The debate about shrinking government is mostly wishful thinking ... With the selection of Paul Ryan as the Republican vice-presidential candidate, it is clear both political parties agree that the central issue in the coming presidential election will be the scale and scope of government involvement in the U.S. economy. There will be disagreement over what constituted "normal" levels of spending in the past and indeed over what constitutes "spending." But there is a widespread view in both parties that it is feasible and desirable that in the future the federal government will be no larger as a share of the overall economy than it has been historically. Unfortunately, this aspiration is unlikely to be achieved. Even preserving the amount of government functions the U.S. had before the financial crisis will require substantial increases in the share of the economy devoted to the public sector. This is the case for several structural reasons. – Reuters/Lawrence H. Summers
Dominant Social Theme: The path we are on toward larger government and more federal expenditures in the US (and the West) is an inevitable one. We have no choice other than to live this way and discuss what (helpful) services we will disallow.
Free-Market Analysis: Here comes Lawrence H. Summers to tell us that shrinking the US federal Leviathan is at least improbable. Summers is very good at this kind of thing. After Milton Friedman passed away, he wrote an article entitled, "We're all Friedmanites Now."
Of course, who really would want to be a "Friedmanite," the man most responsible for the US graduated income tax, who believed in steady state monopoly central banking, who campaigned against the draft but ended up giving the US its all-volunteer army?
With this statement as in so many other ways, Summers provides us a head-fake in one direction – toward free markets – while listing evermore leftward. This is, of course, the ambit of his career. He's very good at it.
He believes in market-based competition but served as the president of Harvard University from 2001 to 2006. Harvard is not about the marketplace. It's about elite paternalism and is nothing more than a training ground for those who will serve a handful of dynastic families intent on running the world.
Summers is seen as a deregulator but he served in high economic capacities in both the Clinton and Obama administrations – neither administration being well known for free-market sympathies.
In this article, Summers is up to his old tricks, writing from the point of view of someone who hopes to shrink government but finds it is going to be impossible to do so as the 21st century unfolds.
Here's how Summers explains it:
First, demographic change will greatly expand federal outlays unless politicians decide to degrade the level of protection traditionally provided to the elderly ...
Second, the accumulation of more debt and a return to normal interest rates will raise the share of federal spending devoted to interest payments ...
Third, increases in the price of what the federal government buys relative to what the private sector buys will inevitably increase the cost of state involvement in the economy ...
Fourth, several methods that have been used to repress the deficit will soon be found to be unsustainable. Federal pension liabilities and the deferred maintenance of federal infrastructure are two examples ...
Summers also points out "a steady decline in audits and ... evidence of growing tax noncompliance. Both are a reflection of unsustainable cuts in spending."
This is another problem, then, for Summers. US Fedgov is not funding the IRS adequately. Given that the US Congress is in the process of extending US tax outreach to cover the entire world, this is a somewhat puzzling statement.
Summers makes other points in this Reuters column. He speaks of reducing defense spending but cautions that "in a dangerous world our military is badly stretched by sustained deployments that are far smaller than even the first Iraq war suggests ... [T]here is little ground for confidence that the Pentagon budget would be cut dramatically."
Attempting to conjure up some more unusual approaches to cost-cutting, he imagines that technology itself could cut costs. But he brings himself back to [his] reality by pointing out that much of the US budget is simply focused around cash payments that cannot be alleviated.
Summers is clear on what's going to happen. "For the next three months the U.S. will debate the merits of growing versus shrinking government. But for the next three decades the nation will confront the reality that major structural changes in the economy will compel an increase in the public sector's fraction of the total economy unless there is a substantial scaling down in the functions that the federal government has long performed."
He closes by explaining that extracting appropriate revenues from society for use by government will constitute the great economic question for the next generation.
The article, of course, provides us with a cul de sac. There is no way out, Summers seems to be saying. The "adults in the room" simply need to realize that a federal government now spending US$3 trillion a year will soon be spending four ... or five ... or six .... It is inevitable.
But it is not. Summers has written an article that makes a series of assumptions and only by accepting those assumptions do we arrive at his conclusions.
The most credible alternative paradigm is one we regularly advance in these pages and has to do with the directed history of expanding globalism.
Accept this perspective and the entire fundament that Summers assumes is drawn into question. The current nature of US society was engineered by a series of extraordinarily broad sociopolitical gestures occurring one after the other and dating back at least to the Civil War.
After the Civil War, from what we're able to tell, the power elite had the ability to do pretty much what it pleased in the US and embarked on moves one after another to expand federal authority and spending as well.
The power elite that wants to run the world cannot do so without governments to manipulate, the bigger the better. The history of the past 150 years in the US (and really the West) is simply one of imperial engorgement.
We are fortunate to have had the US as a template of free-market thinking pre-war because it provides us with a full text of power-elite manipulation. When the history of the West is fully written by someone other than court historians, the expansion of America's federal government and then of world government will be the single, salient enterprise to be noted. There is simply nothing else.
It is this directed history that Summers uses as the template for his rather merciless and hopeless dissection of options available.
Our perspective is rather different. Thanks to what we call the Internet Reformation, people may simply cease to accept these sorts of options. We think that's already taking place.
Rather than acquiescing to ever more drastic measures to support society as it is, people may begin to seek their own solutions and to build their own communities separately from the control of the elite.
Because of the Internet, the power elite has been thrown back onto fairly primitive methodologies. These include war, economic impoverishment and authoritarian legal measures. In most epochs these mechanisms work fairly well; but in the Internet era, people will turn to electronic resources when faced with challenges to their economic and spiritual wellbeing.
The more the elite pushes in the Internet era, the more people it actually awakens as to their plight. The Internet is a process not an episode.
Summers assumes that society will run along the well-laid rails of elite dominant social themes and that people simply do not have the imagination or other intellectual resources to conceive that they may live their lives differently.
But is it true? Put enough pressure on people and they may rediscover the power of community living. They may return to the land and live in extended families within agrarian communities as Thomas Jefferson hoped. Even urban environments may offer local solutions. The alternative, after all, is more of what we've got now.
Decisions may be taken more locally; efficient private solutions could be substituted for ruinous public ones. People living in this way may find the vocabulary to reject punitive tax levies, ruinous fiat-money inflation and the whole phony war-on-terror narrative that the elites are relentlessly promoting.
Summers, in flat, clinical prose, provides us with a series of directions and an equally detailed set of unspoken end points. He is pointing us in a certain direction and assuming that as in the 20th century, we will confine our discussion to the parameters he is providing.
Conclusion: What if we don't?