Ed Driscoll

'The End of the New Deal Order'

At the Weekly Standard, Matthew Continetti has a tremendous article that’s well worth your time. He begins with the arrival of a young William L. Shirer to Paris in 1925, the capital of a nation that had recently concluded one World War, and as Shirer would go on to document in his most famous book, would be engulfed in another within 15 years. The 20 year interregnum in-between would see change in Europe moving at a breakneck pace, of the worst kind imaginable. But during the mid-20s, the more perceptive thought they could discern remarkable signs of hope on the Continent that a new progressive era would bring enlightenment, and with it, the necessary peace so vital after the “The War That Will End War,” as H.G. Wells put in the previous decade.

Similarly, Continetti writes, “Imagine a foreign journalist arriving in Washington, D.C., on New Year’s Day 1998. He, like Shirer in 1925, would have been visiting the capital of a global power in the midst of a golden age:”

 Having won the Cold War, America was at peace. It was the “indispensable nation.” With the takeoff of the Internet, the economy was booming. The approaching millennium brought technological progress and optimism about the future. American culture, for better or worse, permeated a unipolar world.

Within weeks of his arrival, though, our journalist began to observe an incredible train of events. Over the next 12 years he would watch as America experienced its first presidential impeachment since 1868, the most controversial presidential election since 1876, the deadliest terrorist attack in our nation’s history and worst attack on American soil since 1941, and the largest financial crisis and deepest recession since the 1930s.

He watched as the American military toppled regimes in Afghanistan and Iraq in a matter of weeks, only to spend years of conflict in those bloody lands. He watched as the federal budget relapsed from surplus to jaw-dropping deficit, as debts piled up and threatened to suffocate the economy, as American bonds lost their AAA rating for the first time ever.

He watched the promise of his first days in this country evaporate. A series of bubbles burst before his very eyes: the tech bubble, the mortgage bubble, the sovereign debt bubble. The churn and froth corroded Americans’ faith in institutional authority. The presidency seemed to hold few answers. Bill Clinton was a political adept but a moral lout. George W. Bush was a decent man, but he mismanaged the wars on which he staked his reputation. Barack Obama was debonair but clueless.

The political consequences were dramatic. The foreign journalist’s jaw would drop whenever he analyzed congressional election results. He couldn’t believe how American voters continually redrew the electoral map in such unpredictable ways. The 1998 midterm elections were the first since 1822 in which the nonpresidential party failed to gain seats in the sixth year of a president’s term. The 2002 midterms, on the other hand, were the first since 1934 in which the president’s party gained seats in the second year of his term.

The 2006 midterms saw the best performance for House Democrats since 1974, the lowest number of House Republican freshmen since 1911, and unified Democratic control of Congress for the first time in 12 years. But the Republicans came storming back in 2010, gaining more House seats than in any election since 1938, their largest share of the House popular vote since 1946, and more seats in state legislatures than in any election since 1928. There was a growing sense that yet another wave election would crash into the nation’s capital in 2012. The results were so bipolar that what the American public needed most, the journalist thought, was a dose of lithium.

By the time 2011 rolled around it was clear that America was experiencing fiscal, institutional, and spiritual crisis. No one could doubt any longer that the federal budget was unsustainable. Both Republicans and Democrats saw the projections from the Congressional Budget Office: Left alone, entitlement spending would drive the national debt to multiples of GDP under which no economy can function.

Both Republicans and Democrats read the headlines from Europe, where governments in Greece and Ireland were experiencing something like debt slavery, with depressed economies incapable of paying off creditors. Members of both parties understood that the European Union faced a choice between tighter fiscal and political integration and disintegration. They watched as neighborhoods of London and other English cities were convulsed in rioting. The impassioned and embittered fight over raising the debt ceiling left even President Obama aware that his presidency would be judged partly on whether he could tame government spending. Through all the kicking and screaming, it was increasingly apparent to anyone with eyes to see that the looming threat was national insolvency and the end of the dollar as the world’s reserve currency.

Even so, the debt was only one aspect of a larger problem that threatened to undermine the very premises of the welfare state: a collapse of confidence in the institutional structures of American life. FDR’s vision required capable managers to administer the rights and benefits government “accorded” to individuals. But such competence was being exposed as mythical. The Federal Reserve seemed impotent. The judiciary was aloof and ideologically riven. The U.N., NATO, the EU, and other multilateral organizations appeared to be anachronisms.

The regulatory arms of the federal government were dysfunctional. From the asleep-on-the-job FAA to the let’s-put-jobs-to-sleep NLRB, the bureaucracies worked at a remove from, and often at cross-purposes to, the everyday concerns of Americans. The country’s transportation and energy grids were in desperate need of maintenance. Congress was far more unpopular than the president.

Just as the examples of institutional failure were multiplying, however, the government gathered more power to itself. The dramatic consolidation of state power that began with Washington’s response to the financial crisis in late 2008 did not stop until the 2010 elections. And the elections only halted the expansion. They didn’t roll it back. The Supreme Court directed the EPA to regulate carbon emissions throughout the country. The Dodd-Frank financial bill gave regulators vast discretion over markets.

Obamacare handed the Department of Health and Human Services—and a bewildering array of new boards and commissions—one-sixth of the economy. The government used its financial stake in the auto industry to reshape the innards of your Chevy. AIG and Fannie and Freddie were kept on life support, apparently in perpetuity. Health care, finance, autos, housing, even diet—nothing seemed beyond Leviathan’s reach.

Read the whole thing, which concludes with Continetti’s imaginary journalist reflecting “on the prospects of the American welfare state. He asked how it could possibly keep the promises it had made. He pondered how long a political system could function without the public trust. He meditated on the strengths and weaknesses of the New Deal order. And he wondered: What comes next?”

And similarly, how ugly will it get for the nation along the way?