The economic indicators all show the economy is booming. Unemployment is at record lows. The stock market is seeing record highs. Wages are up, and taxes are down. Stifling regulations are being lifted. Everything seems to be working just fine.
There is much truth in this perception of a boom. Part of this can be attributed to less government interference and taxation. Unnecessary government regulation and spending always hurt the economy. When markets are freer, profits tend to come galloping back. And much has galloped back.
However, beneath the surface, major problems threaten the boom. These problems have long plagued the nation. Yet, not much is being done to address these problems. Most people assume that if ignored long enough, they will go away. Decades of cheap, low-interest fiat money certainly makes it easier to paper over them.
The Problem of Debt
The big problem that the boom does not address is debt. America has a lot of federal debt—some 22 trillion dollars’ worth. Boom times normally pay off debts. But that is not happening. The government is still spending money with wild abandon.
Deficit spending is now the norm, and annual trillion-dollar shortfalls are the new normal. Low-interest rates make this borrowing almost painless so hardly anyone resists the temptation.
What makes this problem so exasperating is that the bad habit of overspending makes no economic sense. Since 1961, only five years have seen budget surpluses, the latest being in 2001.
This problem should be fixable. The national capacity to overcome practical obstacles is prodigious. The fracking turnaround is just one example of how, when Americans put their mind to something, they can make it happen. There is no practical reason why the federal debt cannot be resolved.
The Lack of a Consensus
Deep down, the federal debt involves a moral problem caused by a lack of restraint. Moral problems involve the fight against the passions that take people toward that which is intemperate and wrong. They cause disunity by inviting people to think only in terms of their self-interest.
When there is a national consensus, people can easily agree on positive goals where everyone profits. However, the real test of a nation is agreement on the sacrifices all must make for the common good. When all are convinced of this need, the resulting suffering serves to bond people together rather than divide. History records how, in times of adversity, people are capable of heroic sacrifices for the nation.
However, where there is no consensus, no one can agree on what to sacrifice. Each wants the burden to be carried by the other. The individual reigns supreme, and there is no common good. Sacrifices serve to create divisions and resentments. Such times of disunion are the settings for revolutions where “the rich” are targeted for excessive taxation or even confiscation.
A War of Individual Passions
Such is the sad state of the nation today. No one can agree on the unifying moral issues that forge a people and keep a nation from coming apart.
People refuse to follow what Russell Kirk called those “permanent things,” those norms of courage, duty, courtesy, justice, and charity that owe their existence and authority to a power higher than the markets—indeed to a transcendent God. These things help people think in terms of the common good.
To paraphrase Hobbes, today, the common good has morphed into a war of every individual’s passion against every other individual’s passion. The result is a disintegrating social fabric that finds its worst expression in divorce, drugs, alcohol and suicide.
Avoiding the Pain
The nation is so polarized that agreement on the painful issue of spending is all but impossible. Each side faces off against the other. Cynical and unscrupulous liberals promise to pay for everything if elected. Consequently, afflicted fiscal conservative politicians resort to paying for more and more improper expenses as the only means to get at least some indispensable budgets approved by the House of Representatives.
For this reason, liberal crowd-pleasing measures like healthcare, subsidies, environmental, social, and welfare programs have become entitlements. All this comes at the expense of the federal government’s true responsibilities, especially national defense, foreign policy, and major infrastructure. Any effort to introduce some sense into the overblown budget leads to the melodrama of closing down the government, which is an exercise in futility.
Moreover, the quest to pay for everything knows no bounds. Liberals seek to expand the lists of “free” things to include healthcare for all (including non-documented aliens), college education, guaranteed basic income, reparations, a global carbon-free society, and many other crazy schemes.
Why America Is and Isn’t Booming
Thus, the economy is booming because individual self-interest is unleashed from excessive government regulation. The market system still works well since it is based on human nature and the rule of law. The American practical spirit is capable of amazing things.
However, the economy is also booming in part because the government is inefficiently booming. As if to compensate for the lack of national unity, it is pumping hundreds of billions of dollars of borrowed money into the economy to smooth things over. That money would work much better in the private sector. Government debt crowds out private investment by taking huge amounts of money out of the credit markets. It weakens productivity and growth.
A Dangerous Situation
The situation is dangerous. The American economy is built on the social capital collected over generations. The dollar is the world’s reserve currency because America assumed the responsibility of leadership, stability and trust.
As the federal debt spirals to 100 percent of GDP, concern grows. These are uncharted waters in the vast sea of $253 trillion of global debt. Should the frenetic intemperance of federal spending continue unabated, it may bring down the whole system. It all comes down to a moral problem of restraint that few want to face.
Yes, America’s economy is booming. But things that go boom, often explode.