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US Government Shutdown - The Roots of Discontent

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On the U.S. government shutdown, it can be hard to pick your way through the millions of words of blather and blame. For anyone who's still paying attention, there are deep roots to the problem.

First, we should all know by now that the shutdown is principally over an argument about Obamacare. I like what Anne Applebaum -- who herself worries about the costs and consequences of the legislation -- writes in Slate:

"The Affordable Care Act is the law, as confirmed by the executive, legislative, and judicial branches of our political system. A portion of one of those branches is therefore not now legally or morally empowered to change that law by holding other parts of the government hostage, no matter how strongly its members or their constituents feel" (Disclosure: Applebaum is a colleague of mine at the Legatum Institute).

I also find reasonable, though, what (friend) Gary Schmitt writes in the Weekly Standard:

"Certainly, a measure [Obamacare] with such profound implications for the country should have more support than a bare majority made up exclusively of one party." Schmitt continues: "the House's proposal to postpone the law's enforcement for a year should have been acceptable [to the President].

As a matter of fact, the shutdown happened because of Obamacare, and because President Obama is not a consensus builder. But it also happened because it's increasingly difficult to build consensus in an America that is becoming deeply partisan and dangerously polarised.
How did we get here?

Economist Tyler Cowen of George Mason University has written a new book titled "Average Is Over," which helps us understand. It's a startling statement about the hollowing out of the American middle class. Cowen depicts growing economic inequality, falling wages, and the shift of national product from labour to capital -- developments driven in large measure by technological change -- as trends that are quite possibly irreversible. Cowen says this new situation will produce "more wealthy people than ever before, but also more poor people, including people who do not always have access to basic public services." He continues: "One day soon we will look back and see that we produced two nations, a fantastically successful nation, working in the technologically dynamic sectors, and everyone else."

What Cowen is talking about is a fundamental re-definition of the American dream.

Economist Angus Deaton of Princeton University is concerned with many of Cowen's themes. In his new book on health, wealth and the origins of inequality (titled "The Great Escape"), Deaton observes that post-war history can be divided into two periods: "one with relatively rapid, widely shared growth and one with slower growth together with a growing gap between the poor and everyone else." The gap is widening at an alarming pace.

As for the well off, in Deaton's forecast a white, middle class girl born into decent circumstances today has a 50-50 chance of living to a hundred years old (compared to her great grandmother who, born in 1910 let's say, had a life expectancy of 54 years). We live in an era of breakneck development and innovation. That's progress. The dark side, though, is obvious: the emergence of a new plutocracy that motors ahead while leaving the less fortunate behind.

To be clear: Deaton advocates policies that promote vibrancy and wealth creation and is keen to emphasise that redistribution doesn't solve the problem. But he's far from espousing anything akin to anti-state libertarian slogans either. It's not acceptable, he writes, for the new winners of today's economy to pull up the ladders behind them. They may use their wealth, he warns for instance, "to influence politicians to restrict public education or health care that they themselves do not need."

Which brings us to the roots of the shutdown. It's hard not to see an America of widening gaps: between Democrats and Republicans, red states and blue; between a well-positioned meritocracy and another class that, for myriad reasons, is falling behind. Socialism doesn't work; yet markets don't sort everything. We've been here many times before, but this time the plot seems more complicated, the stakes higher.

Which is why another gap is exceptionally dangerous. That's the gap between researchers like Cowen and Deaton -- who are endeavouring to identify trends, uncover roots and contemplate serious solutions -- and our politicians who seem caught up in the zeitgeist of our time. An increasing number seem intent on smash and grab short-termism. Public policy discourse is mindlessly simple, choices binary. It has become rule not exception to vilify your opponent and seek profit from populism and pandering.

The US government will re-open. But the toxic roots of the problem will remain.