I suggest that the tools needed to weather a serious economic crisis are qualities of character, and try to predict, given what we currently know about our economic and cultural situation, what sort of country this will be like in a few decades. The same general outlines apply, with modifications, elsewhere.
Please bear in mind that I am not addressing questions about “social justice” or about justice or about fairness. It isn’t honest to promise someone a retirement and renege, or to fail to pay a veteran’s medical bills for war injuries. I just want to know what happens when the money runs out.
“Prediction is very difficult, especially about the future.” (Niels Bohr)
In the near future the burgeoning entitlements programs will overwhelm available taxes. Some modest efforts have been but into rationalizing Social Security, but by all accounts not nearly enough. Modest efforts went into welfare reform under Clinton, but programs are still growing. If under Obama more programs appear or old ones are expanded, the day of reckoning comes that much faster. And sooner or later more taxes mean less revenue.
Shortly before D-day the crunch will start hurting badly. The irreducible functions of government—police and prisons and military and pork projects—will be the last things standing. National parks, science research, NASA, even agricultural subsidies will go away.
So far so predictable. The temptation to print money to cover the deficits will probably be irresistible, unless we elect officials with more wisdom than I expect; or unless some creditor like China has us by the short hairs and is willing to retaliate if we try inflation. In any event, inflation only puts off the inevitable for a short time, since people will quite reasonably demand the spirit of their entitlements and not just the letter. And of course inflation badly hurts investment, which means commerce suffers and the (inflation adjusted) tax base shrinks. It also eats up retirement savings, making retirees that much more dependent on programs like Social Security.
War is the largest unpredictable factor here—or rather the timing of it is, and the nature and popularity of the war. (Predicting that there will be war sometime is like predicting that the sun will rise.) If there are no wars at the time, or if they are far afield then the military will be cut deeply. Since the US is currently the main guarantor of ocean security this will start to impact commerce, though slowly at first. Hostile powers will become more prominent.
If there is a popular (felt to be important) war in progress when the crunch hits, the country will immediately shift to a command economy. Call “war leading to a command economy” Outcome 1. I do not want to go into what this means—its nature and hazards are well described elsewhere. Merely notice that even if the war ends the country will remain locked in thorough government management of the economy in order to maintain the entitlement programs.
Outcome 1: war and a command economy requires the government to manage not just the major industries, but to set prices, wages, retirement incomes across the board, housing construction, and so on. As the crunch worsens the level of involvement has to grow to keep the system working. In the end strikes become illegal. So long as the war is popular people will hang together for some sacrifices, but not all and not forever.
If there is a war and it is unpopular and it is not possible to retreat from it without disaster, the blame and anger land on the existing government, which gets replaced. But this doesn't change the situation; and I'd predict further replacements (possibly becoming violent) continuing at intervals until either a strong-man seizes control of the country and economy (Outcome 2) or an incompetent who by mismanaging either the economy or the war causes general collapse (Outcome 3. I can't predict what happens if we lose a war in such a situation, but I assume we lose big.
Let's stipulate that there no ongoing war, or if there is one we can back out of it without instant catastrophe (like pre D-day World War II in the Eur-African fronts). In this case military budgets will be cut back hard—big ticket systems first, then training, integration, and then personnel. The US uses money as a force multiplier to make our relatively small army more capable. It will become radically less capable, even if it stays the same size. The ill effects of this aren't directly germane to my subject, but the general feeling of weakness will contribute to problems described later. I can’t predict what sort of delayed consequences there would be from backing out of a war—they might be trivial or severe.
Reducing the military buys a little time. If the situation looks dire enough even pork projects might get more than symbolic cuts.
Entitlements ratchet. You can expand them but contracting them is very hard, especially if there is no crisis. People are not so adamant about extending them to the next generation so long as you don't change the rules for the people in the pipelines. However, reducing the benefit rates or increasing eligibility ages don't win votes from the sheep voters our legislators cultivate. Any adult who can do arithmetic can understand the problems but two huge issues appear.
- Political discourse is sound-bite length and usually without any serious discussion. Planning for the future is deprecated. When public discussion is infantilized, major decisions are made by the powerful behind the scenes.
- How will “Joe Average” react to losing benefits he thought he was promised?
The government will break its promises—one plus one is not three—they will have no choice. The way the government will break its promises will vary by the type of promise. Universal Health Care is an easy promise to break: just underfund it. In any event the service will undoubtedly have been deteriorating all along. But since people are often quite loyal to their doctors, if the UHC plans let them keep the same doctor the system can become quite decrepit before people revolt.
Pension checks are another matter. Whether reduced by fiat or by inflation smaller incomes hurt. It isn't as easy to postpone meals as it is doctor visits. The government can try to introduce new goodies or dress things up in an effort to distract people, but this only helps in the short term.
Different recipients face different challenges: AFDC single mothers vs disability pensions vs Social Security pensions vs government retirement pensions—but all have this in common: nobody expects them to help themselves. The single mothers are supposed to be overwhelmed with taking care of the kids, the disabled can't work and the pensioners are too old to work. Everything depends on how far these groups have internalized those expectations.
Character is Destiny.
If the pensioners give up independent living and move into spare rooms with family, or band together to share expenses, they can make do after cuts—perhaps for long enough. It is an open secret that some of the officially disabled are able to work at some level. Many could reach accommodations with family or friends; though often families don't exist anymore. AFDC recipients could theoretically manage similarly—but notice the assumption that families exist and feel some obligation.
Will this be true? Is it true now? Is there enough family left to provide emergency support to enough people? If the families do exist, will they think of the deprived ones as an imposition?
I know not all circumstances or reactions will be the same. I ask about averages and overall attitudes, not whether John Smiley loves his step-father, or whether any of Bessie's series of boyfriends feels any obligation to help her mother. The issues here revolve around what is the majority view: the “character” of the society.
For the entitlement contraction to be peaceful, with (in general) people taking care of themselves and their own, the culture needs to have encouraged particular values: family obligations, reliability, willingness to take the bad with the good, and willingness to balance other's needs against your own.
Retired pensioners probably understand the virtue of reliability, and schools try to encourage this as well, but it isn't universally admired. Ask business owners about how hard it is to find people willing to show up on time. The rest of these qualities aren't taught by any major group but churches; and precious few of them these days. I don’t see a majority of families addressing these, and the popular entertainments implicitly and often explicitly denigrate them. (How does rap view women—as wives and mothers to be supported, or whores to be used?)
I wish I were confident that the “character” of the society will have us taking care of our own peacefully. I don’t think troubles form character so much as reveal it, and the trends are not encouraging. In what follows I will assume that a people taught to look to the government for help will continue to do so.
If the contraction is not stoically dealt with, people will look for someone to blame. Some always do this anyway—the issue is how big a deal this will be.
Demagogues will rise to the occasion as always. The future of the nation depends on whether a large enough fraction of those “entitled” cling to their sense of deprivation and find someone to blame. If enough do, then blame becomes the dominant theme in politics.
Who gets blamed?
If the blame successfully lands on “the rich” the most likely next step is to nationalize the largest businesses, and the government winds up running most of the economy. This has the same general character as Outcome 1, but without a war or external enemy to encourage the people to hang together.
Call this Outcome 4. It is like 2, but with initially less extensive government control (since there's no war yet). Since government control will in no way solve the underlying problem, sacrifices still must be made; but without an external threat to motivate them there will probably have to be more threats from the government itself. Thus, paradoxically, I expect this outcome (a command economy without war) to be more oppressive than one that begins during a popular war.
Trying to put blame on a powerful group can spur them in turn to try to redirect blame to outsiders. “The rich” are a handy target, and can sometimes be felled; but if they are savvy enough then minorities or aliens will get the blame instead. Powerful groups include wealthy ones, but also media groups and established political groups and criminal gangs.
If there is some plausible way of blaming another country, there's clearly a risk of war; if the nation is or can become strong enough. The process of militarization brings government control of the economy, and we're back to Outcome 1.
If the “enemy” is unreachable or too strong or too implausible, and the government is leading the blaming (sooner or later it will: either at the start or when the demagogues reach power), the society will marinade itself in hatred, rather like Egypt or Pakistan. Hatred is never perfectly channeled, and will be turned inward from time to time in assassinations and hunting for traitors. Call this Outcome 5
Outcome 5 is a society that while it may have trappings of a modern democracy, is thug-ridden and violent. The entitlements are gone, replaced by grievances. The government may or may not control the economy; in either case I expect corruption to be the order of the day. Outcome 2 is very like to evolve into this sort of situation.
If the “enemy” is a non-dominant group within the country, the demonized group is unlikely to wait quietly for destruction, and you wind up with diffuse civil unrest shading into civil war without territories, resolving into civil war with ethnic cleansing. The chances are that demagogues will make the government a partner—it is more than the country could expect or deserve to find strong and fair leaders. But if they don't, the unrest offers opportunity for criminal organizations to expand their powers and control territories. Call this Outcome 6.
Outcome 6 is a civil war, with partitioning of the country into enclaves. If the government is strong enough it will probably be a party to the ethnic cleansing, and if it is not the country will wind up with warlords instead.
I want to look at a variant of this in more detail, since it is possibly closer than we think for the USA. Suppose the economy goes into depression and stays there. The entitled classes are split between welfare and retirees. The retirees are hard to blame in a plausible way; so blame goes to the welfare recipients. Blaming all of them is possible but hard to sustain. Blaming blacks sparks a race war right away. That leaves illegal immigrants as the most likely target. Never mind the real proportions of spending—facts are easy to ignore.
“Illegal immigrants” mostly means Mexicans. Abused Mexicans (and legal immigrants from Mexico, and citizens originally from Mexico) can readily flee, and will probably be encouraged to. Mexico will be driven to retaliate somehow, probably via trade restrictions, oil embargoes, and so on. A lot of Americans live in Mexico, and would be vulnerable to tit for tat abuse. There's an obvious risk to Mexico here if some damaged Americans are taken as a cause celebre—the US would still be strong enough to indulge in punitive attacks. A few dozen years from now this may no longer be true.
None of this will improve the lives of the “entitled” any. A punitive war isn't likely to “stimulate the economy” and a war of conquest adds millions of Mexicans to the country—the exact opposite of what the demagogues want. But unfortunately it doesn't seem terribly improbable. It differs from Outcome 6 in that enclaves don’t appear and it isn't strictly a civil war, because one of the parties has a state to support it—but it does involve unrest, ethnic cleansing, and war.
The “ideal” outcome: we tighten our belts for a decade or so and reorganize our political culture with no more than typical rioting and instability. Unfortunately I strongly suspect that the culture has changed enough that this may not be possible anymore. That leaves the bad ones:
- War on, government runs pretty much the whole economy.
- Strong man dictatorship, government runs pretty much the whole economy.
- Lose Big. Unpredictable outcome of losing a major war.
- Soak-the-rich, government runs almost everything.
- Unstable thugocracy
- Civil war/ethnic cleansing, unpredictable degree
The outcomes don't look good. We've recovered from depressions before, but I worry that our cultural shifts make the large entitlements seriously problematic. I don't propose to address the vexed question of whether some of the programs contributed to the cultural shifts.
After the great convention, Franklin was asked what kind of government had been created, and he answered “A republic—if you can keep it.”
Nota bene. Yes, our family has benefited from these programs. We are grateful, but we are also trying to get to the point where they are not needed. And I really don't expect Social Security to be there when I retire.
I don't expect nuclear weapons to be used in ways that modify the analysis substantially.