The Shape of Things to Come and Not to Come

Here is a very good post from Matt Yglesias, who gets to keep his name on the Yglesias Award.  I am reluctant to pull any bit out of context (do read the whole thing), but here is one excerpt:

Get 40 Senators together to filibuster everything and that’s what you get. And when you add in state and local government, that’s a pretty healthy big government agenda right there, especially when you consider that states are shouldering a health slice of the Medicaid bill. Realistically, does anyone think we’re going to increase the overall size of the government faste than that? I sure don’t.

…So the future of American politics is necessarily going to be about things like making the tax code more efficient, finding areas of government spending to cut relative to projection, and thinking of policy measures that will help people that don’t involve spending more money.

I've arrived at somewhat similar conclusions, though from a different direction.  Here is an alternative version of What is Not to Come:

1. Obamacare won't be repealed or declared unconstitutional, nor will Republican candidates be running against it six years from now.  Trying to repeal parts of it would likely backfire and destroy the private insurance industry, given that the process would be ruled by public choice considerations rather than rational technocracy.  We still would end up with a larger public sector role in our health care institutions.

2. I don't view "$200 billion a year to redistribute what is for this purpose a largely fixed supply resource" as an especially good investment, but it won't bring this country to its knees.  The policy won't do much for fiscal responsibility.

3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day.  Given all their elderly white voters, the Republicans are already "the party of Medicare."  The Democrats have become "the party of Medicaid."  That locks three major programs into place, more or less.  I don't hear serious talk of major cuts in defense spending.

4. Taxes won't be raised much (do the Dems seem to have great love for reversing the Bush tax cuts?), spending won't be cut enough (the recent Republican document is extremely weak), and within twenty years we will have a sovereign debt crisis in the United States, as one day a Treasury auction won't go well.  I'll predict, but not favor, the emergency passage of a VAT, a' la TARP, which will restore fiscal stability but lower the long-term rate of growth.  When that time comes, the VAT will indeed be necessary, though ex ante I would opt for less social protection and a higher rate of economic growth.

5. The most important changes will come from aging, how other nations in the world fare especially China and India, the rate of technological progress, and foreign policy events which are exogenous from the point of view of economic policy.  Overall it will be more interesting to follow other nations than the United States.  Get ready for this and pick a few countries.

6. We should try to take back many of our vanquished civil liberties.  Such a fight may or may not succeed, but at least fiscal considerations won't rule out this counterblow for liberty.

7. On issues such as drug legalization and gay rights, I see a more cyclic than melioristic pattern.  We will see marginal improvements but we won't enter a new age of reason, in either the public sector or the private sector.  The Netherlands is backing away from its very liberal social policies, including on drugs, and the cause of gay rights could as easily fall back as progress.  I believe that many people are broadly programmed to be prejudiced in this area.

8. We will tweak financial regulation, but whether this is for better or worse, the link between reforms and final outcomes will continue to be opaque, to say the least.

9. More and more laws will be frozen in place.  This already seems to be the case with immigration policy.  More and more expenditures will be frozen into place.  Politics will become more symbolic, and in some ways more disgusting, in response to the absence of real issues to argue over.

10. Climate change will remain an important yet insoluble issue.  Even major legislation (which seems unlikely) would not change this much, not for a long time at least.

11. People will write profound books and papers on how and why "status quo bias" has strengthened, and then one day some new technological development will change everything.  It's an open question whether this will happen before or after the sovereign debt crisis.

12. In the meantime, the United States will experience an ongoing "late" period of cultural blossoming, driven by the proliferation and democratization of new electronic media.

That's all for now!


Comments for this post are closed