Philip Pilkington, in an piece taking issue with the tepid review of the future of capitalism in The Financial Times, remarks:
WWII gave politicians and policymakers the gall to unbalance the budget sufficiently to restore the economy. It also gave them the space to rejig the taxation system in a way that made it far more sustainable. If anyone objected, well, they were moving against the war effort, anti-patriotic and hence excluded from the debate.
What lessons should be taken from this? Quite simple ones. Democratic capitalism is a deeply dysfunctional, perhaps even suicidal system. In the good times capitalists and financiers gain ever more power to influence politicians and, after a brief retreat when crisis occurs, they continue to hold this influence when the deflationary pressures set in. Meanwhile, the policymakers convince themselves that the government budget is the same as a household budget – and in this are supported by numerous economists. This leads to a sort of ‘perfect storm’ situation where the budget deficit becomes the main issue of the day and all else is ignored, including the declining economy.
George W. Bush and Barrack Obama never asked Americans to make the requisite revenue sacrifices to realign the economy to sustainability the way FDR did. Instead, they convinced themselves and those too ignorant to pursue the truth, that we can cut our way to prosperity. Western democracies are being led by poll watchers, not leaders. Men and women, on both sides of the aisle, pander to the know-nothings who think that tax cuts lead to prosperity, deficits are always bad, and why can't the government balance their budget?
The treasury is not at all like your checkbook, you fools. Balance is not necessarily a good thing.
The unnecessary pain inflicted upon us when leaders obsess over debt and deficit is just stupid. We're clearly too dumb as a nation (or perhaps a species) to learn from our history or from the data.