We live in the Bankruptcy Age. It hasn’t been declared, yet. But it is everywhere you look. If you googled “unfunded pension liabilities” back in 2004, the search would have come up empty (except for obscure academic papers). Do it today and the links run off the page. The problem is global. In Japan, they sell more diapers for adults than they do for infants. The arithmetic of that societal equation does not compute. In Europe, there’s so much debt that getting out from under it is literally impossible. The only question inside the eurozone is who gets the bigger “haircut.”
Last Friday’s rumour was that China and the US were “backstopping” the ECB’s bond purchases of hopeless Italian debt. The market rallied on the news. The notion that the United States is in a position to backstop anyone’s debt is almost ludicrous. The global financial system hangs by such threads.
Walter Mead had a long post last week on the Bankruptcy Age. It’s typically impassioned and well-argued. His certain point is that no amount of “extend and pretend” and worthless promises is going to allow us to escape gravity. It’s pull will bring us back to reality sooner or later. In the age of fibre-optic, light-speed information, sooner seems most likely.
What are the political consequences of the Bankruptcy Age? Neither party is in tune with what it implies or requires. President Obama has made the defence of Medicare (and Social Security) as we know it the centrepiece of his re-election campaign. This may be “smart politics” by Washington standards, but it is delusional as a matter of policy and governance.
Fixing Social Security is relatively easy, policy-wise. You push out the age of eligibility steadily until it reaches the age of 72 in, say, 2025. You means test. You cap COLAs inside a means test. You’re good.
Fixing Medicare is hard (really hard), because you have to blow up some industries (like pharma), you have to reconfigure delivery systems, you have to greatly reduce exposure for medical practitioners, you have to reorient everything toward outcomes, you have to integrate a wave of new technologies (especially genomic technologies), and you have to stop spending one-third of all health care dollars on the last year of life. You have to get cross-wise with a platoon of special interests who have real juice on Capitol Hill. And you will make mistakes, probably some big ones, along the way.
Additionally, the United States will have to reduce its Pentagon expenditures by roughly 20 per cent while increasing “military productivity” by 20 per cent. Putting aside the question of measuring “military productivity,” this will require management excellence across every level of our military institutions that is lacking today.
And on top of that, the United States will have to cut “discretionary spending” by 20-25% while increasing the productivity of each and every government agency and department by a corresponding amount. This requires world-class management at every level of government, which, obviously, does not exist today. If someone asked you to rate the management expertise of, say, Transportation Secretary Ray LaHood, what would you say? What could you say? Mr. LaHood doesn’t manage the Department of Transportation. He sits on top of it.
And along with doing all that, you need to redesign the entire revenue side of government operations and do whatever you can think of to ignite economic growth. Robert Barro sketched out the outline of one such re-design in the Financial Times newspaper last week. There are any number of other plans waiting on the shelf. It’s a question of whether the political will exists to do any or all of this.
It seems certain that not much or any of this will be done by The Republican Party or The Democratic Party. The political will within the two major parties is devoted to protecting favoured constituencies and expanding those protections (when possible) in the hopes of gaining a larger share of the electorate come election day. Both parties are, as Mead notes, backward looking. Their jobs are to protect what turf they hold.
So, change will have to come from somewhere else. As it happens, the American electorate has never been so ready to abandon its established political leadership. Congress’s approval rating is at an all-time low. Congress’s disapproval rating is at an all-time high. President Obama’s approval rating will soon fall into the high 30s, if it’s not there already. Everyone knows we are barrelling down the wrong track.
It is said that no third-party candidate for president can possible win a general election. This may well be true. But a third party presidential candidate aligned with a national “recall them all” Congressional campaign (enlisting candidates in every Congressional District and lashing them to a firm 10-point platform of political and economic reform) would create enormous political energy and change, forever, the direction of American politics.
To paraphrase George Wallace; the grass is dry, all you have to do is light a match to it.
The rising Jacksonian backlash against the political Establishment and national elites would need a leader (obviously); a candidate who could command this grass roots army. The Obama Administration shrewdly short-circuited the possibility of Gen. David Petraeus from running for president by first appointing him to oversee the Afghanistan “surge” and then subsequently appointing him to run the CIA. But there’s another general out there whose abilities, intellect and experience would make him a formidable political force: Gen. Stanley McChrystal (US Army, retired).
If a third party is going to gain any traction with the roiling rage across the country, it must nominate someone who people can imagine, immediately, as president of the United States. Gen. McChrystal qualifies on that score. He’s Jacksonian to his core and he’s served his country with distinction on a number of its most difficult assignments.
The word is that McChrystal has no interest in running, that he doesn’t have the “fire in the belly” for such an undertaking. One can certainly understand why he would feel this way. The question is whether he can be persuaded to run by a national movement that enlists him to service.
What would that require? 20-five rich people would have to each put up $1 million for a campaign fund of $25 million. The necessary apparatus (legal, political, advertising, research, demography, policy, expertise, management) could then be assembled. A campaign could be “tested” across the country. If viable, it could offer up the position of Independent candidate for president to General McChrystal and set in motion a political earthquake.
Would it work? Who knows? But it just might. Does anyone have a better idea?