Friday, June 22, 2012

Civil society: an "us" or a bunch of "I's?"

NPR just published an article describing how, in this age of budget cuts, large donations from private individuals are keeping California state parks open. For example, Dan McCranie, who made a substantial fortune in the semiconductor industry, donated $750K to help keep Henry Coe State Park open. According to the article:

    McCranie figures that now that private donors have stepped up, state money will never come back to Coe Park. So it will be up to them [the private donors] to create an endowment fund big enough to keep this park open in perpetuity.

The really interesting part of the article is the reaction of Rob Reich to Mr McCranie's donation (Mr Reich is co-director of Stanford University's Center on Philanthropy and Civil Society and no relation, apparently, to former Labor Secretary Robert Reich):

    Getting the state off the hook for funding parks may also set into motion a slippery slope, says Rob Reich ... "You get lots of people like [McCranie] or others who do this who have great intentions and are civically minded and spirited," Reich explains. "But acting one by one by one, they set into motion this dynamic ... where suddenly we're not acting collaboratively or collectively as a public. We're acting individually as philanthropists to benefit the thing we're most passionate about. And suddenly we don't have a civic sphere anymore. We don't have political participation. We don't have an 'us.' We have a bunch of 'I's.' "

First of all, let it be noted that Mr Reich seems somewhat confused inasmuch as he calls Mr McCranie "civically minded" and yet characterizes his actions as leading to a situation where "we don't have a civic sphere anymore." Nevertheless, it seems clear that the predominant sentiment expressed in Mr Reich's comments is that the only kind of action that is legitimate is action taken by the state; actions taken by an endowment fund established by a bunch of private citizens are somehow second-rate, suspect, and undesirable.

And yet, why should the actions of private individuals, unaffiliated with the state, be undesirable? After all, there are certain thinkers, for example, Albert Jay Nock, who consider the state to be the enemy of its citizens and all state actions to be usurpations of the prerogatives of private citizens and institutions. For example, in his book Our Enemy, The State, Mr Nock writes:

    [E]very assumption of State power, whether by gift or seizure, leaves society with so much less power; there is never, nor can there be, any strengthening of State power without a corresponding and roughly equivalent depletion of social power. ... Instead of recognizing the State as "the common enemy of all well-disposed, industrious and decent men," the run of mankind, with rare exceptions, regards it not only as a final and indispensable entity, but also as, in the main, beneficent.

Let us consider the following two alternatives:

    a.) the individual sends his hard-earned money off to the central government so that one or more apparatchiks may substitute their own judgment for the taxpayer's and decide how that money should be spent (often in some way the taxpayer objects to);

    b.) the individual, acting as a philanthropist, spends his money directly "to benefit the thing [he's] most passionate about."

Why should option a. be viewed as automatically superior to option b.? This is the thinking of a man who has become accustomed to a society in which all institutions besides government have atrophied under the totalitarian pressures brought to bear by the leviathan state.

In an article earlier this year, Yuval Levin describes the process by which private institutions (in this case, the Catholic Church) are being "cleared out" by the Obama Administration:

    [D]oes civil society consist of an assortment of efforts by citizens to band together in pursuit of mutual aims and goods as they understand them? Is it an extension of the state or of the community? In this arena, as in a great many others, the administration is clearly determined to see civil society as merely an extension of the state, and to clear out civil society—clearing out the mediating layers between the individual and the state—when it seems to stand in the way of achieving the president’s agenda. The idea is to leave as few non-individual players as possible in the private sphere, and to turn those few that are left into agents of the government.

Bill Kristol expands:

    As Yuval Levin noted in National Review Online ... institutions such as the Catholic church [or, say, an endowment fund run by a bunch of private citizens] represent a mediating layer between the individual and the state. This layer, known as civil society, is one of the principal differences between Western liberal order and the socialist view.

In Mr Reich and Mr Obama's world view, all institutions besides government are inherently suspect and undesirable. Only "collective" actions undertaken by the state are legitimate. This attitude is best summed up by the mantra Progressives keep repeating: "We're all in this together." For example, Robert Reich, the former Labor Secretary, has written:

    Obama must show America that the basic choice is between two fundamental views of this nation. Either we're all in this together, or we're a bunch of individuals who happen to live within these borders and are mainly on their own.

Obviously, I prefer to believe that we are a bunch of individuals acting on our own. In the socialist, collectivist view, on the other hand, all action must be taken by the people acting collectively. The problem with this view, of course, is that it is an illusion. The actions will not be taken by some mythical "us acting together." Such an entity does not exist. Rather, a small cadre of government bureaucrats located in a far off capital will impose their personal judgments on us all. What's more, the policies they impose on us, although funded by taxes expropriated from all of us, will often benefit only a small special interest group who, in turn, are supporters of the apparatchiks themselves.

What is especially ironic about this situation is that many of the Progressives who now adopt the socialist, collectivist world view and see government as the solution to every problem, were hippies back in the 60's and then viewed the government as the root of all evils.

The fact that private individuals have stepped forward to spend private funds to support what previously had been a function of government should not be viewed as a regression and relapse to a less advanced state, but as the healthy reengagement and revitalization of individuals and institutions that operate independently of government. It is these individuals and institutions that constitute civil society proper.

Let a thousand I's bloom.

Wednesday, June 20, 2012

The private sector is doing just fine

As WSJ reported on June 20:

    The Fed’s “central tendency” for the U.S. gross domestic product now ranges from 1.9% to 2.4% this year, compared with the 2.4% to 2.9% gain predicted in April. Growth is seen between 2.2% and 2.8% in 2013, from the April view of 2.7% to 3.1%. U.S. GDP growth is seen between 3.0% to 3.5% in 2014.

    The Fed’s outlook on hiring was also gloomier. It now sees the unemployment rate this year as coming in between 8.0% to 8.2%, from April’s projection of 7.8% to 8.0%. Next year the Fed sees the unemployment rate coming in between 7.5% to 8.0%, versus April’s projection of 7.3% to 7.7%. The Fed’s 2014 unemployment forecast is 7.0% to 7.7%.

And, as WSJ reported on June 21:

    The Dow ... quickly turned red after Mid-Atlantic manufacturers said that business conditions deteriorated sharply this month, according to the Federal Reserve Bank of Philadelphia. ... "What we're seeing is the job market slowing to a crawl," said Saira Malik, head of global equity research for TIAA-CREF in San Francisco.

Yes, under President Obama's stewardship the private sector is doing just fine.

Thursday, June 14, 2012

The Keynesian Illusion

The Keynesian program can be described briefly as follows:

    During recessions, the government should countercyclically borrow and spend to stimulate the economy. During boom times, the government should countercyclically cut spending and reduce its debt.

For example, the Keynesian wizard deluxe, Paul Krugman, wrote in a recent column:

    "The boom, not the slump, is the right time for austerity." So declared John Maynard Keynes 75 years ago, and he was right. Even if you have a long-run deficit problem — and who doesn’t? — slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression. ... When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

Let's examine how this Keynesian program might be applied in the real world.

In his recent press conference, President Obama said that the federal government could stimulate the economy by sending money to state and local governments to hire more police officers, firefighters, and teachers:

    [O]ne of the biggest weaknesses has been state and local governments, which have laid off 450,000 Americans. These are teachers and cops and firefighters. Congress should pass a bill putting them back to work right now, giving help to the states so that those layoffs are not occurring. ... The private sector is doing fine. Where we’re seeing weaknesses in our economy have [sic] to do with state and local government — oftentimes, cuts initiated by governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don’t have the same kind of flexibility as the federal government in dealing with fewer revenues coming in.

One municipality that has cut the number of its police officers dramatically over the last several years is San Jose, California. A website sponsored by the San Jose Police Officers Association, the union for San Jose policemen, has a graphic that shows that the number of police officers in San Jose has been reduced from around 1420 in 2000 to around 1070 in 2012, a 25% reduction. So, presumably, President Obama would approve of sending federal money to San Jose so that San Jose can hire back the police officers who have been laid off.

But, let's ask ourselves why these police officers were laid off? According to Chuck Reed, the Democratic mayor of San Jose, it is because the cost of retirement pensions and benefits for these government workers has spiraled out of control. If San Jose is to make the payments it is obligated to make to retired police and firefighters, it has no choice but to make cuts elsewhere, including in the number of police and firefighters currently employed.

Now, suppose that the Federal government sends stimulus money to San Jose to hire back some of these laid off workers. According to the Keynesian program, this stimulus money will be withdrawn when the economy improves. After all, "the boom, not the slump, is the right time for austerity." But, then, San Jose will find itself back in the same situation it currently is in: the costs of pension and benefits for its retirees will still be sky high and it still won't have sufficient funds to cover them.

We conclude, then, that, absent any reform to police retirement pensions and benefits -- a reform that 70% of San Jose residents recently voted for, but that the San Jose police union is vigorously opposing in court -- either San Jose will again be forced to lay off massive numbers of city employees when the Keynesian stimulus is withdrawn, or the stimulus will not be withdrawn. The second alternative is the one that is usually chosen. After all, when "happy days are here again," what incentive is there to cut spending? This results in a new, permanently higher plateau of federal borrowing and spending.

In sum, the Keynesian program that economists like Krugman and politicians like President Obama peddle is a bait and switch. People are lured into spending by the promise that debt and deficit reduction will follow. But, only the first part of the program, the stimulus spending, is ever carried out. The "time for austerity" never, in fact, arrives and deficits and debt spiral ever upward.

The only permanent solution to San Jose's problem is to reduce its retirement pension and benefit costs. Keynesian stimulus won't work. It is nothing more than a payoff for Obama's cronies in public service employee unions, similar to the payoffs to the UAW that Obama orchestrated through the Chrysler and GM bailouts.

Wednesday, June 13, 2012

A right wing conspiracy or a corruption of the attitude of public service

President Obama says that the private sector is doing fine and that we should send more money to state and local governments, say, to San Jose, California, to hire and retain more policemen. A portion of the wages of these policemen will be handed over to the police union in the form of compulsorily deducted dues. The union will use these dues to fund litigation to thwart the will of the 70% majority of San Jose voters who voted to approve Measure B to reform the pensions and health care benefits policemen receive.

We have had the idea inculcated in us that being a policeman is an honorable profession. Policemen place themselves at risk of grave personal injury to protect the rest of us. Republicans should honor policemen, we hear Democratic talking heads say, not demonize them.

Is the movement to reform police pensions nothing more than a part of a vast right-wing Republican conspiracy?

Well, San Jose is one of the most Democratic cities in the United States, having voted 69% for Obama in 2008, nearly identical to the 70% majority that voted for Measure B. Chuck Reed is the Democratic mayor of San Jose. In his book, Boomerang, Travels in the New Third World, Michael Lewis quotes Reed on the police and their pensions:

    "Our police and firefighters will earn more in retirement than they did when they were working. ... When did we go from giving people sick leave to letting them accumulate it and cash it in for hundreds of thousands of dollars when they are done working? There's a corruption here. It's not just a financial corruption. It's a corruption of the attitude of public service." ... The problem was going to grow worse until, as [Mayor Reed] put it, "you get to one." A single employee to service the entire city, presumably with a focus on paying pensions. ... "I don't know how far out you have to go until you get to one," said Reed, "but it isn't all that far." ... This wasn't a hypothetical scary situation, said Reed. "It's a mathematical inevitability."
Mayor Reed provides more information about the excessive costs of police and firefighter compensation and benefits and how these costs are crippling the City of San Jose on the website of the Office of the Mayor.

Tuesday, June 12, 2012

Government jobs have been recession-proof

In their column America's Hidden Austerity Program, Ben Polak and Peter Schott make the following observations:

    But there is something historically different about this recession and its aftermath: in the past, local government employment has been almost recession-proof. This time it’s not. Going back as long as the data have been collected (1955), with the one exception of the 1981 recession, local government employment continued to grow almost every month regardless of what the economy threw at it. [emphasis added]

To some commentators, the loss of government jobs during the current recession has been an argument in favor of sending more money to the states to hire or retain more government workers. In fact, Polak and Schott's findings are a remarkable confirmation of my Thesis 1:

    Government always gets bigger and more centralized.

That is, in the past local government employment has been, generally speaking, recession-proof and immune to any kind of job reductions.

As I have already done in many blog posts, let me describe the cycle of ever-increasing government borrowing and spending once again:

    Hard times hit. Government engages in Keynesian stimulus. Good times return. Government does not withdraw the Keynesian stimulus because political and legal pressures from government unions prevent it from doing so and because, during good times, there is no incentive to borrow and spend less. Thus, a new permanent plateau of government employment, government borrowing, and government spending is achieved.

This is why since 1955 there has never been a significant reduction in the number of government employees come rain or come shine.

This cycle repeats itself over and over again with government becoming more burdened by debt with each iteration, more enfeebled by that burden, and less able to deliver a potent, effective stimulus during hard times. Finally, the government reaches the point of exhaustion: it still is obligated to pay all the financial commitments it has made (for example, in the form of high salaries, pensions, and benefits to workers and retirees in government unions), but it cannot borrow anymore (for example, because its debt rating has gone to junk, as has California's). At this point, when recession strikes, the only alternative state and local governments have is to cut back on the number of current employees since they cannot cut back on salary levels or on pension and benefit payments.

Thus, the fact that we have reached the point where government is cutting back on government employees is not an argument in favor of having the federal government pump more money into supporting government jobs, rather it is a sign that state and local governments have reached the point of exhaustion, the point where their borrowing and spending is unsustainable. To give more money to states to hire more government employees would simply transmit the disease at the state and local level to the Federal level.

The only real solution to the problems at the state and local levels is to pass reforms to curb the growth of salaries and the cost of pensions and benefits for government union workers. This is precisely what Republican governors like Mitch Daniels, Chris Christie, and Scott Walker are doing, saving jobs in the process. President Obama and the Democrats and Keynesians, on the other hand, would rather centralize and federalize the disastrous spiral of ever increasing borrowing and spending that has brought our state and local governments to the brink of disaster.

Saturday, June 9, 2012

Obama: Private Sector Doing Fine; Let's Help Government Unions Instead

In a week in which the voters of Wisconsin and California dealt stinging rebukes to public service employee unions, telling them, in essence, that cash-strapped, overtaxed taxpayers will not foot the bill anymore for their plush pension and health care benefits, President Obama states:

    The private sector is doing fine. Where we're seeing weaknesses in our economy have [sic] to do with state and local government. Oftentimes cuts initiated by, you know, Governors or mayors who are not getting the kind of help that they have in the past from the federal government and who don't have the same kind of flexibility as the federal government in dealing with fewer revenues coming in. ... [What Republicans] should be thinking about is how do we help state and local governments.

Could there be anyone more out of touch with the mood of the American electorate than Mr Obama? Well, perhaps, there could be. We also learned this week that San Jose police and firemen, after Measure B to reform their pensions was passed with a 70% majority, have filed suit to challenge the reforms in court. The website of the San Jose Police Officers Association, with the wonderful domain name www.protectsanjose.com, provides an excellent confirmation of my Thesis 6:

    Increases to government spending or programs that benefit particular special interest groups are always justified by noble-sounding, plausible arguments about promoting the general welfare: ... when we increase the pay of policemen, firefighters, and prison guards, we are "improving public safety;" ...

Every opponent of the Progressive movement should welcome this suit and rejoice at the utter tone-deafness of Obama and his government union supporters. Nothing can be more self-defeating for these union members and their Democratic enablers than the spectacle of public service employee unions using their deep coffers (filled with taxpayer dollars laundered through mandatory unions dues) to attempt to overturn a law passed by such an overwhelming majority and enacting such modest reforms.

The actions of the San Jose firemen and policemen are an illustration of my Thesis 8:

    [T]he modus operandi of public service unions (teachers, firefighters, policemen, and others) is a.) gather mandatory dues from all union employees, b.) use these union dues to fund massive lobbying efforts to elect to office officials who will support the efforts of the unions to increase union pensions and benefits. In this way, the government officials who end up negotiating with the unions are bought and paid for by the unions themselves.

The only thing I would add to that at this point is that, apparently, the unions are now using their funds not only to back political candidates, but also to pursue litigation. I will have to modify Thesis 8 accordingly.

Think about if for a moment: firemen and policemen are using dollars that ultimately derive from the taxpayer to engage in litigation whose effect will be to funnel more taxpayer dollars to firemen and policemen at additional cost to the City, which will now have to fight this suit.

Addendum
I just watched the Sunday morning talk shows. The Democrats made the following points:

    The troglodyte Republicans want fewer teachers, firemen, and policemen. It used to be that being a public service employee -- a teacher, a fireman, a policeman -- was an honorable profession. The Republicans are now demonizing people in these professions when they should instead be giving thanks for their selfless service.

Yes, being a public service employee -- a teacher, or fireman, or policeman -- used to be and still is an honorable profession. My wife has been a teacher for 30 years. But something has gone terribly wrong when teachers abandon their classrooms and occupy the statehouse of Wisconsin, disrupting government and screaming threats of physical violence against the governor. Something has gone terribly wrong when the firemen and policemen of San Jose file suit to thwart the will of a 70% majority of San Jose voters, voters in a city that has been exceptionally generous to those city workers over the last several decades.

As for the claim that Republicans want the number of teachers to be reduced, it has turned out in Wisconsin that the reforms instituted by Republican governor Scott Walker have had just the opposite effect: they have preserved the jobs of teachers, who otherwise would have been laid off without the reforms. Or look at San Jose. The reason why the number of policemen has been reduced so drastically is not because a Republican has been slashing their jobs; ferchissakes, the mayor of San Jose is a Democrat, Chuck Reed. No, the reason why Mayor Reed has been forced to cut the number of policemen so precipitously is because the cost of the pensions and benefits for retired policemen has soared out of control over the last decade. That is why Mayor Reed supported Measure B: limit the pension costs, as Measure B does, and you have more money to hire new police officers, as well as to spend on other public services. What is forcing massive cuts to be made to the ranks of public service employees is not Republicans, but the simple fact that so much money is now being spent on pensions and other post-employment benefits for retired employees that there is no money left to pay for or to hire new current employees.

Sunday, June 3, 2012

The Keynes/Krugman/Obama Position

The Keynes/Krugman/Obama position amounts to this:

    The way to achieve prosperity is to borrow more and spend, spend, spend. We should not be overly concerned about the additional debt we are running up. Nor should we be overly concerned about whether we get any return on investment for all the spending we are doing: better, as Keynes said, to pay workers to dig holes and fill them back in than not to spend at all. All of our borrowing and spending will bring back boom times. When those times return, we will cut spending and reduce the national debt.

This position constitutes a belief in a kind of fiscal alchemy that produces not gold from lead, but prosperity from debt and undifferentiated spending. All we need to do is borrow and spend freely and happy days will return. Only then will we have to make the spending cuts that we are unable to agree to now.

What is so remarkable about this position is that it requires no discrimination or judgment whatsoever to execute. What politician would not like to have free rein to borrow and spend with no accountability? What politican would not like to have the consequences of his unrestrained spending postponed until after his/her departure from office? (We can imagine that Obama and Krugman would like to see the bill come due during a Republican administration.) Why do we need the supposedly most intelligent president we have ever had to execute this policy? A chimpanzee would do just as well.

If people really believe that this is the way the economy works, then, by all means, they should vote for Obama.

Friday, June 1, 2012

Hurrah for Ireland, Down with Greece

Victor Hanson has published an interesting column, comparing the national culture of Germany to that of Greece. Victor writes:

    [O]ver the years I have developed an unscientific and haphazard — but often accurate — politically incorrect method of guessing whether a nation is likely to be perennially insolvent and wracked by corruption.

    Do average passersby throw down or pick up litter? After a minor fender-bender, do drivers politely exchange information, or do they scream and yell with wild gesticulations? Is honking constant or sporadic? Are crosswalks sacrosanct? Do restaurant dinners usually start or wind down at 9 P.M.? Can you drink tap water, or should you avoid it? Do you mostly pay what the price tag says, or are you expected to pay in untaxed cash and then haggle over the unstated cost? Are construction sites clearly marked and fenced to protect pedestrians, or do you risk walking into an open pit or getting stabbed by exposed rebar?

    To put these crude stereotypes more abstractly, is civil society mostly moderate, predicated on the rule of law, and meritocratic — or is it characterized by self-indulgence, cynicism, and tribalism?

I agree with Victor. There is such a moral phenomenon as “national character” or “national ethos.” Look at the difference between the election in Ireland yesterday and the last election in Greece. The Irish sent a message yesterday that they are willing to do whatever it takes, suffer through whatever austerity measures are imposed on them, to right their fiscal ship. In Greece, the people are turning to Syriza. That’s why people like Wilbur Ross are currently investing in Irish banks while there is a run on the banks in Greece and Spain.

Hurrah for Ireland! The Greeks can go to the devil.

Krugman's "Spending Agenda"

In a recent column entitled "The Austerity Agenda", Paul Krugman has once again trotted out his favorite quote from Keynes:

    "The boom, not the slump, is the right time for austerity." So declared John Maynard Keynes 75 years ago, and he was right. Even if you have a long-run deficit problem — and who doesn’t? — slashing spending while the economy is deeply depressed is a self-defeating strategy, because it just deepens the depression. ... When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

Krugman's solution to our current economic malaise, then, is that the government, for whom interest rates now are exceptionally low, should borrow money and spend, spend, spend.

Let us consider what is wrong with this argument. To help us do that, let us first look at one of my favorite passages from Daniel Yergin's book The Quest: Energy, Security, and the Remaking of the Modern World, in which the author describes the fate of what he calls the "petro-state:"

    When [oil] prices soar, governments are forced by society's rapidly-rising expectations to increase their spending as fast as they can -- more subsidies to hand out, more programs to launch, more big new projects to promote. ... But when world oil prices go down and the nations' revenues fall, governments dare not cut back on spending. Budgets have been funded, programs have been launched, contracts have been let, institutions have been created, people have been hired. Governments are locked into ever-increasing spending. Otherwise they face political and social explosions.

(For further commentary on this passage, see my blog post We are all "Petro-States" Now.)

The gusher of spending that Yergin describes petro-states unleashing is not unlike the gusher of stimulus spending that Krugman would have our Federal government unleash. The only difference is that in the case of the petro-state, the spending is funded by soaring oil prices, whereas in the case of our federal government, the spending would be funded by increased debt. According to Krugman, this increased debt is not a problem because interest rates are currently so low. That is, instead of soaring oil prices to fund its spending our government has plunging interest rates. In essence, our most precious natural resource is nothing more than the fickle willingness of others to lend us money.

But, these interest rates won't remain low forever, just as oil prices don't remain high forever. When interest rates reverse and begin to rise, then, according to Krugman, the federal government will cut back on its spending. But, what will have happened in the meantime is that "Budgets will have been funded, programs will have been launched, contracts will have been let, institutions will have been created, people will have been hired. Governments will be locked into ever-increasing spending." Many of the people who will have been hired will have organized themselves into public service employee unions. Other people will be receiving pensions or subsidized health care or food stamps or some other kind of benefit from the government. All these people will resist any effort to cut government spending. Furthermore, one of the reasons why interest rates will be rising, presumably, is because the economy will be doing better, boom times will have returned. But, during boom times there will be even less of an incentive to cut spending. The end result will be that we will have reached the next permanently higher plateau of government spending and indebtedness.

Then, this process will repeat itself all over again. That is, at some point, the boom times will end, recession will rear its ugly head again, and we will hear renewed cries for government stimulus. Given the new permanently higher plateau of indebtedness, however, our government will be in an even more precarious position and even less able to borrow and spend. As this process repeats itself over and over again, eventually our indebtedness will reach such a level that lenders will not be willing to lend money to the United States. We will have arrived at the point where a.) much of the population is dependent on governmental largesse and will riot if that largesse is withdrawn through austerity measures, but b.) the government can no longer borrow to provide such largesse because they have already run up such massive debts. This is the state Greece currently finds itself in.

Krugman writes: "By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity." The problem is that "the right time for austerity" never arrives. This is one of the major conceptual weaknesses of Keynesianism: Keynesians always talk about how the government will cut back on spending in countercyclical fashion once the good times have returned; but they neglect the fact that all their government spending will have created constituencies that will resist these spending cuts and that politicians will pander to in order to gain their votes.

Krugman tries to argue that the austerity programs being pursued in Europe and the United States are really strategems being used to eliminate the welfare state:

    So the austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America.

In reality, it is Krugman's drive for ever-increasing spending -- government stimulus spending during recessions and unabated government spending during boom times -- that is designed to make the people of America ever more dependent on their government. This may be able to go on a while longer. But eventually the government will exhaust itself and collapse beneath a mountain of debt.