This concentration of rent seekers is one reason why five of the seven wealthiest counties in the nation border on Washington, D.C., and also why the average income for the District of Columbia’s top 5 percent of households exceeds $500,000, the highest among major American cities. Washington is among the nation’s most unequal cities as measured by the income gap between the wealthy and everyone else. Those wealthy individuals did not descend upon the nation’s capital in order to redistribute income to the poor, but rather to secure some benefit to their institutions, industries, and, incidentally, to themselves. They understand a basic principle that has so far eluded progressives: the federal government is an effective engine for dispensing patronage, encouraging rent seeking, and circulating money to important voting blocs and well-connected constituencies, but not so effective at redistributing income.
James Madison wrote in The Federalist that the possession of different degrees and kinds of property is the most durable source of faction under a popularly elected government. Madison especially feared the rise of a redistributive politics in which the poor might seize the reins of government in order to plunder the wealthy by heavy taxes. He and his colleagues introduced various political mechanisms—the intricate system of checks and balances in the Constitution, federalism, and the dispersion of interests across an extended republic—to forestall a division between the rich and the poor in America and to deflect political conflict into other channels. While Madison’s design did not succeed in holding back the tide of “big government” in the twentieth century, it nevertheless proved sufficiently robust to frustrate the aims of redistributionists by promoting a national establishment open to a boundless variety of crisscrossing interests.
The ingrained character of the American state is unlikely to change fundamentally anytime soon, which is why those worried about inequality should abandon the failed cause of redistribution and turn their attention instead to broad-based economic growth as the only practical remedy for the sagging incomes of too many Americans, and the only reliable means of averting a political upheaval that could easily bring down America’s postwar order.
America’s Shattered Consensus
In the excited aftermath of the 2008 election, many pundits saw Barack Obama as a liberal messiah who would inaugurate a new era of liberal reform and cement a Democratic majority for decades to come. He was predicted to become a Franklin Delano Roosevelt or perhaps even an Abraham Lincoln for our time. The pundits were not alone in saying this: Obama himself said much the same thing.
These forecasts sounded grandiose at the time, and today, more than six years into the Obama presidency, they seem more than a little foolish. In contrast to 2008, Obama now looks less like a transformational president than like a typically embattled politician trying to keep his head above water against a mounting wave of opposition. Extravagant hopes have given way to a struggle for survival. Few still believe that Obama will lay the foundations for a new era of liberal governance. Some observers are pointing toward a more surprising outcome: that Obama, far from bringing about a renewal of liberalism, is actually presiding over its disintegration.
Whether or not that turns out to be so, it is clear in retrospect that President Obama and his supporters were kidding themselves in thinking that his election marked the start of a new era in American life. In fact, the reverse is true: Obama came to power near the end of an era, at a time when America’s postwar system was beginning to come apart under the weight of slowing economic growth, mounting debt, the rising costs of entitlement programs, and a widening polarization between the two main political parties. The consensus that sustained that system had been fraying for decades. A new president taking office in the midst of the most serious financial crisis since the Great Depression might have tried to repair that consensus by seeking compromises to address the challenges of growth, debt, and entitlements. President Obama instead did something very nearly the opposite. Believing that he was elected to bring about “change,” he exploited a temporary partisan supermajority to push through an expensive new health-care program while doing little about the long-term problems that have the potential to bring down the nation’s tottering system of governance. He placed more burdens on the system when the urgent task at hand was to shore up its foundations.
One consequence of Obama’s tenure has been to fray the postwar consensus beyond the possibility of repair. There is no longer enough agreement in the American polity to address any of the nation’s systemic problems before they escalate to the point of crisis. When it comes, the next crisis—whether in the form of a recession, a stock market collapse, a terrorist attack, or some combination of the above—will force Americans across the board to adjust to a lower standard of living and the various levels of government to renegotiate the promises made to seniors, students, government employees, and the various individuals and groups that rely on public subsidies. Americans will then be compelled to organize a new system of governance on the remnants of the postwar order, one that can generate the kind of growth and dynamism to support the way of life to which they have become accustomed. Failing that, they will watch their country cease to be a high-functioning nation-state and world superpower.
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The aim of this book is to make sense of the rise and decline of America’s postwar political order. To a great degree, it is a tale of the rise and decline of the consensus that evolved in the 1940s and 1950s around the role of the federal government in maintaining full employment at home and containing communism and promoting freedom abroad. That consensus seemed so strong and durable during the 1950s that many historians and political analysts thought it was a permanent feature of American life. It came under heavy attack during the 1960s from student protest movements on the left and from the new conservative movement on the right. It held together, barely, during the Reagan and Clinton years in the 1980s and 1990s, but since then it has come apart altogether. This is evident in various arenas of American life, from politics to higher education and even the world of philanthropy. Parts II and III of this book examine the rise of the postwar dispensation and the centrifugal forces that developed against it in the 1960s, including the Kennedy “legend” that formed a counternarrative to the consensus view of American society.
A major theme of this book is that unsettled transitional periods of the kind we are now living through have happened before in American history—in the 1850s and 1860s, for example, and later in the 1930s and 1940s. In each period, an old order collapsed and a new one emerged out of an unprecedented crisis; and in each case, the resolution of the crisis opened up new possibilities for growth and reform. No particular consensus or set of political arrangements can be regarded as permanent in a dynamic country like the United States.
The political economy of American capitalism has evolved in distinct chapters, not in cycles or in an orderly sequence as Marxists or developmental theorists would have it. Part I elaborates on this theme, especially in “America’s Fourth Revolution.” The United States has had three such chapters in its history: (1) the Jefferson-Jackson era stretching from 1800 to 1860, when slavery and related territorial issues broke the prevailing consensus apart; (2) the capitalist-industrial era running from the end of the Civil War to 1930, when the regime collapsed in the midst of the Great Depression; and (3) the postwar welfare state that took shape in the 1930s and 1940s and extends to the present, but is now in the process of breaking up. Each of these regimes accomplished something important for the United States; each period lasted roughly a lifetime; and each was organized by a dominant political party: the Democrats in the antebellum era, the Republicans in the industrial era, and the Democrats again in the postwar era. The first two regimes fell under vastly different circumstances: the sectional conflict was a crisis of America’s constitutional system, while the Great Depression was a crisis of capitalism.
The postwar order emerged out of the twin crises of the Great Depression and World War II, and it represented something new in the unfolding history of American democracy. In terms of prosperity and world influence, this era was probably the most successful period in America’s national history. The postwar consensus took some time and political effort