Kevin Hassett:  The Road to Serfdom meets the debt ceiling

Ordinarily you would not drive a motorcycle without a headlight down a narrow, winding mountain road at high speed on a dark, rainy night.  But you would do this if your child is dying and you need to fetch a doctor immediately.  Even sensible people take great risks to avoid an imminent catastrophe. 

Kevin Hassett, chairman of Trump’s Council of Economic Advisors, applies this logic to the debt ceiling in a post at National Review subtitled “Fiscal-policy brinkmanship might be the only thing that can save us from catastrophe”. 

Let’s look.  Here are some of Hassett’s key points:

Small-government conservatives have been outraged by our profligacy for decades, of course, but the stakes are getting very, very high. The fact is that if we don’t change the trajectory of our fiscal policy soon, we will inevitably suffer a Weimar Germany–style collapse of our currency. 

. . .

There is a way off this disturbing path to destruction, and that is to control spending now. 

. . .

But, if we are already set to out-borrow Weimar Germany and head for ruin, as the numbers clearly indicate, what’s the added harm from that risk?

The truth is that brinkmanship now is the only thing that can save us from catastrophe. My guess is that a Republican Party tough enough to put McCarthy through the wringer won’t lift the debt limit unless each additional dollar by which the debt limit is lifted can be guaranteed to produce many more dollars of reduced government spending in the future. The Democrats will accuse them of being irresponsible, but since it is far more irresponsible to run spending to 200 percent of GDP, Republicans will likely not cave. This will be a showdown for the ages.

Sounds like Hassett is getting ready to enjoy himself.  Good for him.  But let’s note a few wee difficulties with his argument:

  • The fiscal catastrophe we face is not imminent.  It is also not certain (“inevitably”).  If Armageddon arrives at all, it will be decades in the future.  There is no point driving down the mountain at high speed in the dark if your child a) may not really be sick at all and b) can safely wait until morning to see a doctor.
  • Engineering a debt default in 2023 will not keep spending and revenue in alignment over the coming decades.  And any cuts Republicans manage to ram through Congress this year in a debt ceiling showdown will almost certainly be trivial (except to the poor people who are likely to be the main targets), or gimmicky promises of future cuts, or they will be unpopular and reversed in future years.
  • Like essentially all Republicans and classical liberals commenting on the debt ceiling standoff, Hassett focuses only on spending cuts, not tax increases.  This anti-tax, anti-government extremism is the main obstacle to achieving a more balanced fiscal policy over the coming decades, assuming this is desirable.  Small government conservatives have no hope of persuading a sustainable majority of Americans to support large cuts in spending, partly because most spending is popular, and partly because conservatives have incinerated their fiscal credibility with reckless and regressive tax cutting.

Limited government is a conservative pipe dream.  Instead of using his conservative cred to talk truth to power, Hassett is encouraging the apocalyptic fears and fiscal self-righteousness that impedes realistic thinking and threatens to send us all over the (fiscal) cliff.  This deliberate recklessness will continue until conservatives make peace with the welfare state and endorse substantial tax increases to sustain popular programs in the years ahead.