The Debt Debacle

Boy are we in trouble.

Everyone who has been following political news these past few days knows by now that Obama, Reid, Boehner et al. just negotiated an agreement for ending the debt-ceiling holdup initiated by Republican members of the House. The deal consists of no new revenue-raising measures (i.e. taxes), but does contain over two trillion dollars in spending cuts. Most news coverage on the deal has celebrated the amazing feats of bipartisanship that brought the deal to its closure; coverage of Giffords returning to Congress comes to mind. (Giffords’s return to Congress is of course a wonderful thing, but few can deny that the spectacle of her return drowned out serious coverage of the substance of the debt agreement). While a large number of Democrats have dissented and expressed their disappointment with the bill, the consensus in popular discourse (or at least in America’s televised media) is that the agreement saved the day; at the very least, it was a necessary evil. They proclaim: The world of politics requires that tough decisions be made—the Democrats had to compromise in order to avert disaster. Of course the radical, progressive branch of the Democratic Party would be disappointed by the way negotiations turned out! But they are fringe elements of the political system, so who difference does their dissatisfaction make to the bulk of us?

Of course this is all bullshit. The deal is not only a tremendous loss for the left—more tragically, it’s really, really bad for America.

The reasons the agreement bodes ill for liberals are obvious. Revenue was not raised as Democrats wanted; socially valuable discretional spending on education and infrastructure are going to get cut; Social Security and Medicare costs are still going to spiral out of control under a Democratic president’s watch; and of course progressives have been alienated by Obama’s failure to leverage the superior bargaining position he attained in the beginning of the showdown and reluctance to invoke the fourteenth amendment as a means to legally circumvent the whole ordeal. The agreement does contain some provisions for defense cuts, which is a minor plus for Democrats. But really, who cares? The political consequences of this new agreement are inconsequential in the grand scheme of themes; come election season, none of this will figure into people’s votes—Americans don’t have a knack for remembering. They do, however, care about unemployment, and other indicators of economic catastrophe. So…what we really should be talking about are the economic consequences of the agreement, not the politics of who wins brownie points today.

And this is what disturbs me: virtually no one is talking economics!

Brad Delong posted a short entry on his blog shortly after the agreement was announced with an early guestimate that the proposed cuts to spending would hack 0.4% from our 2012 real fiscal GDP growth.

http://delong.typepad.com/sdj/2011/07/the-debt-ceiling-deal.html

In the world of macroeconomics, this is a pretty big chunk of change. And the timing couldn’t be worse: newly released economic figures have shown that growth over the past few years has been much lower than previously believed. Many indicators are suggesting we are about to plunge right back into full-fledged recession. As any real macroeconomist will tell you, a huge slash in government spending will also decimate demand, leading to more job losses and tanking productivity. A reduction in spending now is just stupid from a policy perspective.

Unfortunately almost no one is drawing on the Great Depression as a historical example for what this spending cut could do to our economy. In 1937, just as the US was beginning to bounce back from the worst years of the crisis, the Conservative Coalition came into power in Congress and forced the rollback of many New Deal policies, effectively hacking away at fiscal spending (sound familiar?). Compounded with some ill-timed monetary maneuvers on the part of the Fed—and some other messy things going on with international capital flows—the US sank right back into recession.

Of course, defenders of the deal will point out that the spending cuts are back-heavy: only twenty-some billion dollars in spending cuts will go into effect in 2012, for example, the majority being instituted in the last few years of a ten-year period (though this still is more complicated…more cuts would automatically be triggered if spending caps out at some point along the way). While it is true this does mean that the burden on the economy won’t be as severe as it could be, one could hardly list this as a plus; and in fact if projections that we are about to re-enter recession are correct, then the institution of mandatory, inflexible spending cuts over the next ten years will do nothing to pull us out of it. Why should we be so eager not only to walk off the plank, but to tie our hands behind our backs before doing so?

While everyone on MSNBC is talking about what a travesty the debt agreement will be for America’s social safety net (and believe me, it will be), few are talking about the even more startling economic ramifications this massive cut in spending could elicit. The compassion of the left for the poor is, ethically speaking, what makes it the superior ideological pole, so understandably many liberals take up arms over the flagrant human rights violations that accompany socially toxic right wing policies. Thus the bleeding-heart reaction of liberal media news outlets to the debt ceiling agreement is unsurprising. But what liberals often forget is that their ideology—which holds firmly to the value of equality—is not only good for the poor: more dramatically, it benefits the economy as a whole! Until liberals learn to be standard-bearers of this empirical truth, and until they make a push to change the discourse around what being liberal looks and sounds like, they shall continue to alienate potential allies among the public. Ostentatious invocations of social justice may sound like music to the choir, but to those outside the congregation they inevitably come across as naïve and pretentious posturing.

Leftists: learn to trump up the nationalism! Conservatives aren’t the only ones who care about this country. If there’s anything most Americans can agree on, it’s that a robust economy is good for America.

Make them see that your way is best, and they will listen.

The pitfalls of ideological meritocracy

When libertarians and other free market fundamentalists are forced to offer a defense for the sort of unfettered capitalism that they advocate, they are almost guaranteed to invoke meritocracy in some form. Somewhat more surprising is that among the political left there are many who claim to be meritocrats at heart; probably this has something to do with the fact that the ranks of vocal liberals swell with educated technocrats, and it is common for people with a good education to believe that it (or, at a deeper level, their supposed intelligence) entitles them to a larger slice of the pie. What makes this surprising is that pure meritocracy is in effect at odds with core liberal ideals, among them social mobility, economic vitality and egalitarianism.

Most attacks against pure meritocracy revolve around an inherent difficulty in determining what makes some people more deserving of reward than others. While this is certainly a question worth pursuing, there is an even more fundamental problem in meritocracy worth addressing. To put it plainly, meritocracy is structurally infeasible. The ideological thrust behind meritocracy is that social capital—whether in the form of human talent, intelligence, or moral value—ought to be aligned with material wealth. Viewing matters macroscopically, the most salient rationale for instituting a meritocratic system is transparency: we want assurance that our rich men and women are not so by accident, that they really deserve their wealth and power. Otherwise the social order would appear simply unjust. Viewed in this light, meritocracy serves not only as a justification for inequality—it satisfies the itch for truth that is so central a part of Western thought.

Of course, as dozens if not hundreds of political scientists, economists, sociologists and philosophers of various stripes have suggested in one manner or another, the problem in attempting to align social capital with its material counterpart is that doing so creates a messy feedback loop. In short, wealth becomes a justification for itself; simply being rich implies that one is the superior sort of being deserving of being rich. Though this rather clearly reverses the intended directionality of the merit-wealth relationship (at least in name—few would be so stupid to think that the already-rich are ignorant of the benefits of a wealth-merit conflation), structurally there is no way to unravel it when money and social value are made tantamount. And any system that permits wealth to exist as a basis for itself will license the sort of speculative bubbles that threaten economic productivity and political stability. But this is just one of many emergent problems: economic hierarchies are crystalized and what’s more turned into classes; and because occupations are somewhat likely to select for certain ethnic groups or geographically privileged persons, racial segregation and regional disparities are extremely probable outcomes.

Think of it this way: in today’s major industrial countries there are plenty of people who do not self-identify as wealthy who yet are able to carve out a niche for themselves and attain purpose. Consider, for example, the teachers, artists and musicians you have met in your life. The argument goes that academics and intellectuals would fare much better under a true meritocracy, which might perhaps be true for some, but certainly wouldn’t for others; for there will always be writers, scientists and other thinkers whose work runs contrary to the status quo, who have trouble securing research funds for lack of interest or application despite the novelty and brilliance of their endeavors. But in a world where wealth is the only thing that matters, what incentives would they have to go on in the face of adversity? And supposing they slugged on and made some grand new discoveries anyway—who would bother to listen to them, given their poverty and obscurity?

It seems evident that the most structurally sound economic arrangement for society must take care to avoid equating material worth with social capital rather than trying to splice the two together. Only by maintaining a strict disconnect between social capital and wealth can we establish an adequate checks and balances between material worth and the various other abstract values we assign to individuals and institutions (i.e. cultural status, moral uprightness, etc.). Staggering social and economic capital also ensures that society be kept dynamic: creativity and innovation will not be kept down by artificial social hierarchies, but encouraged even among the most materially underprivileged members of society.

Economists have demonstrated that social mobility in general fosters growth, as it allows labor and talent to distribute optimally; economists slip up, however, by supposing that this mobility is strictly vertical, and in particular determined solely by income. A better model for social mobility should be multidimensional: the reality is that people have many incentives to action, among them the acquisition of material worth, certainly, but just as well the accruement of status and power and the attainment of moral righteousness. A dynamic society requires all these different variables be allowed to ‘slide’ independently of each other; by fixing status to wealth, we inhibit people’s freedom of action.

But, one might object, isn’t freedom of action just what unfettered capitalism is designed to do? No—while theoretically free market doctrines do nothing to assign status-values to material parallels, empirically it is clear that the invisible hand does nothing to keep them separate, and indeed more often than not weds the two. Who would you say has higher status: the doctor, or the teacher? The lawyer, or the engineer? Notice that neither education nor moral righteousness is the sole determinant of your judgments—income differences seem to play a key part. One could of course argue that those differences correspond to some difference in social value—doctors are generally smarter than teachers, one might argue—but then we enter chicken-egg territory, since the same people will tell you that the medical profession selects for smarter people precisely because of its higher wages. The proliferation of essentially poisonous fast food and the distension of certain segments of the entertainment industry should be proof enough that the free market, left to its own devices, does not simply reward the deserving. The only thing that could be said beyond doubt is that it rewards the profit-seeking.

Which mode of governance, then, would best serve to maintain the balance between material wealth and the various types of social capital? Pure socialism and communism should be rejected on the grounds that they attempt to eliminate material mobility altogether. The outcome of such a leveling would be not unlike trying to tether status to dollars, for it too would lead to the establishment of a rigid social hierarchy, this time on the basis of supposed innate worth. Whether this measure correspond to intelligence or some indicator of ‘talent,’ it is hard to imagine that determining the worth of human beings so narrowly could be a good thing.

The only sound option left us is some form of social democracy. Systems of social democracy are unique in that they self-consciously employ a system of social values to counter-balance excesses in wealth-accruement, neither obviating wealth disparities to the point that economic incentives disappear, nor allowing those disparities to build to the point where class lines become clearly defined. That this is important comes from the observable fact that the emergence of a clear class structure engenders social capital for those at the top, enhancing the prestige of money and thus inflating demand for it as an end in itself. (We might take this class-eradication function as the defining characteristic of social democracy, but that is beside the point.) 

As a further thought, social democracy—despite its relative lack of technical pretense—is the only system of government that recognizes the truly complex nature of human decision making. Economics as a discipline will remain incomplete until it successfully incorporates the findings of sociology and psychology about how people interact and institutionalize. What I am recommending here is that academics and policy makers take the first steps toward formalizing a rather simple model for a hybrid sociological-economics which takes into account the role social capital plays as an incentive in people’s lives. The beauty of such a model is that through it the rational actor assumption (which underlies almost the entire field of economics, despite the obvious problem that human beings are not robots) could probably be preserved to some degree as a viable model, assuming one got the relative weights of money, status and power somewhat accurate. The world’s social democracies have proven to produce the highest living standards in the world; from this empirical evidence alone we have enough to weigh in against pure meritocracy, and also good reason to believe in the benefits of capital-staggering.

What's this all about?

Now that I am come to my second post, it seems proper that I take some space to lay out the general purpose of this blog, and indicate what sort of content readers should expect from it.

On the surface level my aim is to provide a smart and thoughtful commentary on the state of things in the modern world. The subject matter I intend to cover shall be broad, encompassing matters of philosophy, economics, politics, science, aesthetics, ethics, education and psychology. I plan not to become too wrapped up in any one of these subjects, but at the same time I shall strive not to be too general or superficial in the treatment of any one. To the greatest extent possible, I shall endeavor to make this a blog about everything—a grand and sweeping survey of academia, art, history, civilization, conscience and consciousness, that is, everything that makes us human. Thus at a deep level, my ultimate objective shall be no less than to probe the meaning of life, and beyond that to consider questions of its practical fulfillment.

No doubt the foundation I have here laid must sound impressively overreaching to any well-grounded reader. Surely I must have delusions of grandeur! For starters, the mere notion that I could cover every issue of importance to mankind is both hubris-laden and absurd. To address the dismay any sane reader must now be experiencing, let me remark in anticipation that this project will no doubt have shortcomings. Just like any other human being, my perspective on the world is informed by my own experiences, and my assessment of how the world decomposes into its component pieces is inextricably a product of my own subjective worldview. Consequently one legitimate weakness of my writings is that they will draw upon a limited pool of knowledge (mine), meaning the subjects I discuss, the examples I invoke, and the intuitions that guide me will together conspire toward a reductionist painting of what humanity is. And yet while I cannot be objective in the truest sense (as only an omniscient could), I can do my best to be fair in my analyses. That is, in matters that boil down to binary true-false relations (i.e. which can be considered simply in terms of what is and what isn’t), I can use the principles of logic to arrive at informative answers in spite of my biases and limited perspective.

Building upon this, my expectation is that the brunt of this project shall consist of logical arguments made in favor of this position or that on the sort of issues I have described above. I say ‘expectation’ in that, speaking truthfully, I cannot state for certain whither I might take this project as time progresses. Besides weaving incidental arguments, the overarching trajectory of my writings should adumbrate a general philosophic position for how individuals conduct themselves and societies are arranged. The best method for laying this edifice will require, I believe, a fair lick of playing by ear; and as it happens, my faith in the human mind’s ability to improvise lies at the heart of the utilitarianism-with-a-twist principles that motivate this project.

Which brings me to my final point: though much of the space I reserve for this blog shall be dedicated to the drafting of analytical arguments, the project’s ultimate end is an ethical one. It is one thing to make a convincing case for the correctness (or truth) of one’s position, but it is quite another to write something that makes people better—or, perhaps better said, which gives people the impetus to make themselves better. To achieve such an end, I plan to do whatever I can, experimenting here and there as necessary—and of course, given the scale of the task I have set for myself, I shouldn’t expect to be done in a hurry.

Introduction

What better a way to set the tone for things to come than with music?  Here is Ravel's Introduction et Allegro for the harp, flute, clarinet, and string quartet.  Enjoy!