Santa Claus is now the patron saint of American politics
When I was a boy, like most children, I could barely fall asleep on Christmas Eve knowing that when I woke up our Christmas tree would be surrounded by gifts from Santa. As much as I loved Christmas, as much as I wished every day was Christmas, with Santa Claus coming down to our fireplace and giving me lots of free presents.
This now describes US policy. Each party competes to win votes by offering the gifts. The more the better.
Democrats now promise free health care, free college education (and the elimination of all student loans), free child care, discounted public transport and housing, wage subsidies for tens of millions of workers and tax credits if you have children.
But as the famous American television infomercial puts it, “but wait, there’s more”. If you order now, we’ll even lower your taxes as long as you don’t make more than $ 400,000 per year. That is what the $ 3.5 trillion Senate and House of Commons spending bills promise.
Not to be outdone, Republicans say their Santa Claus is better. Instead of Uncle Santa selecting the gifts you receive (and not giving them to the naughty kids of people who for one reason or another don’t qualify for the programs), Republican Santa just fills your stocking. money – in the form of tax cuts. Yahoo.
None of this would matter if the US government had made the necessary investments in the future and paid off its massive national debt. But he did neither.
Federal R&D funding as a percentage of GDP is lower than it was before Sputnik. Federal funding to help struggling cities rebound economically is 50 times less than it was four decades ago. And the US national debt now exceeds $ 28 trillion, or more than 100% of annual GDP. Compare that to Korea’s 45% of GDP.
Most Democrats don’t care about the national debt anymore because they have embraced modern snake oil monetary theory, which argues that the government can simply print money endlessly.
Republicans still remain in the grip of the equally flawed economic theory on the supply side, that tax cuts are the key to stimulating growth and even raising government revenues (the so-called theory of Laffer’s curve). So both parties can embrace Santa’s economy as they please.
It doesn’t help that while the two sides vie to be the best Santa Claus, most Americans are kids on Christmas morning. Few voters want a lump of coal in their socks; they want either cash or overflowing gifts.
For example, even though the federal tax on gasoline used to pay for highways is less than half of its value today than in 1994 (in inflation-adjusted dollars), a large majority oppose at any rate increase. In contrast, nearly two-thirds of Americans support free tuition. Why not, they don’t pay for it; the next generation is.
The reality is, most Americans are about as rational about budget, spending, and taxes as 8-year-olds are on Christmas morning.
Nearly 80% of Americans are concerned about the decline in the state of America’s infrastructure, but a significant majority would not support higher taxes to pay for infrastructure or finance infrastructure through debt. Maybe they think Santa Claus will pay for it.
No one wants to be Ebenezer Scrooge and demand spending cuts and tax increases; it is a road to political oblivion. So voters keep yearning for Santa Claus and politicians keep playing Santa Claus.
The problem, of course, is that America must not only reduce its national debt which at some point will turn into a national crisis with all the economic carnage that goes with it – it must dramatically increase investments in the factors that will lead to it. future Economic growth and competitiveness of the United States, especially vis-à-vis China.
This means much more funding for a cutting-edge industrial and technological strategy in the United States, including supporting applied research, manufacturing innovation, the relocation of advanced production, and tax incentives to invest in R&D and new machinery and equipment.
And this can only happen by raising taxes, not just on the rich and corporations (the latter will likely reduce the competitiveness of the United States) and by cutting spending (which is different from investing in this sense. that it does not lead to future growth).
But as long as the United States persists in Santa’s economy, the chances of such an investment at the necessary levels are slim. America will continue to struggle, hoping that only the private sector can be the engine of growth.
But at a future date, Santa will come down the chimney, carrying only charcoal for everyone’s storage, as there is no more money at the North Pole to make the presents.
Robert D. Atkinson (@RobAtkinsonITIF) is President of the Information Technology and Innovation Foundation (ITIF), an independent, non-partisan research and educational institute that focuses on the intersection of technological innovation and public policy .