When the history is written, I suspect the brutal budget battle transfixing the nation will be seen as much more than a spectacular partisan showdown. Careful historians will, I think, cast it as a symbolic turning point for post-World War II institutions — mainly the welfare state and the consumer credit complex — that depended on strong economic growth that has now, sadly, gone missing. The story behind the story is that prolonged slow growth threatens to upend our political and social order.The belief that we are doomed to a future of lower economic growth has become conventional wisdom in some quarters, backed up by a slew of recent studies; I wrote back in July about the work of Robert Gordon, one of the leaders of this school. The result of the economic slowdown, says Samuelson, is to make all our political choices tougher:
Economic growth is a wondrous potion. It encourages lending because borrowers can repay debts from rising incomes. It supports bigger government because a growing economy expands the tax base and makes modest deficits bearable. Despite recessions, it buoys public optimism because people are getting ahead. The presumption of strong economic growth supported the spirit and organizational structures of postwar America.
What looms — it’s already occurred in Europe — is a more contentious future. Economic growth serves as social glue that neutralizes other differences. Without it, economic and political competition becomes a game of musical chairs, where “one person’s gain is another’s loss,” [economist Stephen] King writes. There’s a “breakdown of trust,” as expectations are continually disappointed. It’s an often-ugly process that is convincingly confirmed by Washington’s current political firestorm.Well, maybe. Samuelson is a conservative in the sense he never thinks we have the money to do the things liberals want to do, like educate poor children; he didn't think we could afford such things back in the 90s, during the last boom, so of course he doesn't think we can afford them now. But if we restored tax rates to where they were under Clinton, we would have plenty of money for all our expenditures; or, failing that, we could slash the defense budget and stop fighting dubious wars. We don't do that for simple political reasons, because many Americans don't want to do them.
Our choices are hard because big choices are always hard.
Nor do we really know that we are in for a future of slowing economic growth. I have read such predictions during every recession of the past 35 years, and yet somehow we forge on. Who knows what emerging technologies like genetic engineering and cheap solar power may do for us? What if we succeed in controlling fusion power? The future is unpredictable, but one thing I would not expect is that it will be just what you would get from drawing all current trend lines out to infinity.