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Niall Ferguson with an important lecture on public debt.
Critics of Western democracy are right to discern that something is amiss with our political institutions. The most obvious symptom of the malaise is the huge debts we have managed to accumulate in recent decades, which (unlike in the past) cannot largely be blamed on wars.
According to the International Monetary Fund, the gross government debt of Greece this year will reach 153 per cent of GDP. For Italy the figure is 123, for Ireland 113, for Portugal 112 and for the United States 107.
Britain’s debt is approaching 88 per cent. Japan – a special case as the first non-Western country to adopt Western institutions – is the world leader, with a mountain of government debt approaching 236 per cent of GDP, more than triple what it was 20 years ago.
Often these debts get discussed as if they themselves were the problem, and the result is a rather sterile argument between proponents of “austerity” and “stimulus”. I want to suggest that they are a consequence of a more profound malaise.
The heart of the matter is the way public debt allows the current generation of voters to live at the expense of those as yet too young to vote or as yet unborn. In this regard, the statistics commonly cited as government debt are themselves deeply misleading, for they encompass only the sums owed by governments in the form of bonds. …
… In his Reflections on the Revolution in France (1790), Edmund Burke wrote that the real social contract is not Jean-Jacques Rousseau’s contract between the sovereign and the people or “general will”, but the “partnership” between the generations. He writes: “SOCIETY is indeed a contract… The state … is … a partnership not only between those who are living, but between those who are living, those who are dead, and those who are to be born.” In the enormous intergenerational transfers implied by current fiscal policies we see a shocking and perhaps unparalleled breach of precisely that partnership, so brilliantly described by Burke.
I want to suggest that the biggest challenge facing mature democracies is how to restore the social contract between the generations. But I recognise that the obstacles to doing so are daunting. Not the least of these is that the young find it quite hard to compute their own long-term economic interests.
It is surprisingly easy to win the support of young voters for policies that would ultimately make matters even worse for them, like maintaining defined benefit pensions for public employees. If young Americans knew what was good for them, they would all be in the Tea Party. …
Investors.com Editors show how this “What me worry?” attitude has infected the city of Chicago.
… Cook County Treasurer Maria Pappas recently disclosed a staggering $108 billion debt tab across various governing bodies in the county that translates to $63,525 per Chicago household. Unfunded pension liabilities make up nearly a quarter of that. Not all the debt is Chicago’s, a city with the nation’s highest sales tax, but enough of it is.
Chicago lost 200,000 people from 2000 to 2009. The only one of the nation’s 15 largest cities to lose people. Of all cities, it fell between Detroit, reigning champion of progressive urban decay, and hurricane ravaged New Orleans, in the number of people fleeing to greener pastures.
As Aaron M. Renn writes in City Journal, during the first decade of this century Chicago lost 7.1% of its jobs. Chicago’s famous Loop, the second-largest business district in the nation, lost 18.6% of its private-sector jobs.
While Obama’s critics delve into his Kenyan ancestry, and his defenders delve into likely opponent Mitt Romney’s record at Bain Capital and as governor of Massachusetts, pundits and voters would be wise to look at Obama’s Chicago for clues to his past and our future.
Chicago was the political incubator for a community organizer who would become president. It is where President Obama sat in the pews on Sunday listening to the liberation theology of the Rev. Jeremiah Wright for two decades. Its liberal academia provided an educational haven for the likes of the former bomb-wielding terrorist Weatherman William Ayers, who was host to Obama’s first fund-raiser. …
John Fund stopped by at the convention of the American Federation of State, County and Municipal Employees. It was like a funeral.
Since 2008, we’ve seen the biggest economic crisis since the Great Depression. Unlike 75 years ago, however, unions and the Left have this time largely failed to build a rigorous movement of economic populism to further their goals: Witness the now largely disbanded Occupy movement. Indeed, as members of the American Federation of State, County and Municipal Employees gathered here last week, the mood was pessimistic.
“Our success or failure will mark a turning point not only for our union but for the entire labor movement,” Lee Saunders, the new AFSCME president, told his members. Attendees noted how few changes in labor law they had been able to get through Congress since President Obama’s election. Union members in San Diego and San Jose, two cities that voted heavily for Obama in 2008, mourned the overwhelming passage this month of ballot measures in those cities curbing public-sector pension benefits: In both, two-thirds of voters approved the measures. Hanging over the crowd was the crushing loss unions experienced in Wisconsin three weeks ago, when GOP governor Scott Walker won 38 percent of the votes of union members and apparently carried a majority of private-sector-union members.
But even as AFSCME delegates convened in Los Angeles, they received word of yet another blow. …
NY Times had a funeral of sorts too, in a piece on the left’s denial of the constitutional vulnerability of the health care act.
… In passing the law two years ago, Democrats entertained little doubt that it was constitutional. The White House held a conference call to tell reporters that any legal challenge, as one Obama aide put it, “will eventually fail and shouldn’t be given too much credence in the press.”
Congress held no hearing on the plan’s constitutionality until nearly a year after it was signed into law. Representative Nancy Pelosi, then the House speaker, scoffed when a reporter asked what part of the Constitution empowered Congress to force Americans to buy health insurance. “Are you serious?” she asked with disdain. “Are you serious?”
Opponents of the health plan were indeed serious, and so was the Supreme Court, which devoted more time to hearing the case than to any other in decades. A White House that had assumed any challenge would fail now fears that a centerpiece of Mr. Obama’s presidency may be partly or completely overturned on a theory that it gave little credence. The miscalculation left the administration on the defensive as its legal strategy evolved over the last two years.
“It led to some people taking it too lightly,” said a Congressional lawyer who like others involved in drafting the law declined to be identified before the ruling. “It shouldn’t strike anybody as a close call,” the lawyer added, but “given where we are now, do I wish we had focused even more on this? I guess I would say yes.” …