Today we are living in an era of indebtedness. Over the past several years, society has oscillated ever more wildly though three debt-fueled bubbles. First, there was the dot-com/Y2K bubble. Then, in 2008, the mortgage-finance bubble. Now, we are living in the fiscal bubble.
In this country, the federal government has borrowed more than $6 trillion in the last four years alone (plus $3 trillion more on the Fed's balance sheet) trying to counteract the effects of the last two bubbles. States struggle with pension promises that should never have been made. Europe is on the verge of collapse because governments there can’t figure out how to deal with their debts. Nations around the globe have debt-to-GDP ratios at or approaching 90 percent — the point at which growth slows and prosperity stalls.
It all goes back to the increase in the tolerance for debt.
Democrats and Republicans argue about how quickly deficits should be brought down. But everybody knows debt has to be restrained at some point. The problem is that nobody has been able to find a political way to do it.
The common view among politicians is that pundits may rail against debt, but voters don’t actually care. Voters don’t want to face the consequences of their spending demands. They’ll throw you out of office if you make the tough decisions required to cut deficits. That’s why debt mounts and mounts. Voters want it to.
Until maybe today.
Voters in Wisconsin went to the polls to decide whether to recall Gov. Scott Walker. I’m not a complete fan of the way Walker went about reducing debt. In an age of tough choices, one bedrock principle should be: We’re all in this together. If you are going to cut from the opposing party’s interest groups, you should also cut from some of your own. That’s how you build trust and sustain progress, one administration to the next.
Walker didn’t do that. He just sliced Democrats. But, in the real world, we don’t get to choose perfect test cases. And Walker did at least take on entrenched interest groups. He did turn a $3.6 billion deficit into a $150 million surplus, albeit with the help of a tax collection surge. He did make it possible for willing school districts to save money on health insurance so they could spend it on students.
Walker’s method was obnoxious, but if he is recalled that will send a broader message, with effects far beyond Wisconsin. It will be a signal that voters are, indeed, unwilling to tolerate tough decisions to reduce debt. In Washington and in state capitals, it will confirm the view that voters don’t really care about red ink. It will remove any hope this country might have of avoiding a fiscal catastrophe.
On the other hand, if Walker wins today, it will be a sign, as the pollster Scott Rasmussen has been arguing, that the voters are ahead of the politicians. It will be a sign that voters do value deficit reduction and will vote for people who accomplish it, even in a state that has voted Democratic in every presidential election since 1984.
A vote to keep Walker won’t be an antiunion vote. It will be a vote against any special interest that seeks to preserve exorbitant middle-class benefits at the expense of the public good. It will tell the presidential candidates that it is safe to get specific about what they will do this December, when hard deficit choices will have to be made.
President Obama has hung back from the Wisconsin race. I’m hoping that’s not crass political opportunism but an acknowledgment that governments do have to confront their unaffordable commitments. Mitt Romney has been more straightforward, but even he hasn’t campaigned on the choices he would make. If Walker wins, the presidential candidates would have to be as clear before their election as Walker has been after his.
The era of indebtedness began with a cultural shift. It will require a gradual popular shift to reverse. The Wisconsin vote might mark the moment when the nation’s long debt indulgence finally began to turn around.
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