Back in that summer of discontent I talked to a journalist who was very concerned about the “dysfunction” in Washington. So am I. But I told her then what’s still true today: that the real problem is not the dysfunctional processthat’s getting all the headlines, but the dysfunctional substance of governance. Congress and the president will work out the debt ceiling issue, probably just in the nick of time. The real dysfunction is a federal budget that doubled in 10 years, unprecedented deficits as far as the eye can see, and a national debt (more accurately, gross federal debt) yet again bursting through its statutory limit of $28.4 trillion and soaring past 120 percent of GDP, a level previously reached only during World War II.
We’ve become so used to these unfathomable levels of deficits and debt—and to the once‐rare concept of trillions of dollars—that we forget how new all this debt is. In 1981, after 190 years of federal spending, the national debt was “only” $1 trillion. Now, just 40 years later, it’s more than $28 trillion. Traditionally, the national debt as a percentage of GDP rose during major wars and the Great Depression. But there’s been no major war or depression in the past 40 years; we’ve just run up another $27 trillion more in spending than the country was willing to pay for. That’s why our debt as a percentage of GDP is now higher even than during World War II.
Additionally, broader labor shortages arising from the payment of Federal unemployment bonuses have been impacting every link in the international logistical chain. “Many companies,” Business Insider reported, “have fewer workers [now] than before the pandemic started but face significantly more work due to the boom in demand for goods.”
Walter Williams, the great African-American economist who died last year, once said: “Most of the great problems we face are caused by politicians creating solutions to problems they created in the first place.” Sadly, his aphorism holds true across most ages and most nations.
For some reason, this argument is habitually dismissed as “dogmatic” or “ideological”. People who oppose price controls, rent controls and other forms of economic dirigisme are painted as doctrinaire Thatcherites, more interested in the sanctity of contract than in the welfare of the masses.
In fact, it is the other way around. Free-marketeers hold beliefs that seem counter-intuitive but that turn out to work in practice. Most people, coming new to the subject, assume that lower prices are a way to help the poor – or, at least, to ensure that resources are not monopolised by a few oligarchs. But the most cursory study of history shows that the opposite is true. Price-fixing causes shortages, making everyone worse off – though the rich are usually more able to find ways around the rules.
The story of capitalism is the story of the progressive enrichment of ordinary people through falling prices. Specialisation and competition mean that goods and services become cheaper, thus allowing people to live at a higher standard while working shorter hours. As the great economist Joseph Schumpeter observed in 1942, “the capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.”
Mark Perry rightly applauds UCLA lecturer Gordon Klein who is courageously resisting the mindless and illiberal evil that is the institutionalization of the push for so-called “diversity, equity, and inclusion.”