We're Winning

The tropes that the president used in his deficit speech Wednesday were the kind of tired talking points that you expect when you go to a liberal dinner party--any time this past 20 years.

You know how it goes. The debt problem started in the 1980s. Then "our leaders came together three times during the 1990s to reduce our nation’s deficit" so that in 2000 the nation's finances were in great shape. But then "we lost our way in the decade that followed. We increased spending dramatically for two wars and an expensive prescription drug program -– but we didn’t pay for any of this new spending."

Actually he's right. And the reason is that Republicans, following thinkers like Irving Kristol, have come around to the view that they shouldn't be the tax collectors for the welfare state. Our view is that welfare state spending all goes to Democrats, so let the Democrats raise the taxes to pay for it. On this view, the Bush 41 tax increases were a disastrous mistake, and the Bush 43 tax cuts a brilliant move.

Because now Obama is stuck with an unaffordable welfare state and he is the guy that has to start reining it in. Only he won't do it.

Now we learn that the supposed spending cuts agreed between the House Republicans and the president, the $38 billion, are in fact a mere $300 million or so. This is supposed to be an embarrassment to the Republican leadership and so it is, but it merely raises the stakes. At some point we have to cut spending and that means that the Democrats are going to scream blue murder.

Of course the centerpiece of the president's speech was the Medicare paragraph.

We will change the way we pay for health care -– not by the procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. And we will slow the growth of Medicare costs by strengthening an independent commission of doctors, nurses, medical experts and consumers who will look at all the evidence and recommend the best ways to reduce unnecessary spending while protecting access to the services that seniors need.

He's talking about the payment commission that will set rates for procedures. It's one of the "death panels" that Sarah Palin was talking about. At least the president is consistent. He believes in the liberal myth of administrative centralism, the reduction of social cooperation to bureaucratic rules and ukases.

Ninety years ago, an Austrian economist, Ludwig von Mises, showed by administrative centralism does not work. It cannot compute prices. Prices are the means by which we allocate resources, by which any society allocates resources beyond the boundaries of the family household. If you suppress prices, in a socialist state or in a government bureaucracy, you cut yourself off from knowledge about the use of resources. Then Mises' student F.A. Hayek extended the analysis. He wrote that the man in Whitehall (the seat of British government) could never make decisions that out-performed the millions of ordinary consumers and businesses making day-to-day decisions about millions of products and services. The government bureaucrat just couldn't know more than the millions of economic actors.

Our liberal friends have tried now for nearly a century to deny these dicta. That's because the logic of government power is always the power of the politician to allocate resources to favored political clients and away from less-favored clients. But every political act in the economic sphere is a net loss to society, because it is almost certain a less-than-optimum decision when compared with the decisions of producers and consumers. So the president's policy of administrative centralism is bound to fail.

President Obama made a mistake in making his speech yesterday. Any poker player could tell you why. His shrillness was a "tell" that he is losing the argument.

In fact the president is already behind the 8-ball. To get out of the present deficit spiral the federal government is going to have to implement some pretty severe spending cuts, and spending cuts are bound to fall on the president's own supporters.

But first the president wants to get reelected.

We're not actually winning, not yet. But the president is on defense, and Republicans are moving the ball downfield.

The big test will be the goal-line stand when the welfare-state beneficiaries realize that the cuts are real and the unions and the community organizers put them into the streets to demonstrate their rage. Then we shall see.