Wednesday, November 24, 2004

Why Bush's Economic Policies Don't Piss Me Off

Here's why the Bush administration's demonstrated contempt for fiscal issues on the home front doesn't particulars bother me. In fact, I look forward to its likely devastating effects with a positive glee. It is even possible to see them as being favorable, from a libertarian perspective.

Consider Russia. The Soviet Union's brittle centrally planned economy failed spectacularly, decimated by the market forces arrayed against it. There came a time when it was blatantly obvious that the Party had lost any ability to pay its seventy-year outstanding debt to its citizens. Said citizens promptly withdrew moral support from the Communists, at which point a different group of thugs took over, sold off everything but the army at bargain-basement prices, dissolved the Evil Empire, and declared a market economy.

The U.S., with it's more dynamic private sector, weathered the economic storms it experienced during the same period and even thrived despite them. Its economy grew at a remarkable pace throughout the nineties. What growth there's been since then, however, has been primarily due to the bloating of housing-price and stock bubbles, wealth that can disappear very rapidly if the bubble bursts. At the same time, the government depreciates the currency on the international markets and runs up deficits orders of magnitude greater in scale than anything attempted by any other government in history. Although I must admit, in all fairness, the British have used similar tricks to great effect in three different wars, in the vast majority of cases such a policy leads to the economic apocalypse known as 'hyperinflation'. Indeed, some are already suggesting that the current housing bubble is itself a kind of hyperinflation, resulting not from demand for housing but from a large asset class soaking up the government's excess liquidity.

The most likely side-effect of a severe hyperinflation is that the government will no longer be able to pay its bills. Given the very large size of the economy under control by the State, this cannot fail to be painful. People will lose trust in the government. Hell, lets be honest here: who really trusts the government to handle anything competently, outside of defense (though up here in the True North Weak and Free, who really trusts the bureaucrats to do even that?)

Now, given that the United States government is a) controlled at every level by a party that at least ostensibly believes in the superiority of market forces over Big Government, and b) in the middle of an open-ended war against the only foe since the British to strike on the U.S. mainland, what will the most obvious solution for the Presidency to make when condition c) is applied, namely, the insolvency of the federal government?

Exactly.

For those who haven't been paying attention, I am suggesting that the Bush administration may be maneuvering towards the Soviet Solution: they will announce an emergency and sell off large chunks of the government infrastructure, essentially everything that isn't directly related to defence. They will replace the income tax with a flat national sales tax, privative social security, and nix medicare. No more postal service, no more department of education. Hell, they might even call off the drug war. When the dust settles, the U.S. government will consist of soldiers, spooks, and not much else; maintaining the military at its current size would be a bearable burden for the U.S. economy if the vast majority of the rest were gone.

Bush might well intend to preside over what will, in essence, be a bloodless revolution. He will achieve what Republicans used to say they wanted - a small federal government - by running the whole thing into the ground. It will be chaotic, divisive, and likely dangerous. The American economy will suffer mightily in the process, though I imagine the transition back to prosperity will be relatively quick. In the end, the American people will be better off, and history will look back on Bush and smile.

Of course, I might be crediting Bush with being smarter than the vast majority of the world believes to be the case. It could be he's just utterly incompetent on economic issues. Maybe he really believes Big Government is the way to do things, and this is all just wishful thinking on my part.

Maybe. Give it four years.

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