"What Our Declaration Really Said" (E.J. Dionne)

WASHINGTON -- Our nation confronts a challenge this Fourth of July that we face but rarely: We are at odds over the meaning of our history and why, to quote our Declaration of Independence, "governments are instituted."

Only divisions this deep can explain why we are taking risks with our country's future we're usually wise enough to avoid. Arguments over how much government should tax and spend are the very stuff of democracy's give-and-take. Now, the debate is shadowed by worries that if a willful faction does not get what it wants, it might bring the nation to default.

This is, well, crazy. It makes sense only if politicians believe -- or have convinced themselves -- that they are fighting over matters of principle so profound that any means to defeat their opponents is defensible.

We are closer to that point than we think, and our friends in the tea party have offered a helpful clue by naming their movement in honor of the 1773 revolt against tea taxes on that momentous night in Boston Harbor.

Whether they intend it or not, their name suggests they believe that the current elected government in Washington is as illegitimate as was a distant, unelected monarchy. It implies something fundamentally wrong with taxes themselves or, at the least, that current levels of taxation (the lowest in decades) are dangerously oppressive. And it hints that methods outside the normal political channels are justified in confronting such oppression.

We need to recognize the deep flaws in this vision of our present and our past.

A few points to make here. First, the main problem is not that taxes are too high but that deficits are so high as to be a profound threat to the very legitimacy of the United States government. There is never really all that good a reason why a new generation of Americans should accept the debts incurred by a previous generation, but when the debts aren't too large, the merely utilitarian logic of not defaulting so as to hold down one's costs of borrowing tends to prevail. But with deficits of 10% of GDP or so, we are forfeiting the legitimacy of asking our children to pay for the reckless spending of today's politicians. Such deficits amount to a rampant degradation of our institutions. Second, taxes are far higher than anything the founders imagined. Third, the federal government's powers today extend far beyond anything the founders would have believed they were sanctioning. To that extent the "Constitution in exile" school is right. In deriding the idea that "the current elected government in Washington is as illegitimate as was a distant, unelected monarchy," Dionne elides the distinction between whether the government is legitimate at all and whether there should be any limits on what it can legitimately do, implicitly rejecting the latter with an idea of democratic absolutism, i.e., since the government is elected, it can do whatever it wants. An important question is thus begged.

Comments

[Nato]

It's a pretty strong charge to claim that Dionne endorses democratic absolutism, and it's very unfair to impute it just because he doesn't regard the limits as being in the same places Nathan does.

As for taxes being higher than anything the Founders imagined, so also are our military expenditures much higher, and our provision of universal education (by whatever means - one need not assume that the government do more than provide funding), and a bunch of other things that, I think, even the Tea Party activists would regard as both legitimate and desirable.

And to address your first point last, the whole fight between the parties right now is over whether the deficit can be closed in part through tax hikes, not whether to close the deficit. So Nathan may correctly locate the problem, but this doesn't in any way respond to Dionne's point.

[Nathan Smith]

Dionne doesn't explicitly endorse democratic absolutism, but the way he mocks the idea that the current federal government might be analogous to George III-- namely, he does so only on the grounds that it is elected-- certainly suggests it. Yes, both parties want to close the deficit, or at least say they do, but since the Democrats want to close it via tax hikes, Dionne's point that tax rates today are low is a red herring, because the point is that Democrats are pushing for them to rise steeply. And Dionne also dodges the fact that what Republicans are pushing hardest for is to cut spending, which is well above historic 20th-century levels, let alone anything the Founders envisioned.

There's a permanent asymmetry in American politics, in that Americans of all stripes admire the Constitution and the work of the Founders' generation, in which the worldview of the right is rooted, but only Americans of the left admire the new de facto constitution that was imposed in the country by FDR and augmented by the Johnson Administration. The truth is that the whole apparatus of the welfare state has a very tenuous and, if one looks at the matter objectively, not very plausible constitutional basis. Of course, it's quite routine for constitutions to be based on usurpation. The whole Roman Empire was an exercise in usurpation, while the Senate with its largely fictional power remained the symbol of Roman sovereignty for hundreds of years. It's quite plausible that FDR's and LBJ's transformation of the federal government was unconstitutional, and yet for the public good. And it's true that even Tea Party activists probably wouldn't *really* want to go back, whatever that would even mean. Still, the asymmetry is interesting. Liberals' "living Constitution" is the modern equivalent of the Donation of Constantine.

[Nato]

"...he does so only on the grounds that it is elected..." - of course he does, considering the traditional tea party refrain from Revolutionary times was "No taxation without representation." Given the theme of his article, it's entirely natural that he speaks directly to the complaint that engendered the original tea party. Perhaps Nathan would prefer that Dionne introduced an additional caveat regarding the limits of democratic governance so as to protect himself from such charges, but the necessity certainly wouldn't have occurred to me in Dionne's place.

"...the Democrats want to close it via tax hikes..." They want to close it with a combination of spending cuts and tax hikes. The tax hikes the Dems have been proposing have not been that steep, and would leave them quite low by postwar standards. The GOP wants to do it with no tax hikes or even with tax cuts. Either way, the cuts would have to be very deep; just less deep if revenue was to be increased to close to historical averages. Of course, the Dems haven't really offered any real* example of actual cuts they'd be willing to make, so they don't get a pass. Presumably, the GOP has refused to consider tax increases while the Dems refuse to consider the really deep buts (or vice-versa), which is hardball politics but not crazy.

However, threatening default is irresponsible as a political move, and it had *better* be mere politics. I hope the GOP isn't starting to believe the rhetoric of some of its wingers that seems to imply that not lifting the debt ceiling would not place us all in very grave, hard-to-predict danger. That's a Jacobin move, and not at all aligned with the spirit of the Founding Fathers.

*They've talked of cuts, but not in the right ballpark to solve the problem, even with revenue increases

[Nathan Smith]

Well, actually, I think a lot of the founders did want to default on the revolutionary war debt. What's disturbing to me is that the only time in the past generation when the economy really seemed to be on the right track, the late 1990s, took place immediately after and probably as a result of the tight fiscal policy and welfare reform ushered in by the 1994 Contract with America Congress. That time, too, the House GOP was threatening to default on the national debt. It's starting to seem like the only way government spending can be dragged back from stranglingly high levels is with threats of default. I wouldn't be surprised to see deep cuts today lead to another high-flying 1990s-style boom, but it's still disturbing that default threats seem to be becoming an essential part of the checks and balances by which the American people keep runaway spending under control. Democracy is not handling adverse demographics well. Immigration reform would fix the problem easily enough, but if we don't do that we're in a lot of trouble. And I guess that's only fair. A country that deports hundreds of thousands of people every year deserves a lot more suffering than we've experienced so far.

[nato]

I'm not aware of any founding fathers who wanted to default; really I'm only aware of those who argued strenuously that the US had to honor its debt to establish its national credit. Having said that, the systemic effects of a default then could hardly be compared to those following from a default from the government of the world's primary reserve currency.

As for Gingrich's threat - my understanding is that Clinton didn't bend, and the government shut down, but no one seriously thought default might happen. So far, it seems to be the same this time, but I wonder.

[Nathan Smith]

http://en.wikipedia.org/wiki/Alexander_Hamilton

"In the Report on Public Credit, the Secretary made a controversial proposal that would have the federal government assume state debts incurred during the Revolution.[55] This would give the federal government much more power by placing the country's most serious financial obligation in the hands of the federal, rather than the state governments.

"The primary criticism of the plan was spearheaded by Secretary of State Thomas Jefferson[55] and Representative James Madison. Some states, like Jefferson's Virginia, had paid almost half of their debts, and felt that their taxpayers should not be assessed again to bail out the less provident. They further argued that the plan passed beyond the scope of the new Constitutional government.

"Madison objected to Hamilton's proposal to lower the rate of interest and postpone payments on federal debt, as not being payment in full; he also objected to the speculative profits being made. Much of the national debt had been bonds issued to Continental veterans, in place of wages the Continental Congress did not have the money to pay; as these continued to go unpaid, many of these bonds had been pawned for a small fraction of their value. Madison proposed to pay in full, but to divide payment between the original recipient and the present possessor. Others, like Samuel Livermore of New Hampshire, wished to curb speculation, and save taxation, by paying only part of the bond."

I'm actually not sure that defaulting on the debt would hurt us that much. If you look at what happened when Russia and Argentina defaulted, they actually did quite well. That's not to say I'm in favor of defaulting, I'm definitely not. But I'm not sure that either theory or evidence suggests it would be such a disaster. It seems kind of dishonorable.

Then there's another question: would it be a default if the US kept paying interest and principal on T-bills, but paid only 50% of Social Security checks? If you could stop payment only on Social Security checks to the relatively affluent (might be a challenge administratively), it's hard to see what the downside would be. I think the US government has a lot of assets to sell, too. Gold. The Strategic Petroleum Reserve. Maybe land. ANWR. :)

[nato]

I'm actually in favor of Greece defaulting, and possibly Ireland as well. But they aren't reserve currencies. For me, this story is about US bonds' place in financial markets, not the direct damage it would do to the US' credit rating.

As for Nathan's quote, it sounds like Samuel Livermore was the only one who wanted to not pay the bonds.

[Nato]

I do agree that some kind of partial shutdown is much more likely than straight ahead default, and I don't think this would cause anything like the kind of chaos that actual default would, even a technical default.

[Nato]

This is the sort of thing that worries me:
http://www.businessweek.com/news/2011-07-10/boehner-backs-away-from-4-trillion-deficit-reduction-deal.html

Obama puts entitlement cuts on the table over the howling of left-wingers, offering a chance for deeper deficit reduction than before, but Boehner has to back away because it would involve tax increases (loophole closing).

[Nato]

Even more to the point, Obama offered 3$ of cuts for 1$ of revenue and still got turned down. Hopefully not for long.

[nato]

http://www.thefiscaltimes.com/Columns/2011/07/22/Barack-Obama-The-Democrats-Richard-Nixon.aspx