David Gergen has written a piece decrying the lack of leadership on the debt-deficit “crisis” and calling for a new Churchill. David Gergen, who saw no problem working for both Ronald Reagan and Bill Clinton, now teaches at the JFK School of Government at Harvard. He has a claim to being a member of the political establishment if anyone has.
This call is not confined to Gergen, however. It appears as a widely agreed-upon diagnosis in the news media, whether old or new. It is the conventional wisdom of the day.
Yet it is dangerously superficial. It completely misdiagnoses the problem before us.
It is no accident that the current political impasse exists. It is the direct result of the vast expansion of government that has occurred in recent decades. It also echoes the discussions of comprehensive economic planning that took place during the Depression and post-World War II periods.
The Führer (Leader) Principle predates the National Socialist regime in Germany. It is not a specifically Nazi concept. In fact, such people as the socialist Harold Laski argued in the early 1930s that ordinary parliamentary procedures would not work to produce comprehensive planning (as Sidney and Beatrice Webb had also argued in the 1880s). No one would consider these people Nazis.
The essence of the idea is that the leader’s word (command) is law or, more exactly, it is the highest law. It can overcome the incompetence or deadlock of the legislative body to agree on a program for economic revival, reform or planning.
Now in its extreme form the leader issues decrees and all follow. In a less extreme form, a strong leader suppresses dissent from his vision or plan by his direct relationship with the people or commanding personality and pushes the edge of what is technically legal. In America President Franklin D. Roosevelt might be a good example. More generally, however, the centralization of power in the hands of the executive and executive-controlled agencies is part of the phenomenon. Certainly in the area of foreign policy and war-making the Führer Principle is alive and well.
It is no accident that the calls for leadership bring up examples of war leadership (e.g., Churchill). During war – usually major wars – people perceive the survival of the nation is at stake. They unite temporarily in the war effort because everyone believes that their interests are served by victory. (This is not to ignore the free-rider and corruption issues that arrive in war economies.)
In the war economy there is an unambiguous hierarchy of values among the people that has victory as top priority. However, this widespread agreement does not extend to ordinary collective decisionmaking about the allocation of resources including decisions about government spending, tax rates, and distribution of burdens.
The lack of agreement implies that legislative bodies will find it difficult to reach consensus or to compromise on priorities. The more extensive the planning governments seek the more and deeper will be the conflicts among individuals. As a result, there arise cries that the legislature is a mere “talking shop” and that we need a strong leader to get things done.
This argument was made by Friedrich Hayek in his 1944 book, The Road to Serfdom. (See the quotation in the note at the end of this post.)
Hayek was talking about comprehensive economic planning. How does what he said relate to our problems today?
We are facing the problem Hayek saw in reverse. Over the years, issue-by-issue, law-by-law, expansion-by-expansion, a whole complex of welfare-state and regulatory interventions has accumulated. Many of these may have started out with broad public support but there were accretions over the years supported and maintained by special interests. Reforms were delayed because interests became entrenched after the laws were passed.
Most importantly, there was a negative externality at work. No one was responsible for (or internalized) the cumulative effect of the legislation on the overall fiscal situation. Each law at the time of passage, or each expansion of a program, made only a small negative contribution. The advocates of each program could ignore the particular consequences of their policies. The fiscal consequences of particular programs would be spread over large numbers of Americans and not just their advocates. What was rational for some was rational for all. Thus, the current situation is the aggregate result over many programs and many years.
Now, however, we face a general fiscal crisis. According to the economist Lawrence Kotlikoff, the “fiscal gap,” that is, the difference between the present value of federal government expenditure commitments and projected tax revenues is currently $211 trillion. While we can debate precise assumptions, by any reasonable measure it is quite extraordinary.
To solve this problem the government must take a look at the big picture. It must reduce spending and “adjust” taxes in a comprehensive and long-term manner. It must have, in a sense, a comprehensive plan. To be sure, it need not be as all-encompassing as would be required by a centrally planned economy. Yet the comprehensiveness exceeds what can be agreed upon. We do not have a sufficiently common hierarchy of welfarist values.
Which group or program gets cut? By how much? Whose taxes get raised? By how much? The Congress, we are told, is incapable of coming up with a grand bargain. Thus, we need a strong leader. We need a Churchill or FDR to clear away the encumbrances of legislature wrangling and procedural slowdowns.
This problem is the result of government previously exceeding the limits of the true general-welfare or minimal state and developing, in a case-by-case manner, into an unsustainable welfare-state Leviathan. This is the outgrowth of the “non-ideological” or “pragmatic” approach to policy making: finding specific problems and coming up with specific programs with no thought of the overall world we are producing.
The solution to this problem may now actually require further centralization of power to the executive branch and a diminution of legislative control. On the other hand, perhaps the Congress could successfully delegate power, as it proposes to do, to a “super legislature” or committee to bind its actions. When it comes to the point that each interest group has more to lose by resisting change than by agreeing to it, compromises will be reached. That may take a while.
But what kind of change?
If the lesson is that when government becomes too large and has too wide a scope, it goes beyond the common hierarchy of values that exists, then certain kinds of change would be a mistake.
I suggest that, for example, increasing taxes to shrink the deficit simply makes the current size and scope of government more sustainable in the short run. This delays the adjustment. I conjecture that it is not sustainable in the long run because people will not want to pay higher taxes to support what they believe are a scope or depth of government beyond the social consensus.
From F.A. Hayek, The Road to Serfdom (definitive edition), p. 104:
“It may be the unanimously expressed will of the people that its parliament should prepare a comprehensive economic plan, yet neither the people nor its representatives need therefore be able to agree on any particular plan. The inability of democratic assemblies to carry out what seems to be a clear mandate of the people will inevitably cause dissatisfaction with democratic institutions. Parliaments come to be regarded as ineffective “talking shops,” unable or incompetent to carry out the tasks for which they have been chosen. The conviction grows that if efficient planning is to be done, the direction must be “taken out of politics” and placed in the hands of experts–permanent officials or independent autonomous bodies.”