July 31, 2012
Democratic Government and Good Government
To My Fellow Citizens:
The American experiment, as these letters have argued (here and here), is a never ending
experiment. It is the experiment of every generation to prove again, as our Founders set out to prove, that democratic government can be good government.
Political philosophers have been debating the meaning of good government for centuries. It is safe to say that two requirements, defending against foreign aggressors and avoiding insolvency, are probably not sufficient for achieving good government but are absolutely necessary to any conception of it. No matter what else a government may achieve, if it allows the nation's subjugation or financial ruin it must be considered a failure.
These elemental goals are especially difficult for democracies, however. For one thing, both require the majority of people to assent to managing public affairs by imposing tangible, short-term sacrifices for the sake of abstract, long-term benefits. This is exactly the maxim that the majority of people apply reluctantly and inconsistently to the management of their private affairs.
Moreover, even if a democracy's selected leaders succeed in persuading the nation that military preparedness or fiscal restraint is necessary in general, they will still face the problem of imposing the necessary sacrifices on particular citizens. That is, convincing people that soldiers should be conscripted, taxes raised, or subsidies cut is different, and easier, than responding to the "Yes, but" replies: Yes, we need more soldiers, but there are compelling reasons not to draft my kid. Yes, we need to balance the budget, but you should raise his taxes, not mine, and reduce their benefits, not ours.
Equality is democracy's fundamental principle, and majority rule is the obvious manifestation of that principle: If everyone's votes are equal, then the candidate or proposition that gets the most votes deserves to win. Majority rule would seem to equip democracies to impose sacrifices on minorities for the benefit of the whole society, perhaps in ways that lend themselves to the abuse of minorities.
Nonetheless, the history of democratic governance shows that minorities are often very successful at fending for themselves, despite majority rule. When, for example, the costs of a policy are borne by everyone, but are very slight, while the benefits are garnered by only a minority of the population, but a minority that is deeply committed to receiving and continuing those benefits, the correlation of democratic forces favors the minority over the majority. Federal price supports for farmers are an example of this phenomenon. Few citizens will vote against a politician because of a farm program that adds a few dollars a year to their tax bill or grocery bill, so no politician fears that supporting those programs will end his career. Many farmers, however, will vote against a politician who tries to end those programs, so politicians, especially from rural states and districts, have compelling reasons to perpetuate the subsidies.
In one respect, the democratic challenge of defending the nation is harder than preventing bankruptcy, since the sacrifices required by the latter expose no one to violent death or dismemberment. Viewed from another angle, however, this same distinction makes fiscal discipline the more difficult attainment. Washington, D.C., like every nation's capital, is crowded with statues of military heroes, whether generals mounted on horseback or enlisted men captured in a moment of valor, such as the Marines raising the flag on Iwo Jima. There are, by contrast, very few statues of Secretaries of the Treasury, and none showing a civil servant fearlessly subduing a spreadsheet.
The fact that keeping our national accounts in order is a permanent need, and a mundane one, means there will always be a gravitational pull in the direction of bigger deficits, growing debt, and increased borrowing. The historical record shows that there’s a further connection between martial and fiscal imperatives: big increases in the federal debt usually correspond to major wars. Thus, the federal debt, the total amount owed by the federal government to all lenders as a result of past borrowing not retired, increased from $65 million in 1860 to $2.77 billion in 1866, a factor of 43. It increased from $3.61 billion in 1916, the year before America entered World War I, to $25.95 billion in 1920, the fiscal year after the war ended. The debt then grew from $48.96 billion in 1941 to $258.29 billion in 1947.
Few would argue, of course, that it would have been better if America had lost or never fought these wars rather than incur the expense and indebtedness necessary to win them. One noteworthy thing
about this historical pattern, however, is that the wartime increases define plateaus rather than peaks. After incurring huge loans to fight a war, the federal debt never gets much smaller than it was at the end of the war, and never gives the slightest indication of reverting to the levels seen before the start of the war. These plateaus seem to be only partly explained by the duration of the loans needed to build ships and planes. Another part of the explanation is that wartime borrowing shows what the market and the electorate will bear. Lenders offer to loan the government much more money than it had ever before tried to borrow, and voters learn to live with levels of debt that had previously been unimaginable.
According to the field of economics known as public choice theory, the wonder is not that our budget deficits aren’t smaller, but that they aren't much larger. Borrowing more money will always be the least unpopular option in a democratic contest where the alternatives are taxing more or spending less. Americans can look at Greece or Spain, however, to see the dangers of borrowing as much money as the world is willing to lend. The nations that try it routinely wind up borrowing more than the world is willing to lend, and are forced to pay a high premium to induce lenders to make loans to governments that can't be counted on to repay them. This course leads into a fiscal death spiral, where a national government is forced to borrow at high interest rates because its ability to repay is dubious, but the high interest rates put such a burden on its finances that its ability to service its loans is in fact diminished. If we have the sense to attend to its lessons, daily experience is teaching us what it has always taught: that America must find a way for its democratic government to be a good, fiscally disciplined government.
Ohio Farmer
The American experiment, as these letters have argued (here and here), is a never ending
experiment. It is the experiment of every generation to prove again, as our Founders set out to prove, that democratic government can be good government.
Political philosophers have been debating the meaning of good government for centuries. It is safe to say that two requirements, defending against foreign aggressors and avoiding insolvency, are probably not sufficient for achieving good government but are absolutely necessary to any conception of it. No matter what else a government may achieve, if it allows the nation's subjugation or financial ruin it must be considered a failure.
These elemental goals are especially difficult for democracies, however. For one thing, both require the majority of people to assent to managing public affairs by imposing tangible, short-term sacrifices for the sake of abstract, long-term benefits. This is exactly the maxim that the majority of people apply reluctantly and inconsistently to the management of their private affairs.
Moreover, even if a democracy's selected leaders succeed in persuading the nation that military preparedness or fiscal restraint is necessary in general, they will still face the problem of imposing the necessary sacrifices on particular citizens. That is, convincing people that soldiers should be conscripted, taxes raised, or subsidies cut is different, and easier, than responding to the "Yes, but" replies: Yes, we need more soldiers, but there are compelling reasons not to draft my kid. Yes, we need to balance the budget, but you should raise his taxes, not mine, and reduce their benefits, not ours.
Equality is democracy's fundamental principle, and majority rule is the obvious manifestation of that principle: If everyone's votes are equal, then the candidate or proposition that gets the most votes deserves to win. Majority rule would seem to equip democracies to impose sacrifices on minorities for the benefit of the whole society, perhaps in ways that lend themselves to the abuse of minorities.
Nonetheless, the history of democratic governance shows that minorities are often very successful at fending for themselves, despite majority rule. When, for example, the costs of a policy are borne by everyone, but are very slight, while the benefits are garnered by only a minority of the population, but a minority that is deeply committed to receiving and continuing those benefits, the correlation of democratic forces favors the minority over the majority. Federal price supports for farmers are an example of this phenomenon. Few citizens will vote against a politician because of a farm program that adds a few dollars a year to their tax bill or grocery bill, so no politician fears that supporting those programs will end his career. Many farmers, however, will vote against a politician who tries to end those programs, so politicians, especially from rural states and districts, have compelling reasons to perpetuate the subsidies.
In one respect, the democratic challenge of defending the nation is harder than preventing bankruptcy, since the sacrifices required by the latter expose no one to violent death or dismemberment. Viewed from another angle, however, this same distinction makes fiscal discipline the more difficult attainment. Washington, D.C., like every nation's capital, is crowded with statues of military heroes, whether generals mounted on horseback or enlisted men captured in a moment of valor, such as the Marines raising the flag on Iwo Jima. There are, by contrast, very few statues of Secretaries of the Treasury, and none showing a civil servant fearlessly subduing a spreadsheet.
The fact that keeping our national accounts in order is a permanent need, and a mundane one, means there will always be a gravitational pull in the direction of bigger deficits, growing debt, and increased borrowing. The historical record shows that there’s a further connection between martial and fiscal imperatives: big increases in the federal debt usually correspond to major wars. Thus, the federal debt, the total amount owed by the federal government to all lenders as a result of past borrowing not retired, increased from $65 million in 1860 to $2.77 billion in 1866, a factor of 43. It increased from $3.61 billion in 1916, the year before America entered World War I, to $25.95 billion in 1920, the fiscal year after the war ended. The debt then grew from $48.96 billion in 1941 to $258.29 billion in 1947.
Few would argue, of course, that it would have been better if America had lost or never fought these wars rather than incur the expense and indebtedness necessary to win them. One noteworthy thing
about this historical pattern, however, is that the wartime increases define plateaus rather than peaks. After incurring huge loans to fight a war, the federal debt never gets much smaller than it was at the end of the war, and never gives the slightest indication of reverting to the levels seen before the start of the war. These plateaus seem to be only partly explained by the duration of the loans needed to build ships and planes. Another part of the explanation is that wartime borrowing shows what the market and the electorate will bear. Lenders offer to loan the government much more money than it had ever before tried to borrow, and voters learn to live with levels of debt that had previously been unimaginable.
According to the field of economics known as public choice theory, the wonder is not that our budget deficits aren’t smaller, but that they aren't much larger. Borrowing more money will always be the least unpopular option in a democratic contest where the alternatives are taxing more or spending less. Americans can look at Greece or Spain, however, to see the dangers of borrowing as much money as the world is willing to lend. The nations that try it routinely wind up borrowing more than the world is willing to lend, and are forced to pay a high premium to induce lenders to make loans to governments that can't be counted on to repay them. This course leads into a fiscal death spiral, where a national government is forced to borrow at high interest rates because its ability to repay is dubious, but the high interest rates put such a burden on its finances that its ability to service its loans is in fact diminished. If we have the sense to attend to its lessons, daily experience is teaching us what it has always taught: that America must find a way for its democratic government to be a good, fiscally disciplined government.
Ohio Farmer
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