Commentary Magazine


Topic: Adam Smith

The Moral Case for Conservative Economics

I wrote a piece for the Weekly Standard that attempts to explain what’s wrong with the liberal affinity for class warfare. In response to it, one of the really bright political minds I know wrote me and said that the person who “captures the moral critique (in addition to the intellectual one) of Obamanomics” will be the Republican Party’s nominee and the next president.

Whether or not that’s accurate — and I happen to believe there’s a lot of wisdom in it — it does strike me that a compelling moral argument on behalf of conservative economics specifically, and capitalism more broadly, has been sorely missing from the public debate. That case can be made easily enough; the question is who will step forward to make it.

There is, I think, a useful analogy that can be made to welfare reform. The conservative case was far more powerful and effective when welfare reform was framed in explicitly moral terms — when those on the right argued why (a) welfare policies (in the form of AFDC) were inflicting terrible damage on those they were intended to assist, and (b) reforms to the system would lead to greater self-reliance and human flourishing.

Something similar needs to be done on economics. (Arthur Brooks, president of the American Enterprise Institute, and I try to do it in this monograph, Wealth and Justice: The Morality of Democratic Capitalism.) Conservatives need to expand on their reliance on economic facts and figures and explain why economic growth is the best antidote to widespread poverty and misery; why Leviathan is a threat to liberty and human character; and why capitalism is a civilizing agent and national wealth a moral good. That shouldn’t be too much to ask for a movement that counts Adam Smith (a profound moral philosopher) and Abraham Lincoln (a profound moral thinker) in its pantheon.

I wrote a piece for the Weekly Standard that attempts to explain what’s wrong with the liberal affinity for class warfare. In response to it, one of the really bright political minds I know wrote me and said that the person who “captures the moral critique (in addition to the intellectual one) of Obamanomics” will be the Republican Party’s nominee and the next president.

Whether or not that’s accurate — and I happen to believe there’s a lot of wisdom in it — it does strike me that a compelling moral argument on behalf of conservative economics specifically, and capitalism more broadly, has been sorely missing from the public debate. That case can be made easily enough; the question is who will step forward to make it.

There is, I think, a useful analogy that can be made to welfare reform. The conservative case was far more powerful and effective when welfare reform was framed in explicitly moral terms — when those on the right argued why (a) welfare policies (in the form of AFDC) were inflicting terrible damage on those they were intended to assist, and (b) reforms to the system would lead to greater self-reliance and human flourishing.

Something similar needs to be done on economics. (Arthur Brooks, president of the American Enterprise Institute, and I try to do it in this monograph, Wealth and Justice: The Morality of Democratic Capitalism.) Conservatives need to expand on their reliance on economic facts and figures and explain why economic growth is the best antidote to widespread poverty and misery; why Leviathan is a threat to liberty and human character; and why capitalism is a civilizing agent and national wealth a moral good. That shouldn’t be too much to ask for a movement that counts Adam Smith (a profound moral philosopher) and Abraham Lincoln (a profound moral thinker) in its pantheon.

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A Response to John Derbyshire

In his post responding to George W. Bush’s op-ed on combating AIDS in Africa, John Derbyshire writes this:

The subsidizing of expensive medications (the biggest part of our AIDS-relief effort, though not all of it) in fact has long-term consequences more likely to be negative than positive. The high incidence of AIDS in sub-Saharan Africa is caused by customary practices there. What is needed is for people to change those customary practices. Instead, at a cost of billions to the U.S. taxpayer, we have made it possible for Africans to continue in their unhealthy, disease-spreading habits.

Perhaps the future of sub-Saharan Africa would be brighter if the people of that place changed some of their customs; but now, thanks to us, they don’t have to.

Here are a few facts that undermine Derbyshire’s case: (a) Africans have fewer sex partners on average over a lifetime than do Americans; (b) 22 countries in Africa have had a greater than 25 percent decline in infections in the past 10 years (for South African and Namibian youth, the figure is 50 percent in five years); and (c) America’s efforts are helping to create a remarkable shifts in how, in Africa, boys view girls — reflected in a decline of more than 50 percent in sexual partners among boys.

So Derbyshire’s argument that our AIDS efforts are “more likely to be negative than positive” because they will continue to subsidize and encourage “unhealthy, disease-spreading habits” is not only wrong but the opposite of reality.

There is more. Derbyshire’s view might best be expressed as “the Africans had an AIDS death sentence coming to them.” But in Africa, gender violence and abuse is involved in the first sexual encounter up to 85 percent of time. And where President Bush’s PEPFAR initiative has been particularly effective is in slowing the transmission of the disease from mothers to children. Perhaps Derbyshire can explain to us how exactly infants are complicit in their AIDS affliction. Or maybe he doesn’t much care if they are. Read More

In his post responding to George W. Bush’s op-ed on combating AIDS in Africa, John Derbyshire writes this:

The subsidizing of expensive medications (the biggest part of our AIDS-relief effort, though not all of it) in fact has long-term consequences more likely to be negative than positive. The high incidence of AIDS in sub-Saharan Africa is caused by customary practices there. What is needed is for people to change those customary practices. Instead, at a cost of billions to the U.S. taxpayer, we have made it possible for Africans to continue in their unhealthy, disease-spreading habits.

Perhaps the future of sub-Saharan Africa would be brighter if the people of that place changed some of their customs; but now, thanks to us, they don’t have to.

Here are a few facts that undermine Derbyshire’s case: (a) Africans have fewer sex partners on average over a lifetime than do Americans; (b) 22 countries in Africa have had a greater than 25 percent decline in infections in the past 10 years (for South African and Namibian youth, the figure is 50 percent in five years); and (c) America’s efforts are helping to create a remarkable shifts in how, in Africa, boys view girls — reflected in a decline of more than 50 percent in sexual partners among boys.

So Derbyshire’s argument that our AIDS efforts are “more likely to be negative than positive” because they will continue to subsidize and encourage “unhealthy, disease-spreading habits” is not only wrong but the opposite of reality.

There is more. Derbyshire’s view might best be expressed as “the Africans had an AIDS death sentence coming to them.” But in Africa, gender violence and abuse is involved in the first sexual encounter up to 85 percent of time. And where President Bush’s PEPFAR initiative has been particularly effective is in slowing the transmission of the disease from mothers to children. Perhaps Derbyshire can explain to us how exactly infants are complicit in their AIDS affliction. Or maybe he doesn’t much care if they are.

Let’s now turn to Derbyshire’s characterization that America is becoming the “welfare provider of last resort to all the world’s several billion people”: he is more than a decade behind in his understanding of overseas-development policy.

President Bush’s policies were animated by the belief that the way to save lives was to rely on the principle of accountability. That is what was transformational about Bush’s development effort. He rejected handing out money with no strings attached in favor of tying expenditures to reform and results. And it has had huge radiating effects. When PEPFAR was started, America was criticized by others for setting goals. Now the mantra around the world is “results-based development.” Yet Derbyshire seems to know nothing about any of this. That isn’t necessarily a problem — unless, of course, he decides to write on the topic.

Beyond that, though, the notion that AIDS relief in Africa is AFDC on a global scale is silly. We are not talking about providing food stamps to able-bodied adults or subsidizing illegitimacy; we’re talking about saving the lives of millions of innocent people and taking steps to keep human societies from collapsing. Private charity clearly wasn’t enough.

On the matter of Derbyshire’s claim that AIDS relief in Africa is unconnected to our national interest: al-Qaeda is actively trying to establish a greater presence in nations like Tanzania, Kenya, and Nigeria, which have become major ideological battlegrounds. And mass disease and death, poverty and hopelessness, make the rise of radicalism more, not less, likely. (Because of AIDS, in some countries nearly a half-century of public-health gains have been wiped away.)

Many things allow militant Islam to take root and grow; eliminating AIDS would certainly not eliminate jihadism. Still, a pandemic, in addition to being a human tragedy, makes governments unstable and regions ungovernable. And as one report put it, “Unstable and ungoverned regions of the world … pose dangers for neighbors and can become the setting for broader problems of terrorism … The impoverished regions of the world can be unstable, volatile, and dangerous and can represent great threats to America, Europe, and the world. We must work with the people of these regions to promote sustainable economic growth, better health, good governance and greater human security. …”

One might think that this observation very nearly qualifies as banal — but for Derbyshire, it qualifies as a revelation.

For the sake of the argument, though, let’s assume that the American government acts not out of a narrow interpretation of the national interest but instead out of benevolence — like, say, America’s response to the 2004 tsunami that hit Indonesia and other nations in the Indian Ocean. Why is that something we should oppose, or find alarming, or deem un-conservative? The impulse to act is, in fact, not only deeply humane but also deeply American.

In a speech in Lewiston, Illinois, in 1858, Abraham Lincoln, in quoting from the Declaration (“all men are created equal … endowed by their Creator with certain unalienable right”), said:

This was their majestic interpretation of the economy of the Universe. This was their lofty, and wise, and noble understanding of the justice of the Creator to His creatures. Yes, gentlemen, to all His creatures, to the whole great family of man. In their enlightened belief, nothing stamped with the Divine image and likeness was sent into the world to be trodden on, and degraded, and imbruted by its fellows.

This belief about inherent human dignity does not mean that America can solve every problem in the world or that we shouldn’t focus most of our energy and treasure on America itself. But if the United States is able, at a reasonable cost ($25 billion over five years), to help prevent widespread death, that is something we should be proud of it. (A recent Stanford study found that PEPFAR was responsible for saving the lives of more than a million Africans in just its first three years.)

Derbyshire seems to take an almost childish delight in advertising his indifference to the suffering of others, at least when the others live on a different continent and come from a different culture. Back in February 2006, when more than 1,000 people were believed to have died when an Egyptian ferry sank in the Red Sea, Derbyshire wrote:

In between our last two posts I went to Drudge to see what was happening in the world. The lead story was about a ship disaster in the Red Sea. From the headline picture, it looked like a cruise ship. I therefore assumed that some people very much like the Americans I went cruising with last year were the victims. I went to the news story. A couple of sentences in, I learned that the ship was in fact a ferry, the victims all Egyptians. I lost interest at once, and stopped reading. I don’t care about Egyptians.

Cultivating what Adam Smith (in The Theory of Moral Sentiments) called “sympathy” and “fellow feeling” is a complicated matter. Suffice it to say that very few of us care about the suffering and fate of others as much as we should. Yet most of us aren’t proud of this fact; we are, rather, slightly embarrassed by it. Not John Derbyshire. He seems eager to celebrate his callousness, as if it were a sign of manliness and tough-mindedness. I haven’t a clue whether this is a pose, done for shock value or some such thing, or real. All we can do is judge Derbyshire by his public words. And they are not only unpersuasive; they are at times downright ugly.

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Who Runs the Internet: What Lobbying Is Really All About

You’ll be hearing a lot today and tomorrow about an issue bubbling over in Washington called “net neutrality.” You’re probably aware of the concept of “stickiness” — an idea or concept that stays with you no matter what. “Net neutrality” is an example of an “anti-sticky” idea.  No matter what you do, you can’t remember what the hell it is.

So rather than trying to understand the issue’s confusing contours, you should instead look at the key question: who benefits? The truth is that net neutrality is about who controls broadband — the pipe through which we now connect to the Internet. Internet service providers, who bring us broadband, naturally want to control the pipe. That seems logical; it’s their pipe. But companies providing the content that goes through the pipe don’t want the Internet service providers to exert that control, because they fear the providers could figure out ways to secure an advantage for content the providers own. That also seems like a reasonable concern.

The providers say that a) they don’t know how to do what the companies fear they will do, and b) there’s so much competition in the field that it wouldn’t matter anyway, because if they were to restrict access to their pipe, a consumer could just go elsewhere for his service. The first point smacks of disingenuousness because, of course, there are ways to privilege certain kinds of content and block others, even now. The second, competitive point is the most important one. Free-market theory says plainly that we should not expect any one provider of a good to act in service of the broader public interest; his goal is to maximize his own profit. The force that disciplines him, controls his appetite, and compels him to behave in responsible ways is competition — that’s what guides the “invisible hand,” in Adam Smith’s Olympian image.

So what case do the content providers have? Their case is that the Internet is not a marketplace but a combination of a Wild West in which nobody is making the rules and an oligarchy in which a few powerful behemoths have managed to secure unlimited control. This is an illogical argument — a system can’t simultaneously be anarchic and authoritarian — but it is a powerful one, in the sense that the only thing we care about when it comes to the Internet is the content. We don’t care about the pipe; we care about the water that comes through the pipe. Any force that limits our access to the water is a force that cannot be tolerated. Read More

You’ll be hearing a lot today and tomorrow about an issue bubbling over in Washington called “net neutrality.” You’re probably aware of the concept of “stickiness” — an idea or concept that stays with you no matter what. “Net neutrality” is an example of an “anti-sticky” idea.  No matter what you do, you can’t remember what the hell it is.

So rather than trying to understand the issue’s confusing contours, you should instead look at the key question: who benefits? The truth is that net neutrality is about who controls broadband — the pipe through which we now connect to the Internet. Internet service providers, who bring us broadband, naturally want to control the pipe. That seems logical; it’s their pipe. But companies providing the content that goes through the pipe don’t want the Internet service providers to exert that control, because they fear the providers could figure out ways to secure an advantage for content the providers own. That also seems like a reasonable concern.

The providers say that a) they don’t know how to do what the companies fear they will do, and b) there’s so much competition in the field that it wouldn’t matter anyway, because if they were to restrict access to their pipe, a consumer could just go elsewhere for his service. The first point smacks of disingenuousness because, of course, there are ways to privilege certain kinds of content and block others, even now. The second, competitive point is the most important one. Free-market theory says plainly that we should not expect any one provider of a good to act in service of the broader public interest; his goal is to maximize his own profit. The force that disciplines him, controls his appetite, and compels him to behave in responsible ways is competition — that’s what guides the “invisible hand,” in Adam Smith’s Olympian image.

So what case do the content providers have? Their case is that the Internet is not a marketplace but a combination of a Wild West in which nobody is making the rules and an oligarchy in which a few powerful behemoths have managed to secure unlimited control. This is an illogical argument — a system can’t simultaneously be anarchic and authoritarian — but it is a powerful one, in the sense that the only thing we care about when it comes to the Internet is the content. We don’t care about the pipe; we care about the water that comes through the pipe. Any force that limits our access to the water is a force that cannot be tolerated.

The Obama FCC, led by Julius Genachowski, has come down on the side of the Web companies. They are the ones who are demanding “net neutrality.” The FCC is about to declare itself the regulator of the Internet pipe, a role it now says it has the constitutional right to assume despite earlier Court rulings suggesting otherwise. Conservatives, viewing this as a huge power grab by the federal government, have tended to lean in the other direction.

The truth is, it could have gone either way. Conservatives could have viewed the providers as uncompetitive players whose positions are due in some part to the fact (especially in the case of cable companies) that they were granted monopoly roles by state and local governments, giving them unfair  access to 100 million homes. Liberals could have viewed the Web companies as greedy businesses seeking to use the leverage of state power to seek mercantilist advantage over rival greedy businesses.

But they didn’t. The sorts of businesses most keenly interested in net neutrality in the early 2000s ended up being liberals and Obama supporters, while the old lions were doing business in a Washington dominated by Republicans and saw that the best way for them to get leverage was to push the conservative competition argument while throwing dollars all over the place.

In the end, then, there’s a reason it’s impossible to listen to arguments over net neutrality without falling asleep. This is simply an act of corporate gamesmanship in which one player wishes to use the leverage of the federal government to secure an advantage over another player. The reason it has traction now is that there is an administration eager to play as direct a role in the economy as it can. What was intellectually seductive for Republicans was the idea that competition was working in the world of broadband and government shouldn’t interfere. What is intellectually seductive for Democrats like Genachowski is the idea that government has to step in to make sure everything is fair.

So in the end, how you feel about this issue gets to whether you think government should, on balance, do more or should, on balance, do less. It’s the fundamental divide between right and left. And that’s why net neutrality, despite how unbelievably boring it is, matters, and why it should not be imposed, and why the courts should not stand by while the FCC widens its authority over private industry.

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Tax Day

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

“Can I deduct the cost of marijuana if it’s for medical use?”

“Only if you’re filing a joint return.”

The Cato Institute has an excellent short film on all that is wrong with the federal tax system. In short, that system violates all four principles of taxation described by Adam Smith:

1. The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

As Warren Buffett complained, his effective tax rate is half that of his secretary.

2. The tax which each individual is bound to pay ought to be certain, and not arbitrary.

The system is so complex that not even professionals can be sure what people owe. Send out the tax information of a middle-class couple with children to six tax accountants and they will come up with six different sums owed. That experiment has been run numerous times. The advice the IRS itself gives out is frequently wrong.

3. Every tax ought to be levied at the time, or in the manner, in which it is most likely to be convenient for the contributor to pay it.

Most people never see the money, as it never gets into their paychecks. Those with incomes not subject to withholding must estimate in January, April, July, and October, regardless of whether those months are convenient.

4. Every tax ought to be so contrived as both to take out and to keep out of the pockets of the people as little as possible over and above what it brings into the public treasury of the state.

Well over 50 percent of filers hire people to fill out the forms because they can’t understand them. The corporate income tax is even worse. As the Wall Street Journal explains today, the cost of complying with the corporate income tax this year will equal 89 percent of the revenues received by the government. General Electric’s tax return, filed electronically, will be the equivalent of 24,000 pages long.

The current tax system benefits two groups: the rich and powerful, who are able to lobby Congress for loopholes, subsidies, tax credits, etc. etc., and the 535 members of Congress, who sell those loopholes, subsidies, tax credits, etc. etc. Yes, sell. They are traded for campaign contributions. It’s as legal as it is disgraceful.

There is no reforming the current system, as it is permeated with corruption. But Congress is utterly unable to write a new tax code from scratch. If this country is to ever get out from under a tax code that has become a clear and present danger to American prosperity and power, it will have to be done using a means similar to the military base closings after the Cold War: in secret, with Congress voting up or down, no amendments.

Only overwhelming pressure will make that happen. That’s another reason why the 2010 election might turn out to be the most consequential midterm election in American history.

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Obama’s Financial Failure

It’s impossible to know with certainty at this point because we’re only about 30 percent through President Obama’s first term, but I suspect he will be judged quite harshly by history and his countrymen for not simply avoiding but dramatically accelerating the major domestic concern facing the United States: our unsustainable and soon-to-be debilitating deficit and debt.

I don’t lay all, or even most, of the blame on President Obama for the debt he faced upon taking office. While his party, like the GOP, was clearly complicit in the situation, and Obama’s own actions in the Senate (especially blocking reforms of Fannie Mae and Freddie Mac, which played a role in the collapse of the housing market) contributed to what went wrong, much of the river of red ink he inherited was due to a financial and credit implosion for which he wasn’t chiefly responsible.

What I do hold President Obama responsible for is that he took office when it was clear that our debt and deficit had reached crisis proportions. While that situation wasn’t the case when he decided to run for the presidency, it was the situation when he assumed the presidency. And rather than rethink the core purpose of his presidency, he decided to pursue his agenda in a state of denial, as if the financial collapse that began in September 2008 never happened, as if our ominous new fiscal reality had never occurred.

At the moment when history demanded one thing of Mr. Obama, he did another.

What the president should have done, in the wake of market collapse, was to create his own Nixon-to-China moment: trimming and reforming our middle-class-welfare state. It is the type of thing that a Democratic president and a Democratic Congress have much greater latitude to do than a Republican president and a Republican Congress. Instead, Obama used this moment to create a new middle-class entitlement, ObamaCare, at precisely the moment when our other ones are falling into bankruptcy. On top of that, of course, was the president’s $860 billion-plus stimulus package, his $410 billion omnibus spending bill, and his decision to spend hundreds of billions of TARP (Troubled Asset Relief Program) repayment dollars rather than to pay down the deficit.

Consider where we are and where we are headed. The deficit in 2009 was $1.4 trillion — the equivalent of 10 percent of the nation’s economic output and the highest percentage since the end of World War II. The president’s 2011 budget will generate a combined $9.75 trillion in deficits over the next decade. Our publicly held debt, which was $6.3 trillion when Obama entered office, now totals $8.2 trillion. According to the CBO, it’s headed to more than $20 trillion in 2020, equaling 90 percent of the estimated gross domestic product that year. (As a reference point, nations that comprise the European Union are required to keep their debt levels below 60 percent.) Interest rates alone would consume some $900 billion per year, almost five times what they were last year. In addition, the total unfunded liability (the gap between projected assets and benefit obligations) for Medicare and Social Security is $43 trillion; in five years, the total is estimated to grow to $57 trillion. (For more, see this, this, and this.

Confronting figures like this, Mr. Obama should have made spending restraint and entitlement reform his top domestic priority. And yet the president has taken us in exactly the opposite direction, engineering the passage of ObamaCare (over its first ten years of full implementation, it will cost at least $2 trillion). That is the equivalent of dropping plane loads of lighter fluid onto a fire that is raging out of control.

Why Mr. Obama made this fateful decision is hard to tell. He is a person of unusual ideological rigidity. The president is undeniably committed to expanding the size, scope, and reach of government. Like any 21st century Man of the Left, his ambition is to make more and more citizens wards of the state, to create greater dependency on the federal government. That, at least, is what Obama’s actions indicate his intentions to be. But whatever his motivations, the results are what matter. Whether or not we can ever undo the fiscal damage that is being inflicted on us is an open question. It will require us to take steps that we as a society have been exceedingly reluctant to take, including means-testing entitlements and increasing the retirement age. It will require fiscal self-discipline, restraint, and what Adam Smith called “self-command.” (For an enlightening analysis of Smith, see this essay by Ethics and Public Policy Center colleague and National Affairs Yuval Levin.

This is what this moment demanded of this president and this Congress. Instead, we got the opposite. Rather than tapping the fiscal brakes and eventually nudging us into reverse, they have hit the accelerator and are leading us over a cliff. I suppose there are worse things for the political leadership of a nation to do, though it’s hard to come up with them just now.

I have little doubt that Obama, having helped to engineer this fiscal calamity, will, later in his term, try to portray himself as a model of fiscal rectitude and Republicans as the party unconcerned with the mind-bending levels of deficit and debt he’s saddled us with. I am skeptical this trick will work. Family members are surely happy if a gambling addict gives up habit, but they aren’t about to be lectured on financial responsibility by a person whose gambling ruined the family finances.

The majority of the Obama presidency is still before us. Nevertheless, it’s not too early to say that on this vital front, Barack Obama has been, and will eventually be judged to be, a significant failure. He not only missed history’s calling, he mocked it. He placed his own statist ambitions above the needs of the nation he was elected to serve. Soon enough, and perhaps on a scale he cannot now imagine, Obama and his party will be held accountable for having done so.

It’s impossible to know with certainty at this point because we’re only about 30 percent through President Obama’s first term, but I suspect he will be judged quite harshly by history and his countrymen for not simply avoiding but dramatically accelerating the major domestic concern facing the United States: our unsustainable and soon-to-be debilitating deficit and debt.

I don’t lay all, or even most, of the blame on President Obama for the debt he faced upon taking office. While his party, like the GOP, was clearly complicit in the situation, and Obama’s own actions in the Senate (especially blocking reforms of Fannie Mae and Freddie Mac, which played a role in the collapse of the housing market) contributed to what went wrong, much of the river of red ink he inherited was due to a financial and credit implosion for which he wasn’t chiefly responsible.

What I do hold President Obama responsible for is that he took office when it was clear that our debt and deficit had reached crisis proportions. While that situation wasn’t the case when he decided to run for the presidency, it was the situation when he assumed the presidency. And rather than rethink the core purpose of his presidency, he decided to pursue his agenda in a state of denial, as if the financial collapse that began in September 2008 never happened, as if our ominous new fiscal reality had never occurred.

At the moment when history demanded one thing of Mr. Obama, he did another.

What the president should have done, in the wake of market collapse, was to create his own Nixon-to-China moment: trimming and reforming our middle-class-welfare state. It is the type of thing that a Democratic president and a Democratic Congress have much greater latitude to do than a Republican president and a Republican Congress. Instead, Obama used this moment to create a new middle-class entitlement, ObamaCare, at precisely the moment when our other ones are falling into bankruptcy. On top of that, of course, was the president’s $860 billion-plus stimulus package, his $410 billion omnibus spending bill, and his decision to spend hundreds of billions of TARP (Troubled Asset Relief Program) repayment dollars rather than to pay down the deficit.

Consider where we are and where we are headed. The deficit in 2009 was $1.4 trillion — the equivalent of 10 percent of the nation’s economic output and the highest percentage since the end of World War II. The president’s 2011 budget will generate a combined $9.75 trillion in deficits over the next decade. Our publicly held debt, which was $6.3 trillion when Obama entered office, now totals $8.2 trillion. According to the CBO, it’s headed to more than $20 trillion in 2020, equaling 90 percent of the estimated gross domestic product that year. (As a reference point, nations that comprise the European Union are required to keep their debt levels below 60 percent.) Interest rates alone would consume some $900 billion per year, almost five times what they were last year. In addition, the total unfunded liability (the gap between projected assets and benefit obligations) for Medicare and Social Security is $43 trillion; in five years, the total is estimated to grow to $57 trillion. (For more, see this, this, and this.

Confronting figures like this, Mr. Obama should have made spending restraint and entitlement reform his top domestic priority. And yet the president has taken us in exactly the opposite direction, engineering the passage of ObamaCare (over its first ten years of full implementation, it will cost at least $2 trillion). That is the equivalent of dropping plane loads of lighter fluid onto a fire that is raging out of control.

Why Mr. Obama made this fateful decision is hard to tell. He is a person of unusual ideological rigidity. The president is undeniably committed to expanding the size, scope, and reach of government. Like any 21st century Man of the Left, his ambition is to make more and more citizens wards of the state, to create greater dependency on the federal government. That, at least, is what Obama’s actions indicate his intentions to be. But whatever his motivations, the results are what matter. Whether or not we can ever undo the fiscal damage that is being inflicted on us is an open question. It will require us to take steps that we as a society have been exceedingly reluctant to take, including means-testing entitlements and increasing the retirement age. It will require fiscal self-discipline, restraint, and what Adam Smith called “self-command.” (For an enlightening analysis of Smith, see this essay by Ethics and Public Policy Center colleague and National Affairs Yuval Levin.

This is what this moment demanded of this president and this Congress. Instead, we got the opposite. Rather than tapping the fiscal brakes and eventually nudging us into reverse, they have hit the accelerator and are leading us over a cliff. I suppose there are worse things for the political leadership of a nation to do, though it’s hard to come up with them just now.

I have little doubt that Obama, having helped to engineer this fiscal calamity, will, later in his term, try to portray himself as a model of fiscal rectitude and Republicans as the party unconcerned with the mind-bending levels of deficit and debt he’s saddled us with. I am skeptical this trick will work. Family members are surely happy if a gambling addict gives up habit, but they aren’t about to be lectured on financial responsibility by a person whose gambling ruined the family finances.

The majority of the Obama presidency is still before us. Nevertheless, it’s not too early to say that on this vital front, Barack Obama has been, and will eventually be judged to be, a significant failure. He not only missed history’s calling, he mocked it. He placed his own statist ambitions above the needs of the nation he was elected to serve. Soon enough, and perhaps on a scale he cannot now imagine, Obama and his party will be held accountable for having done so.

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Mr. Smith Bears Left

The collapse of even watered-down versions of Marxism has fruitfully pushed a number of leftist British intellectuals into a reconsideration of Adam Smith. The publication in 2001 of Emma Rothschild’s Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment set off a flurry of efforts to reclaim Adam Smith from “the Right.” Rothschild rightly saw that Smith was far from the caricature of a heartless demonic elitist so dear to left wing prayer books. Three years later, Gareth Stedman Jones followed up with his book An End to Poverty, which applauded Smith for his anti-statism.

Now, according to January 18 TLS, new books on Smith have entered the lists. Two of them—Ian McLean ‘s Adam Smith, Radical and Egalitarian and Gavin Kennedy’s Adam Smith’s Lost Legacy—try with a less than scholarly touch to claim Smith for New Labor. Prime Minister Gordon Brown, a Scotsman, has written the introduction to the MacLean volume. Brown, playing up the Scottish card, claims that “Coming from Kirkcaldy as Adam Smith did, I have come to understand that his (1776) Wealth of Nations, was underpinned by his (1759) Theory of Moral Sentiments” which saw “neighborliness” as crucial to mitigating the underside of economic competition. By this Brown, following McLean, argues that Smith was as much a theorist of social justice as an economist.

Taken in a Tocquevillian light this might seem innocuous. But, in the name of “neighborliness,” MacLean and Brown want if not to replace then at least to displace “the invisible hand” of markets with the “helping hand” of the state. This argument, depending on how you look at it, is either a hypocritical perversion of Smith or a thoughtful means of reconciling British leftists to global competition.

An answer, of sorts to Brown, comes from the Tory’s shadow chancellor George Osborne in his introduction to a new edition of The Wealth of Nations. Osborne sees Smith as the definitive answer to the shapeless anti-market ideology of the anti-globalization movement which has no positive program but is skilled at playing Cassandra. Osborne accurately sees economic nationalism as the road to perdition. But invoking Smith is scant guide for how either the Brits or the Americans should respond to the neo-mercantilist sovereign wealth funds of China and some of the Gulf States which invest politically in open societies while closing their own borders to foreigners.

Smith who was a moral ironist would no doubt be amused at the attempt by contemporary British politicians to enlist his writings in their causes. He once, after all, define an elected official as “that insidious and crafty animal vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuation of affairs.”

The collapse of even watered-down versions of Marxism has fruitfully pushed a number of leftist British intellectuals into a reconsideration of Adam Smith. The publication in 2001 of Emma Rothschild’s Economic Sentiments: Adam Smith, Condorcet, and the Enlightenment set off a flurry of efforts to reclaim Adam Smith from “the Right.” Rothschild rightly saw that Smith was far from the caricature of a heartless demonic elitist so dear to left wing prayer books. Three years later, Gareth Stedman Jones followed up with his book An End to Poverty, which applauded Smith for his anti-statism.

Now, according to January 18 TLS, new books on Smith have entered the lists. Two of them—Ian McLean ‘s Adam Smith, Radical and Egalitarian and Gavin Kennedy’s Adam Smith’s Lost Legacy—try with a less than scholarly touch to claim Smith for New Labor. Prime Minister Gordon Brown, a Scotsman, has written the introduction to the MacLean volume. Brown, playing up the Scottish card, claims that “Coming from Kirkcaldy as Adam Smith did, I have come to understand that his (1776) Wealth of Nations, was underpinned by his (1759) Theory of Moral Sentiments” which saw “neighborliness” as crucial to mitigating the underside of economic competition. By this Brown, following McLean, argues that Smith was as much a theorist of social justice as an economist.

Taken in a Tocquevillian light this might seem innocuous. But, in the name of “neighborliness,” MacLean and Brown want if not to replace then at least to displace “the invisible hand” of markets with the “helping hand” of the state. This argument, depending on how you look at it, is either a hypocritical perversion of Smith or a thoughtful means of reconciling British leftists to global competition.

An answer, of sorts to Brown, comes from the Tory’s shadow chancellor George Osborne in his introduction to a new edition of The Wealth of Nations. Osborne sees Smith as the definitive answer to the shapeless anti-market ideology of the anti-globalization movement which has no positive program but is skilled at playing Cassandra. Osborne accurately sees economic nationalism as the road to perdition. But invoking Smith is scant guide for how either the Brits or the Americans should respond to the neo-mercantilist sovereign wealth funds of China and some of the Gulf States which invest politically in open societies while closing their own borders to foreigners.

Smith who was a moral ironist would no doubt be amused at the attempt by contemporary British politicians to enlist his writings in their causes. He once, after all, define an elected official as “that insidious and crafty animal vulgarly called a statesman or politician, whose councils are directed by the momentary fluctuation of affairs.”

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Book Review: God and Gold

In God and Gold: Britain, America, and the Making of the Modern World, Walter Russell Mead coyly claims that the originality of his interpretation of the roots of Anglo-Saxon primacy rests in its focus on the meaning, as opposed to the mere dimensions, of American power. This is too modest: Mead’s achievement is larger than that. His real accomplishment is to restore religion to its rightful place in the history of Great Britain and the United States, and their roles in the world. This no small feat. It’s hard enough to explain why Britain—a small island in the North Sea lacking all natural resources except coal, potatoes, and herring—rose to be the first of the great powers by 1815, and equally hard to explain how the United States inherited and adapted the British system in the 20th century. Factoring the influence of religion into this dynamic is vastly more difficult, but Mead does an admirable job of it.

The historic grand strategy of Great Britain and the United States, as Mead understands it, is simply told: Britain was the world’s first enduringly liberal modern society, and the first practitioner of an open and dynamic economic system that traded throughout the world, relying on its navy to defend its trade routes. This system provided Britain the resources to fight and win its wars, and the power and self-confidence to promote liberal values and institutions. In the 20th century, the United States, shaped by its British inheritance, took over the role of protector of this maritime order from the totalitarian empires and enemies of modernity that continued to threaten it, of whom al Qaeda is merely the latest example. But the rise of Britain as a liberal capitalist power is only the better known half of the story. While capitalism generates resources and tax revenues on a scale unimaginable to early modern empires, it poses a big problem: the vast expansion of state power. Once the revenues begin to flow, in other words, the challenge becomes limiting the power of the state.

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In God and Gold: Britain, America, and the Making of the Modern World, Walter Russell Mead coyly claims that the originality of his interpretation of the roots of Anglo-Saxon primacy rests in its focus on the meaning, as opposed to the mere dimensions, of American power. This is too modest: Mead’s achievement is larger than that. His real accomplishment is to restore religion to its rightful place in the history of Great Britain and the United States, and their roles in the world. This no small feat. It’s hard enough to explain why Britain—a small island in the North Sea lacking all natural resources except coal, potatoes, and herring—rose to be the first of the great powers by 1815, and equally hard to explain how the United States inherited and adapted the British system in the 20th century. Factoring the influence of religion into this dynamic is vastly more difficult, but Mead does an admirable job of it.

The historic grand strategy of Great Britain and the United States, as Mead understands it, is simply told: Britain was the world’s first enduringly liberal modern society, and the first practitioner of an open and dynamic economic system that traded throughout the world, relying on its navy to defend its trade routes. This system provided Britain the resources to fight and win its wars, and the power and self-confidence to promote liberal values and institutions. In the 20th century, the United States, shaped by its British inheritance, took over the role of protector of this maritime order from the totalitarian empires and enemies of modernity that continued to threaten it, of whom al Qaeda is merely the latest example. But the rise of Britain as a liberal capitalist power is only the better known half of the story. While capitalism generates resources and tax revenues on a scale unimaginable to early modern empires, it poses a big problem: the vast expansion of state power. Once the revenues begin to flow, in other words, the challenge becomes limiting the power of the state.

The Anglo-Saxon societies surmounted this challenge because of their dynamic religious faith, which provided both a spiritual compass and assurance in the middle of rapid social and economic change and which, as a result of the English Civil War and the Glorious Revolution of 1689, limited the ability of the monarchy to raise money without the consent of Parliament. The result was that British and American state power left room for both faith in God and the use of human reason, striking a balance between the two. This balancing continues today: the “cultural and political rebalancing the United States is currently witnessing,” writes Mead, is “part of the process by which American society adjust[s] to the rapid pace of change.”

In his book, Mead channels both Adam Smith’s understanding of the role of faith in the making of Anglo-Saxon society, and Alexis de Tocqueville’s convictions that democratic, open, and liberal institutions could not exist unless rooted in a society of believers. The failure of the declared enemies of the Anglo-Saxon order—Mead calls them Waspophobes—to understand the strengths of this order derives precisely from their focus on materialism, and on their failure to arrive at de Tocqueville’s realization that British and American society have, in their faith and their broader civil society, a cultural and intellectual life that is far from simply materialist. (Contemporary liberalism, I would say, suffers in a more mild way from the same deficiency.) Mead’s work, taken as a whole, offers a compelling vision of the roots of American power that is liberal in the truest sense of the word: that is, a study in the importance of human freedom and responsibility.

It is regrettable, therefore, that having run so well, Mead stumbles at the last gate. Throughout his book, Mead’s view is very much the view from 30,000 feet: events like the American Revolution, the U.S. Civil War, or the Suez Crisis fly by in paragraphs, or even in phrases. The emphasis throughout is on the essential unity of Anglo-Saxon culture, and on the grand strategy that resulted from it. There is much to be said for this vision, unpopular though it will be in some quarters, but by limiting himself to it, Mead misses the essential contribution of Britain and, especially, the United States to the modern world order. It is one thing to claim that the United States was influenced profoundly by British culture and faith. But while there may be an Anglo-Saxon culture, or even an Anglo-Saxon grand strategy, there is no Anglo-Saxon state: 1776 saw to that. The Anglo-Saxons did not invent the state or the diplomatic institutions by which states relate to one another. Nor, as Mead notes, is the Anglo-Saxon form of the state dominant in the world today: the French or Soviet models have a far better claim to that title. The uniqueness of Anglo-Saxon grand strategy is that it emphasized resisting empires and establishing rules of secession and state legitimacy; it was only within the nation-state order that the liberal values with which Britain and the United States identified could be defended.

In this context, the final chapters of Mead’s work are truly perplexing. Indeed, they are so out of tune that they raise the suspicion that Mead included them solely to cover himself on the Left. For, after three hundred pages of praise for the Anglo-Saxon order, he about-faces to argue that the mission of the United States now is to carry out a “diplomacy of civilizations” to assuage the grievances of the Islamic world, grievances that began with the Crusades. The United States now must turn to remedying the “centuries of inequality and oppression” by assuring that Muslims have “due recognition” for their “just and legitimate aspirations”—which Mead recognizes may not be compatible with the existing framework of the liberal maritime order.

Coming at the close of a book dedicated to sympathetic explanation of that order, this is a remarkable claim. It is only proper to note that Mead proposes to make the United States responsible for the resolution of grievances that arose long before it came into existence. Burdening the United States with the responsibility for Arab grievances is bad enough, but to view “the Arab world” as a unified entity is to make the same fundamental error that Mead makes when he writes of the Anglo-Saxons: it is to assume political unity where there are merely cultural commonalities. More concretely, it is to agree with the Islamists that the fall of the Caliphate was an immense tragedy.

Through his advocacy of the “diplomacy of civilizations,” Mead turns his back on the nation-state system and on the international organizations that Britain and the United States have, above all other nations, been responsible for creating. Mead, in fact, places the burden of satisfying the Muslim peoples entirely on the United States. He argues that “pious Muslims of unimpeachable orthodoxy, conspicuous virtue, conservative principles, and great passion for their faith,” not liberal reformers, must bring the Muslim peoples into a dynamic, capitalist, and liberal world.

To make things worse, Mead’s precise policy recommendations for the United States are conspicuous by their absence. His “diplomacy of civilizations” revolves, in the end, around listening more closely to the grievances of the Muslim world. Mead cites the liberal theologian Reinhold Niebuhr as this philosophy’s guiding light. Niebuhr’s role in Mead’s work, as it was in Peter Beinart’s The Good Fight: Why Liberals—and Only Liberals—Can Win the War on Terror and Make America Great Again (2006), is to serve as a tough-minded but sensitive liberal who was fully aware of the reality of original sin, and, hence, of the need for the United States to be more understanding of its enemies and more aware of its own potential for evil. From all points of view, this is a most implausible picture. Developing a sympathetic understanding of declared enemies of the system is entirely foreign to Anglo-Saxon grand strategy and its values. Elizabeth I, Pitt the Younger, Churchill, Roosevelt, and Reagan had no time for this approach. Neither, in fact, did Niebuhr. His role in history was, in the era of Hitler and Stalin, to tell American liberals to get in the game, to remind them that a relentless focus on their own capacity for evil was demoralizing and destructive, and that there really were worse things in the world than the United States.

Niebuhr is indeed the philosopher that we, and the democratic world, need today. Mead’s work illustrates why. By casting his lot with the Muslim conservatives and accepting their right to set the international agenda of grievances, and by abandoning the Muslim liberals and reformers whom Niebuhr would have celebrated, Mead undermines, rather than reinforces, the order he wisely, if only partially, explains. A true history of the Anglo-Saxon contribution to the making of the modern world would emphasize not only religion and capitalism, but also the transformation of the world of empires into the international state system. Mead’s failure to find this third leg of the triad leads him into historical errors and contemporary fallacies that reveal the pervasive weakness in our understanding of the system that we ourselves have been the leading force in creating. But, by restoring religion to the story, he has already done a very great deal to correct the prevailing vision.

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No Pomp, Little Circumstance

One way to judge countries is by the way they treat their great musicians. Shockingly, England has dealt a public blow to its national composer, Sir Edward Elgar (1857—1934) on his 150th birthday. Elgar wrote such masterpieces as Enigma Variations and the Pomp and Circumstance marches, one of which provided the music for the popular hymn Land of Hope and Glory.

Just in time for Elgar’s anniversary, Her Majesty’s Exchequer has removed Elgar’s face from the British £20 note, replacing it with an image of the Scottish economist Adam Smith, while the British Arts Council refused to fund an Elgar celebration. Music critic Norman Lebrecht went a step further, declaring in the Daily Telegraph: “Elgar is not a major figure in music history, and we make a mockery of ourselves as a nation if we pretend that he is.” Whatever can the Brits find so incorrect, so objectionable, about Elgar? To some, he embodies the worst of England’s imperialist past; boozy crowds bellowing out “Land of Hope and Glory” at London events like the Last Night of the Proms causes embarrassment in the hearts of influential culture observers.

But “hope” and “glory” per se are not bad goals for a nation, and overseas music lovers need not be concerned with such internal UK squabbles. Elgar’s compositions feature an inherent stiff-upper-lip nobility behind which lurks, as his biographer Michael Kennedy wrote in the Telegraph, a “complex, hypersensitive, self-pitying, unhappy yet idealistic man, yearning for an illusory land of lost content.”

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One way to judge countries is by the way they treat their great musicians. Shockingly, England has dealt a public blow to its national composer, Sir Edward Elgar (1857—1934) on his 150th birthday. Elgar wrote such masterpieces as Enigma Variations and the Pomp and Circumstance marches, one of which provided the music for the popular hymn Land of Hope and Glory.

Just in time for Elgar’s anniversary, Her Majesty’s Exchequer has removed Elgar’s face from the British £20 note, replacing it with an image of the Scottish economist Adam Smith, while the British Arts Council refused to fund an Elgar celebration. Music critic Norman Lebrecht went a step further, declaring in the Daily Telegraph: “Elgar is not a major figure in music history, and we make a mockery of ourselves as a nation if we pretend that he is.” Whatever can the Brits find so incorrect, so objectionable, about Elgar? To some, he embodies the worst of England’s imperialist past; boozy crowds bellowing out “Land of Hope and Glory” at London events like the Last Night of the Proms causes embarrassment in the hearts of influential culture observers.

But “hope” and “glory” per se are not bad goals for a nation, and overseas music lovers need not be concerned with such internal UK squabbles. Elgar’s compositions feature an inherent stiff-upper-lip nobility behind which lurks, as his biographer Michael Kennedy wrote in the Telegraph, a “complex, hypersensitive, self-pitying, unhappy yet idealistic man, yearning for an illusory land of lost content.”

These complexities will doubtless be explored at the upcoming Bard Music Festival, “Elgar and His World,” scheduled for a series of weekends this August and October at Bard College in Annandale-on-Hudson, New York. The Bard festival features an uneven bunch of musicians, but fortunately it will include such accomplished chamber groups as the Daedalus Quartet and Claremont Trio, as well as the sublime solo violinist Jennifer Koh. Meanwhile, we may relish the many superb Elgar performances on CD, keeping in mind that a poorly performed CD—and there are many such of Elgar—can make any composer seem hard to listen to.

Elgar’s Cello Concerto, which the composer described as “just an old man’s darling,” was recorded with staunch restraint, flowing grace, and eloquent emotion by the cellists Pablo Casals and Paul Tortelier, both conducted by Adrian Boult for EMI Classics. Elgar’s orchestral work Enigma Variations communicates a rare personal tenderness—the variations were inspired by some of the composer’s friends—along with a sense of the passionate heights and depths of human relationships.

Enigma requires a conductor of unusual psychological nuance and direct frankness, such as Elgar himself (although his recordings were hampered by primitive sound equipment) or his friend Adrian Boult. There is also a choice of 1950’s recordings by the great French maestro Pierre Monteux with the London Symphony Orchestra in the studio; a live radio broadcast; and a surprisingly idiomatic outing with the Orchestre National de France on Music & Arts. And LSO Live recently released one of the best Enigmas ever, led by England’s current dean of conductors, Colin Davis.

Elgar also triumphed in larger-scale works like Dream of Gerontius, an oratorio set to words by Cardinal Newman about a man accepting his own mortality and the prospect of heaven. As conducted on CD by the composer Benjamin Britten with the tenor Peter Pears in the title role, or on an EMI recording with Janet Baker as the angel who guides Gerontius in his last moments of life, it is a work of brooding majesty. Achievements of this rank certainly ensure Elgar’s artistic immortality—whatever Her Majesty’s Exchequer might think.

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