April 20, 2014

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Herb Stein’s Law
From The New Criterion January 31, 2013.
Herb Stein (1916-1999)

Towards the end of his life, I got to know the late Herb Stein, Chairman of the Council of Economic Advisers under Presidents Nixon and Ford, and I now regret never having asked him for the definitive version of what has come to be known as Herb Stein’s Law. Google tells me that the law is: "If something can’t go on forever, it will stop," but I like to think that Herb would have preferred what seems to me the more rhetorically satisfying version, whose provenance I cannot now recall: "If something can’t go on forever, it won’t." Either way, what amounts to a simple tautology has shown again and again its power to strike through the vaporous fogs of public debate to astound us with the force of revelation — although, as I write, it appears not yet to have done so, except in a few odd corners out of the way of the dominant media, in the case of that now legendary precipice, the "fiscal cliff."

Indeed, the very idea of what the metaphor suggests, an eminently avoidable geographical hazard — one which will either have been avoided or not avoided by the time you read this — as an inflection point in our national fortunes, will tell the tale. The image of the cliff helped to reinforce the media’s representation of the debate surrounding it as a moment of decision between traditional American small(er) government, as championed by the Republicans, and its more recent, social democratic rival, allegedly imported from Europe by President Obama and the Democrats and intermittently billing itself as an historical inevitability. Here was our choice: "Forward" with the President and his Progressives or backward to a more primitive America. Or rather, since the Republicans had lost the power to accomplish their own purpose of protecting "the rich" from tax increases, the simple choice posed by the cliff metaphor was between progress in the only direction progress could take or (to change the figure) a Samsonesque pulling down of the nation’s fiscal temple on everybody’s heads.

It wasn’t much of a choice, I think you will agree. Among the more thoughtful, the alternative to going over the cliff, on the one hand, or reaching a social democratic accommodation, known as a "Grand Bargain," between the two parties on the other was what was usually called "kicking the can down the road." What can? What road? Is that the same road that leads to the cliff? Why not kick the can off the cliff instead? But then, as there is no natural limit to how far you can kick a can down a road, where going over a cliff is pretty much an either/or proposition, can-kicking actually may have begun to look like a pretty good option, at least to those who remained perversely indisposed to political Grand Bargains and yet had managed to retain any interest in what was becoming a terrifically boring subject — perhaps because it seemed, somehow, so academic.

"We are headed for the most predictable economic crisis in history," as Paul Ryan put it some time ago. But its very predictability could only rob it of the sense of urgency that might otherwise have attended a "crisis" — a word which carries within it the idea of choice, or at least a change of direction, neither of which people had come to believe was any longer possible. What a struggle to understand, to shovel a path for ourselves through the blizzard of numbers, only to arrive in the end at a state of whiteout where there were no intelligible markers by which we could make sense of our position. Still, the usefulness of the language of "crisis" — a fossilized metaphor from medicine, or perhaps geometry — like that of the "cliff" was to impart a factitious urgency not in spite of but because of the real urgency of the question it was simultaneously encouraging and even forcing us to neglect. That is, how shall we survive the coming financial collapse?

All the talk of cliffs and crises, that is, paradoxically helped us to defer a little longer any acknowledgment that there was a real crisis, however far ahead of us it now lies, in the increasingly undeniable fact that it’s time, and past time, to invoke Herb Stein’s Law. What Walter Russell Mead calls "the blue model" of late 20th century social democracy clearly can’t go on forever, either here or in Europe. It is already broken and slowly grinding to a halt. The only question of any real interest is how long we will allow the media and the political class to pretend that it is still intact, still the promise or the threat of our future, before time is called on their phony war and they are required to get back to the reality in which the blue model will have to be scrapped and replaced with something more affordable and sustainable. But here’s a prediction for you: when the truth becomes unavoidable, as eventually it will, there will still be a large class, perhaps even a majority, of those who will find a way to continue avoiding it.

That, after all, is what our rhetorical culture is for. It is what the endlessly repeated and endlessly misleading metaphor of the cliff was for too, implying as it did that America’s problems with public finance were an isolated feature of the landscape which a little care and prudence in driving and a little knowledge of geography ought to be enough for sensible and "moderate" leaders to avoid. Whatever will have happened about tax rates by the time you read these words, one way or another we were always going to go — had, in fact, already gone — over the cliff (if you choose to call it one) of national insolvency. We are, as Mark Steyn likes to say, "the brokest nation in history," and what the media and the political leadership were really arguing about during the months of November and December was how best to continue to disguise this fiscal catastrophe from themselves and from its victims and so to defer its worst consequences until such time as they could be blamed on the other party.

Of course, economists have been wrong before, as Herb Stein would surely have been the first to point out, and it may be that Carmen Reinhart and Kenneth Rogoff may be wrong too, though no one seems to have thought it worth his while to prove it. They are the economists whose work identifies the "tipping point" — as habitually vertiginous metaphor coiners have since called it — for economic disaster as a debt to GDP ratio of 90 per cent: the point at which the cost of servicing the debt begins to make any but the most anemic economic growth impossible. That point we passed, by my reckoning, in June, 2010, on our way to its present total of well over 100 per cent. Or at least we did unless, like such of those among the great and good who study the question as former Senator Pete Domenici and former budget director Alice Rivlin, you choose to count only the debt that is held by the public and not by the government itself. This "public debt" so far only amounts to about three quarters of the economy and so could give us a few more big-spending years before we hit bottom.

But even Domenici-Rivlin propose to "stabilize" the debt at more or less its current level, which is not a proposal that is even on the table between those who have lately been making such a fuss about the imaginary "cliff." The trajectory towards some kind of catastrophic bankruptcy, sooner or later, was not interfered with by any proposal on either side of the negotiations, which naturally raised the question of what they could be negotiating about. The answer was how short-term political credit or long-term political blame were to be apportioned. Victorious Democrats, assuming a mandate for endless borrowing and spending, paid no more attention to Domenici-Rivlin, in spite of the recommendation of The Washington Post, than they did to Simpson-Bowles, which defeated Republicans, clinging to their House majority, belatedly and hopelessly proposed as some kind of alternative. The latter, perhaps persuaded that Congressman Paul Ryan’s timid plan to bring the budget into balance some time in the 2040s had been rejected as too draconian by voters in November, along with Mitt Romney, were engaged in a curious kind of me-tooism, pointing to the evil likely to result from raising taxes while treating the much greater evils to be expected from failing to curb spending as only susceptible to palliation at the margins.

As my colleague Kevin Williamson wrote, "the so-called fiscal cliff is one installment in a series of manufactured crises, the purpose of which is to provide the political establishment with small problems it can solve or pretend to solve while steadfastly refusing to address the much thornier problem of the long-term non-sustainability of U.S. public finances." But the media manufactory depends for its raw material on a reliable supply of misleading metaphors that proceed to take on "iconic" status themselves as clichés whose very repetition gives them an unchanging and granite-like fixity in the public imagination. Such was the metaphor of the "cliff," although the cliff we faced was not a hazard of nature which careful statesmanship could avoid but something that was itself created by such statesmanship with the purpose of buying time — I know, I know, using a cliff as currency to "buy" something is impossible, but then at some point mixing these misleading metaphors is inevitable — until the election just past, after which both sides were betting that their hand for bargaining would be strengthened.

The Republicans lost that bet. Subsequently the "cliff" would have been better characterized as a gun to their heads, forcing them to give up their opposition to tax increases. The beauty part, from the Democrats’ point of view, was that, whatever the consequences to the economy, taxes would go up no matter what the Republicans did, and yet the latter would most likely get the blame for the consequences, since they had been cast by the media as bearing the responsibility to join with President Obama in what the media kept telling us was his "struggle" to avoid the supposed "cliff." The bogey-cliff was thus useful as a form of linguistic "framing" so as to make the preferred course seem like the only possible one, the choice having been mischaracterized as a binary one — cliff or no cliff — rather than a matter of complex negotiations about much larger and more serious matters, such as the large and unaffected deficits for years to come.

Looked at more closely, the negotiations were a tacit acknowledgment that catastrophe was coming, eventually, and that the most we could expect of those charged with the stewardship of our public finances in today’s political environment was that they would put off the evil day until they could expect no longer to be around to deal with the consequences. By the time you read this, you will know how this fantastical cliff was addressed, or transformed into something more congenial. But whether the Republicans’ principled resolve to go down with their commitment to no tax increases remained intact or crumbled (as it appears to be doing with the deadline approaching) it seems probable to me that a plunge off the cliff was in fact what the President and his party must have wanted, the Democrats’ appetite for higher taxes on everybody being pretty much a given, as the best way of excusing a massive and economically damaging tax hike by pleading that he was forced to it, there being no alternative save the by now plainly unthinkable one of not raising the top rate of tax.

The tactic is reminiscent of the Southerners who threatened secession if a Republican was elected President and who were mocked by Lincoln in his Cooper Union address in February of 1860: "That is cool. A highwayman holds a pistol to my ear, and mutters through his teeth, "Stand and deliver, or I shall kill you, and then you will be a murderer!" At least there was a metaphor the moral force of which was to clarify, rather than to obscure. And yet here is how The Washington Post reported on last month’s kabuki drama on Capitol Hill as the players were taking up their positions: "Obama public relations effort aims to avoid ‘fiscal cliff’."

The White House signaled Tuesday that it will try to marshal the momentum from President Obama’s reelection triumph into another victory at the negotiating table, launching a full-fledged public relations effort to avoid a "fiscal cliff" that could jolt the nation back toward recession.

Full-fledged public relations! Enough, then, of the merely fledgling kind that the Democrats have been content with hitherto! The article, by David Nakamura and Zachary A. Goldfarb, might as well have been headed: "Obama PR effort successful," since the reporters were obviously so closely in tune with it. The "effort," the authors claimed, was "aimed at increasing pressure on Congress to reach an agreement on heading off a series of automatic spending cuts and tax increases that are scheduled to begin in January." But it would have been more accurate to say that the pressure was on Congress not to reach an agreement, since the "pressure" consisted of a notification that no agreement would be acceptable to the President that did not include a proviso — raising tax rates on upper incomes — that he knew was not acceptable to the other side.

Well, there’s just one indication of what you can do in politics if you can count on having the media on your side. Meanwhile, over at The New York Times Peter Baker was reporting this: "Criticized as Weak in Past Talks, Obama Takes Harder Line." How can it be other than admirable to take note of one’s critics and then, taking their criticisms to heart, try to do better next time? How ungrateful those Republicans must be not to welcome the President’s new strength and resolution — which were expressed by an opening offer on his side so derisory and insulting to Republican concerns that Mitch McConnell, the party’s leader in the Senate, involuntarily laughed at it. Go ahead, Senator McConnell, laugh away. No one else will care that Mr Obama is engaging only in the pretense of negotiations. Anyone not confined to the right-wing media ghetto knows that it is only common decency to give him what he wants without negotiating anyway.

And what the President wants isn’t just higher taxes. It’s an even grander "re-framing" of the national debate so as to exclude the things he doesn’t want and cannot afford to talk about. For the other great purpose served by all the fuss over the fake cliff was to take any potential public focus off the real cliff, now seemingly unavoidable, of national bankruptcy. But that was something that only "extremists" would want to talk about, such are the easy self-limitations of media "moderation." To the media, the election ratified their mapping of the ideological spectrum, as ranging from the rejected "extreme" of Romney-Ryan on the right to whatever lies beyond the newly vindicated expansion of the welfare state on the left — another sort of extreme, perhaps, but one which, such is the progressive impulse in history, must eventually enjoy its own period in the moderate mainstream.

But if there was a limit to the scope of the problem anyone could take in in talking about it, the reason was suggested by Yuval Levin of National Review:

Over and over, the two parties basically try to position themselves in ways that will let them get nearer their versions of deficit politics in the next showdown. What result are all "middle ground" agreements that avert immediate catastrophe by setting up further decision points to come. They are not "grand bargain" agreements that set us on a sustainable course toward fiscal sanity. And there is a reason for that: Broadly understood, the two parties’ goals are not exactly about the budget but about the nature of the government we have, and now that we have entered the lean years of the welfare state they are not quite commensurate. The Democrats want to raise revenue and the Republicans want to reform entitlements. Those goals would seem to be easily reconciled — just do some of each, or even lots of each. But it only seems that way because we don’t often think about why the parties want these things. Simply (and surely somewhat too simply) put, the Democrats want more money so that the entitlement system doesn’t have to be reformed, while the Republicans want to reform the entitlement system so that the government doesn’t have to take more of the country’s money or take up even more of the economy. That means that doing some of each, let alone lots of each, doesn’t give both parties what they want, it gives both parties what they are desperately trying to avoid.

If we take this point of view, it’s the Republicans who have the stronger — indeed, the unassailable — negotiating position, just not one that can do them any good for some months or years to come, since the need for entitlement reform must sooner or later outrun the possibility of raising enough tax-revenue to prevent it. Just don’t expect, when the moment of the GOP’s vindication finally arrives, that all those who have grown so practiced in the art of dodging Herb Stein’s Law will suddenly learn the truth of it.

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