After all, we’re hearing now of a ‘fiscal stimulus’, that the government must borrow and spend in order to re-start the economy in the bad years. But the converse is that it should be running a fiscal surplus – bringing in more money than it spends, and paying off debts – in the good years. And that almost never happens, for political reasons.
The obvious explanation is some form or another of “to be politically acceptable to everyone, governments must spend more than they raise”. Everybody wants a bit of extra money, nobody wants higher taxes.
Now on the face of it, that sounds like a typical example of voters being stupid (I’ll focus on voters, though they’re not the only ones exerting influence for more more money money). It’s rather like the residents of springfield, who in one episode, having seen a bear wonder into town and then wonder out again, march with pitchforks on the town hall twice, first demanding a high-tech “Bear Patrol”, and then demanding to not be made to pay the “Bear Tax” introduced to fund it.
And in a certain sense, of course, demanding more spending than can be funded clearly is irrational, in that it’s impossible: the money will have to be payed eventually, only with interest.
But I think nevertheless it might well be reasonable. Let me explain what I mean.
What sorts of things will influence the level of state spending that a person considers appropriate? One major factor, surely, will be the perceived social wealth. If I look around every day and I see signs of prosperity, high-quality goods, lots of money being spent, etc., I’ll get a higher impression of what that mythical “we” are capable of.
And then when someone points out to me the various cataclysms and tradegies that afflict the world, the homelessness and poverty and disease and hunger and so forth, I will naturally be more inclined to feel an indignant demand that “something” “be done”.
On the other hand, what sorts of things will influence the level of taxes that I’m willing to accept paying? Perhaps one factor – though clearly not one that is wholly uncomplicated – is my perceived personal wealth. If I see that I personally am still struggling to get X, worried about Y, and unable to do more than dream of Z, then this will make me less inclined to support some agency somewhere taking away even more of my money. This will be especially so if I also feel that my money is comparatively hard-earned – a function of the ratio between how often, in earning it, I thought ‘God I don’t want to be doing this right now’ and how often the perceived average person thinks that.
Now that suggests that one reason why people vote for – indeed demand – more state spending than they are willing to finance in taxes is a disconnect between a perceived high social wealth, and a perceived low (or hard-earned) personal wealth.
Under what circumstances would this disconnect occur? It would occur if most people were exploited, i.e. if the wealth they created, or which their ancestors left to society, were appropriated by others, so that they personally end up with a deficient slice of social wealth. Which is, of course, the natural situation of a class society, such as capitalism.
Is such an expectation unreasonable? I don’t think so. It’s irrational in the sense that it’s not going to happen, it’s out of touch with reality. But I don’t think it’s out of touch with good sense and appropriateness.
Because what does it mean that people demand this? It means that they demand that the social wealth extracted from them be spent on sensible and important things. What does it mean that this is impossible? It means that capitalism is unreasonable. And this is precisely what social democratic governments are trying to conceal from people.
And so what does it mean that people are ‘irrationally’ demanding this squaring of the circle? It means that people are demanding that capitalism serve humanity well, which it cannot, but which they are being told it can. Their demand is a reasonable one, and their error is simply their illusion in capitalism.