A Medicine for Our Melancholy

Wednesday, January 12, 2011

You’ll always get a laugh with this announcement: “Trust me. I’m from the government and I’m here to help you.” The laugh, of course, is cynical. It signals the shared belief of speaker and listener that the government official who utters such a line has no clue how he is perceived by others.

This line could have provoked the same response at any point in our political history; such is the durability of our distrust. Naturally, whenever tales of corruption loom large, the government officials involved become the target for such cynicism. But today the loss of trust in our public institutions does not stem from fear of corrupt actions by this or that dishonest official. Rather, the weariness arises from the deep conviction that we should worry about conscientious government officials who are on a fool’s errand. Global confidence is down. News stories bear headlines about how “optimism fades,” or that “earnings are down,” or how even “the rich” are cutting back and tightening the belt. The American dream is under siege.

This uneasiness about public trust would not be news if it were confined to libertarians and other small-government types who resent any state intrusion into private affairs. But the public malaise runs far broader. It goes beyond the card-carrying libertarians who murmur before bed each night, “Those who govern best govern least.”

No, the current unease is rising among people who are comfortable with some substantial government role in providing jobs, supporting agriculture, subsidizing health care, financing education, or regulating banking. They have the visceral sense that things have gone too far. They are clearly fortified in their view by the chronic levels of unemployment that barely dip below 10 percent, in the face of an ill-conceived stimulus program that seems to have done nothing to improve overall productivity. And they are not amused when government pads its payroll with folks who don’t do much of anything useful.

Amid this skeptical public mood, each expansionist move of the Obama administration is like feeding sugar to a diabetic.

Behind the current disquiet lies an implicit marginal calculation that makes good economic sense. Much of the modern rhetoric, especially from the tone-deaf Obama White House, takes this form: “We did well with the previous increases in taxation and regulation, so why worry about the next round?” The answer is that too much of a good thing becomes a bad thing. Yet, like a bad genie once released from the bottle, big government is difficult to stuff back in.

Take, for example, higher taxes, some of which have been telegraphed in advance while others were hidden in the fine print of the new health care and banking regulations. Sure, we can stand some modest level of redistribution across classes. But as the higher taxes threaten the liquidity of capital markets or the willingness of current citizens to invest in new businesses, the large political middle becomes skeptical about these new reforms. That is why the uneasy acceptance of the initial Obama stimulus plan gave way to strong opposition to its extension.

None of these folks (like most of us so-called expert types) are confident that we can identify the optimal level of stimulus or wealth redistribution. But at the same time we can look at the dislocations in Greece, Spain, and Portugal, and the precarious financial situation in Great Britain a generation after Margaret Thatcher left office. Five years later, we could be in just that state.

Government officials have real clout. They can deny you permits, investigate your business, call you into their offices, look at your books, fine you, and send you to jail. Every piece of new legislation gives them more discretion over issues in which they have no comparative expertise. Unsurprisingly, every new piece of legislation erodes public trust in public officials.

The public malaise goes beyond the card-carrying libertarians who murmur before bed each night, “Those who govern best govern least.”

And so as big government gets still bigger, ordinary people’s confidence in its institutions grows weaker. That weakness reflects itself not only in a political resentment to the parties in power but in a gradual withdrawal from the market, manifested by a greater unwillingness to consume or invest. Amid this skeptical mood, each expansionist move of the Obama administration is like feeding sugar to a diabetic.

So what is the cure? The diffuse nature of our uneasiness means it cannot be satisfied by a small tweak in this tax subsidy or that statutory grace period. It needs a clear commitment to halt the lurch toward ever-bigger government. A clear majority of people favor smaller government, even if they do not favor small government. The political powers that ignore that shift in political climate do so at their peril.