16, 2009
How do we restore confidence in free markets? Formulate a robust explanation of their moral value. Read Economic Liberalism and its Discontents on Public Discourse.
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Healthcare and Catholics: True and False Arguments
Friday, October 16, 2009
This week’s Acton Commentary:
Healthcare reform – it’s one of those causes almost everyone favors, but which almost automatically produces sharp arguments when we ask what it means and how it might be realized. You would have had to be living in a cave for the past eight months to be unaware that Americans are deeply divided on this matter, and that the division runs clean through the middle of many communities. That includes Catholic America.
Of course, there are a small number of non-negotiables for Catholics, whatever their politics, when it comes to healthcare reform. These principally concern any provisions that facilitate or encourage the intentional termination of innocent human life, or which diminish existing conscience exemptions.
Without question, these are the primary issues for Catholics who take their Church’s teaching seriously when it comes to healthcare legislation. They dwarf everything else.
No matter how good the rest of the legislation might be in, for example, widening access to affordable healthcare, it is a stable principle of Catholic faith - and natural law - that you cannot do evil in order that good may come from it. St Paul insisted upon this almost 2000 years ago (Romans 3:8), and it is constantly affirmed by Scripture, Tradition, and centuries of magisterial teaching. Try as they may, no amount of rationalization by the usual suspects can get around this point.
For this reason, much of the Catholic contribution to the healthcare debate, especially that of Catholic bishops, has focused on these issues. We’ve yet to see what impact this might have on whatever eventually arrives on the floor of Congress.
But let’s hypothesize. Imagine the healthcare legislation submitted to Congress involved a massive expansion of government involvement in healthcare. Let’s also suppose that the same legislation was stripped of any provisions that violated non-negotiables for Catholics. Would Catholics be obliged to support passage of such legislation? (more…)
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The Economics Nobel
Tuesday, October 13, 2009
My response to the awarding of the Nobel Prize in Economics to Elinor Ostrom and Oliver Williamson was published on National Review Online:
Also see David R. Henderson’s fine “A Nobel for Practical Economics” in today’s Wall Street Journal.
Finally, here’s a lecture hall video of Ostrom on sustainable development and the tragedy of the commons:
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David R. Henderson, Elinor Ostrom, nobel prize economics, Oliver Williamson, sustainable development, tragedy of the commons
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