Gregg Easterbrook

Washington, D.C., is the world capital of phony. Even by Washington’s low standards, the Stanley McChrystal “scandal” now in progress gives phoniness a bad name.

Yes, General McChrystal showed poor judgment in making impolitic remarks on-the-record. But most of what the general said was simply being honest about the shabby aspects of government administration. McChrystal said a rival had leaked a memo to make McChrystal look bad. That’s exactly what happened! The general said he didn’t want to open an email from Richard Holbrooke, who is an accomplished diplomat, but also a haughty man known for condescending hectoring. No sane person wants to open an email from Richard Holbrooke. And General McChrystal pretended not to recognize Joe Biden’s name. People in Washington snipe at each other, stop the presses!

That’s it – the above comments are the super-ultra-mega scandal. Consider:

Nearly everything being attributed to McChrystal was not said by him. That President Barack Obama was “uncomfortable and intimidated” during his first meeting with McChrystal, that National Security Advisor James Jones is “a clown” – these comments did not come from McChrystal. In the Rolling Stone article they are sourced to an “advisor” and an “aide.”

Media coverage has already discarded this significant factual distinction – why let mere facts spoil a scandal? This morning, CBS Radio said the controversy involves “General McChrystal’s numerous attacks on public officials,” while CNN Pentagon correspondent Barbara Starr declared it “extraordinary to hear a general disparaging the president.” It is unnamed aides, NOT McChrystal, who disparage the president in the story. As for the statement that “the wimps in the White House” are “the real enemy” for officers in Afghanistan? That’s a Rolling Stone headline – no one in the story says this!

Bear in mind how convenient it is for Rolling Stone that the inflammatory material comes from people who don’t have names. Reporters and writers place words into the mouths of unnamed sources because people who aren’t identified rarely complain of being misquoted.

What is McChrystal quoted as saying? Of trying to sell the White House on a counterinsurgency strategy, which Jones and Vice President Joe Biden did not support, McChrystal is quoted as saying, “I found that time painful.” Stop the presses!

The scandal began before anyone had read the article. Rolling Stone’s issue is not on the stands until Friday, and the magazine did not post the piece on the Web until Tuesday evening East Coast time, after the three main network newscasts had given prominent attention to the buzz. The article turns out not to support the buzz. But in the Washington cycle of phoniness, who care about that?

Media figures are denouncing McChrystal for talking to the media. A lot of the commentariate reaction boils down to, “This guy was a fool for confiding in a reporter.” Apparently he was. But this line of reasoning does not say much about the media. Plus had General McChrystal refused to talk to a reporter, the media would have been outraged about that, too. Don’t reporters and editors regularly demand that the military be more open with the media?

The great thing about this scandal is that it has nothing to do with substance. There are no policy decisions in the balance, no questions of conscience – just personality sniping. Ideal! The Washington media and political establishments hate substance, while reveling in high-school-style bickering. Had the article involved impassioned appeals to conscience, it would have been ignored.

The other great thing is White House focus. The press loves stories that happen in the White House and involve the president because this generates a narrative of urgency. Will there be an angry confrontation? Will the president lose his cool in the Oval Office? Presidential drama, real or imagined, interests most of the media far more than question of substances, such as whether the United States should pursue a counterinsurgency strategy in Afghanistan (the McChrystal, and now Obama, position) or concentrate on destroying al Qaeda (what Biden and Jones favored). The Rolling Stone article concludes by declaring we have no hope of winning in Afghanistan. That is 10,000 times more important than any stupid snipe by an unnamed “aide.” But the article’s substantial point is nowhere in the scandal coverage. People arguing is a lot more interesting!

Why does the McChrystal-Tillman connection keep getting ignored? Stanley McChrystal was the officer who lied about the death, by friendly fire, of Pat Tillman. That Tillman died by friendly fire does not diminish his heroism. McChrystal lying about this, on the other hand, was shameful. He should have resigned when caught lying about Tillman; that was a serious breach of his officer’s honor. Yet the media are more interested in whether he insulted an ambassador.

Where was the press corps before all this happened? “The Promise,” an extraordinarily good new book, by Jonathan Alter, about Obama’s first year, goes into many pages of detail on tensions among McChrystal, Biden, Jones and Holbrooke regarding Afghanistan strategy. In order for that book to have been in stores last month, Alter had to complete the writing around Christmas. If Alter, who doesn’t even cover national security, knew last year that all this was going on, maybe that means he’s a great reporter – but it also means a lot of other reporters have been asleep at the switch.

The fitting punishment for McChrystal would have been to make him keep his job. Firing McChrystal makes President Obama seem weak — afraid of criticism, reacting in knee-jerk style, basing important national decisions on a Rolling Stone article. What Obama should have done is punch McChrystal in the nose. That is sometimes how moments of stress such as this get worked out within the military.

McChrystal’s comments, and those from his mysterious aides, reflect the way many military men and women talk, especially after consuming beer. It is common for military personnel who are risking their lives to feel hostility about pompous civilians who pamper themselves in Washington. This is fine so long as they always obey their orders from civilians – as U.S. military men and women always do. When the hour is dark, the United States needs tough-minded military personnel. That we seemed shocked to hear a fairly tame version of how they talk among themselves shows how out of contact much of America is with its armed forces.

For points that didn’t quite make the column, click here.

POINTS THAT DIDN’T QUITE MAKE THE MAIN COLUMN:

* The 1981 controversy regarding OMB director David Stockman’s comments to The Atlantic involved genuine points of policy. President Ronald Reagan had said supply-side economics, and supply-side tax cuts, were fundamentally intended to help the poor: Stockman told The Atlantic that everyone in the White House knew supply-side was a gift to the rich – that White House rhetoric was “a Trojan horse” to conceal what the Republican Party’s wealthy donors wanted. Top-rate income tax reduction may have been justified, but that’s a separate issue from whether the president was being honest with the public. Compared to the dustup over McChrystal, the Stockman controversy was substantive.
* The 1951 firing of Douglas MacArthur involved policy disagreements and statements far worse than a worst-case reading of the Obama-McChrystal situation. MacArthur publicly accused President Harry Truman of advocating “appeasement and defeatism” regarding China, attempted to order his units into military actions that civilian leadership had forbidden, and demanded the Korean War end with China surrendering to him personally – the latter suggesting MacArthur had come unglued.
Truman made himself seem weak by flying out to Wake Island to meet MacArthur, rather than recalling him to the White House. It’s a long trip from Washington to Wake Island even today, via jet; imagine doing this in a prop plane, for the convenience of your disobedient general. In the White House, the president has the home-field advantage. Barack Obama was right to meet McChrystal there.
*Wasn’t there some kind of oil spill? The McChrystal confabulation gives BP a few days’ vacation from the front page. “They will never forget you/till somebody else comes along,” as the song goes. And we’ve already forgotten who BP pushed off the front page — Toyota and Goldman Sachs. Sources tell me Toyota sent BP a big box of fancy chocolates, while Goldman Sachs sent flowers and a card that reads, “BP, luv u 4-ever! {signed} Goldy S.”
* This sort-of-scandal needs a name, and the “XXXX-gate” formulation is exhausted. Propose your names for the scandal using the reader comment space below.

POINTS THAT DIDN’T QUITE MAKE THE MAIN COLUMN:

*“We need additional federal relief because our state constitution requires a balanced budget.” Governors often say this as a way of rationalizing giveaway demands. In effect they are saying – because my rules forbid me to be responsible for my bills, you must pay for me. I think I’ll try this argument with the waiter next time I’m out to dinner!

*Unlike the U.S. Constitution, which is structured to be hard to amend, state constitutions are a snap to alter. The Texas state constitution has been amended 467 times, the Maryland constitution amended 198 times – versus 27 amendments for the U.S. constitution. In many states, a simple vote of the legislature amends the state constitution. Because of this, most states could amend their constitutions to drop budget-balancing. It’s just that states don’t want to, because pretending their constitutions are etched on stone tablets and cannot be altered is a way of shifting the burden to the federal level – as well as exempting  governors from criticism for deficit spending.

*Many state and local governments already borrow using municipal bonds and the new Build America Bonds, which are federally subsidized. Steven Malanga reports in the City Journal that muni bond debt has increased from $1.7 trillion in 2000 (stated in today’s dollars) to $2.2 trillion today. So if borrowing your way out of difficulties is smart – this is what local governments tell Washington when they demand extra money – why don’t state and local governments do their own borrowing, and make their own repayments?

*There’s a strong argument that well-to-do parts of the country should assist low-income states such as Alabama, Mississippi and West Virginia. But the last few years of the bailout-a-rama have not been structured as progressive income redistribution. Instead, big federal checks have gone to California, New York, New Jersey and other prosperous states, while boom towns such as Austin and Seattle get funny-money obtained by adding to the federal debt. The billions in recent bailout money to state and local governments has been doled out roughly in proportion to population, not according to need or merit. Here, Julie Creswell reports fully a third of the Build America Bonds subsidy has gone to California and New York.

*Many states are in poor fiscal shape because they’ve cut property taxes, the bête noir of senior-citizen lobbies, while raising top-rate income taxes, which most seniors don’t care about. California has the nation’s worst budget mess, and barely taxes real estate, while imposing a whopping 10.5 percent top rate on income. Since 1972, property taxes have declined to 16 percent from 26 percent of state revenues, as a succession of candidates in multiple states has appealed to seniors – the most reliable voting bloc – by cutting or limiting property taxes.

*The problem is that while property can’t move, income can. California keeps jacking up its income-tax top rate – voters love to hear the rich are being soaked! – only to see tax revenues falter. This is because the rich are not, in fact, being soaked: they are using various ploys to shift their economic activity into low-tax states, while their California property remains in California, taxed lightly if at all. Texas has no state income tax, yet is in better financial shape than California. This isn’t a mystery; Texas taxes property. A California governor with political courage would tell constituents the Golden State needs to raise property taxes while cutting income taxes. It is a lot easier to call on the federal government for special handouts.

*Appealing last weekend in his Saturday radio address for the $50 billion bonus to state and local governments, President Obama said the alternative was “massive layoffs of teachers, police and firefighters.” This is what Charles Peters, founder of the Washington Monthly, memorably called the Firemen First principle of budget politics. All levels of government are overstaffed with sclerotic middle managers who exist to file grievances against each other, and with senior paper-pushers possessing no meaningful responsibilities. But politicians never threaten to lay off the thousands of facilitation specialists and deputy assistant associate administrators. Politicians threaten to lay off those who actually do something – teachers, police and firemen. Fire the Firemen First!

Most states’ fiscal years are ending, accompanied by what is becoming an annual ritual – demands that Washington bail out state and local deficits.  In 2008 and 2009, federal taxpayers covered for the featherbedding and corruption at the local level by awarding state and local governments a total of about $275 billion in bonus payments. Right now on Capitol Hill, state and local governments are demanding a fresh $50 billion round of bailout checks.

Set aside that when states refuse to pay their own bills, they hand the debt to federal taxpayers – all of whom live in states.

Set aside that the states’ claims they must be subsidized because “we are required by law to balance our budgets” is a total political fiction – more on that below. Set aside that governors refuse to make hard budget choices, demand bailouts for their states — then campaign by denouncing the big spenders in Washington.

BOOKKEEPING SWINDLE

The core issue is that Washington should not ship cash to states and localities at all, whether on a routine basis, as has been done for decades, or in the new form of special-pleading bailouts.  The “laboratories of democracy” ought to pay their own ways. Sending the bill to Washington only encourages carelessness with money, indeed, can make fiscal negligence seem a virtue: when money falls from the sky, why not waste as much as possible locally? It is time to end the U.S. national bookkeeping swindle of having the federal government borrow money to hand to state and local governments to spend without restraint. State and local governments should obtain their own funds, via taxes or their own borrowing: this would increase accountability.

There are two types of federal transfers to states and localities: routine, and bailout. Over the last three years, Washington has handed nearly $2 trillion in regular payments to state and local governments, all funds obtained by borrowing. The $275 billion in bonus payments to states is atop the $2 trillion in routine funding. In fiscal 2010, states had about $1.3 trillion in revenue, about $400 billion of which came from the federal government either to help pay for federally mandated entitlements such as Medicaid, or to pay for local want-items such as roads and public transit, or simply as bailouts. That’s about a third of state funding being federal in origin. About 40 percent of local government revenue is direct-federal or a pass-along of federal money through a state, with roughly $300 billion in federal payments to various city, county and town governments in fiscal 2010.

The record $1.6 trillion deficit being run by Washington this fiscal year would decline by nearly half were it not for handouts to state and local governments. All recent federal deficits would decline by a third to a half, depending on the year, if Washington stopped forwarding borrowed money to states and cities; the dizzying $13 trillion national debt would be much lower.

TOLL ON TAXPAYERS

Of course, if Washington did not fund state and local governments, their taxes would have to be higher, or their debts higher, or their spending lower. But the state-and-local residents benefitting from the spending would be taxing themselves, or borrowing for themselves, rather than passing their bills along to someone else.

Massachusetts residents, for example, wanted their Big Dig – unsnarling Boston traffic by moving roads underground. Why did taxpayers nationwide cover $18 billion of the $22 billion cost of a project designed to make life easier exclusively in Boston? Why do taxpayers nationwide cover the bills when Tennessee residents want cheaper health care or Virginia residents want a new subway or Florida wants high-speed rail or California wants more schoolteachers, to cite a few of many recent examples? Here, almost all the nation’s governors ask for a gift of six months of federal payment of their Medicaid costs. This merely shifts state health care costs to federal taxpayers – all of whom live in states.

The great national bookkeeping switcheroo is a reason polls show Americans feel more positive about local government than about their federal government. On a W-2 form that sums your tax year, the federal tax total is higher than it needs to be, while state and local taxes are lower than they should be. Remove the switcheroo, and most Americans would pay higher state and local taxes, while paying less to Washington. Suddenly governors would no longer be able to promote themselves as budget-balancers, while the president and Congress would seem much more careful with money than they do today.

For points that didn’t quite make the column, click here.

Government accounting should be honest and straightforward. Instead the current system is deceptive, making state and local governments appear to be more cost-effective than they are, while causing the federal government appear to be more spendthrift than it is. According to the Center on Budget and Policy Priorities, states will be $281 billion in the red in fiscal 2010 2011 (see slide 7), despite generous handouts from Washington. This doesn’t seem like fiscal conservatism. Yet voters think state and local governments are careful with money while Washington writes blank checks. Fix the switcheroo, and local governments would be revealed as wasteful, while federal government would seem much more cost-effective.

FUNNY MONEY

At the local level, one is more likely than in Washington to find no-show patronage jobs or more administrators than workers. Since the recession began in 2008, about 7 million people in the United States have been fired or laid off – but just 231,000 were state and local government workers, would are protected by the great national bookkeeping switcheroo. Many state and local governments combine overstaffing with terrible performance. The Providence Journal recently reported that  Rhode Island DMV customers “wait hours for a 10-minute transaction” while drivers’-licenses offices often are closed because a staff training project, expected to take three months, is taking a year. State offices like this likely would perform better with leaner staffs.

Partly because local governments operate on funny-money from Washington, their pension systems are out of control. New York State has significant pension corruption; New York City has dozens of former employees who retired in their 40s with pensions of $100,000-plus per year; the Orange County Register recently reported that California has more than 3,000 retired public-school administrators receiving $100,000-plus pensions, many of whom “retired” to activate  pensions and then immediately went back on payroll in the same job. It’s fun and easy for states to hand out candy when the sweets comes from Washington.

In fiscal 2006, when the economy was hot, states had a combined $74 billion surplus. Did they save this money to carry them through lean years – or, heaven forbid, repay previous giveaways  from the federal purse? Except in a few cases such as North Dakota, the states spent every penny. Now states and counties want the federal deficit to bail them out. As long as bailouts from Washington continue, so will insatiable local appetites for money from the sky.

FOOTING THE BILL

Last week when President Barack Obama appealed for the extra $50 billion in state bailouts, he said this was to avert local government layoffs. Well and good: but why don’t the states and cities tax themselves to prevent layoffs, rather than handing the bill to someone else?

Republicans, and the Tea Party crowd, say they believe in states’ rights — what about states’ responsibilities? Even Republican governors, from California and other states, are demanding the extra bailout now before Congress. Maybe that $50 billion makes sense in the short term – but there should be a condition attached, namely, that local governments agree to a long-term reduction in federal support. End the national bookkeeping switcheroo, and have states and cities pay their own ways.

After listening to President Barack Obama call for fiscal restraint in his State of the Union Address this January, the United States Senate imposed the “paygo” rule on itself – no new expenditures unless offset by an equal amount of spending cuts or raised taxes. In the five months since vowing no new spending based on debt, the United States Senate has also voted for $400 billion in new spending that was added to the federal debt. Right now the Senate is debating adding another $80 billion or so in new spending based on borrowing.

As political flaming hypocrisy goes, that’s nothing! The House imposed paygo on itself in January 2007, and since has voted for $5.1 trillion in additions to the federal debt. House leaders support the next $80 billion in borrowing the Senate may approve.

How can the chambers of Congress formally pledge not to increase the debt, then merrily add to the debt as fast as zeroes can be printed? By stamping the word “emergency” on bills. Paygo, you see, not only does not apply to spending for entitlements, defense and interest on the national debt – these categories alone representing the lion’s share of federal expenditures. Paygo also does not apply to any bill classified as “emergency” legislation. And since paygo went into force, nearly all spending bills have been “emergency” bills.

There are two problems. The first, obviously, is hypocrisy. Democrats and Republicans alike theatrically pledge no more borrow-and-spend — knowing full well their intent is to borrow-and-spend until the cows come home. (Note to any cows reading this column: please come home.) Hypocrisy is the polite word for this kind of thing: lying is the precise word. Members of Congress deliberately lie to the public, then they wonder why Congress’s approval rating is at a record low.

The second problem is that a slapdash political attitude of calling everything an “emergency” prevents Congress from thinking clearly. Naturally, interest groups describe their every request as an “emergency.” Lawmakers should be above that ploy; instead, they embrace it, because declaring an emergency exempts them from taking responsibility.

All spending for the wars in Iraq and Afghanistan, for example, has been billed directly to the federal debt – that is, passed on to the young – by stamping the word “emergency” on the appropriations. Two weeks ago, the Senate moved an “emergency” spending bill for Iraq and Afghanistan military operations: the ninth consecutive year the Senate had funded the Afghanistan war on an “emergency” basis. Using the word “emergency” as an excuse to avoid facing the fiscal consequences of spending shows lack of seriousness, and mental weakness. What a dismal image for the Congress to project.

Having criticized this shoddy approach during his presidential campaign, on taking the White House, Barack Obama pledged to end “emergency” funding for wars, promising instead to fund war truthfully, by spending cuts or tax increases. Instead there was an “emergency” war funding supplemental appropriation in 2009 and another, larger, emergency war funding bill this winter.

So far the entire cost of the wars in Iraq and Afghanistan, at least $1 trillion, has been funded by borrowing against the nation’s future, rather than by other spending cuts or by tax increases. In 1781, George Washington insisted that debts from the Revolutionary War rapidly be repaid, lest his contemporaries “ungenerously throw upon posterity the burden which we ourselves ought to bear.” If only George Washington’s spirit still could be found in Washington!

Your columnist does not often hold with Senator Tom Coburn of Oklahoma, but who can disagree with his statement about the latest “emergency” war funding vote: “This legislation is designed to bail out career politicians who want to avoid the hard work of prioritizing spending.”

War funding is hardly the only category of spending done irresponsibly, using the “emergency” stamp. In 2008, then again in 2009, then again this winter, about $1.1 trillion in “emergency” economic stimulus funding has been enacted, including a total of about $275 billion in bonus grants to state and local governments. Haiti earthquake relief is an emergency expense; routinely handing out billions to state and local governments that spent more than they have is a bailout for irresponsibility. But stamping the word “emergency” relieves Congress of accountability.

Last winter, Congress gave local governments $45 billion in borrowed money to prevent public-employee layoffs. Private-sector workers weren’t receiving any special aid against layoffs, but any local-government employee facing a layoff constituted an “emergency” (and set aside that many state and local governments would function more effectively if not overstaffed). Now local governments are asking Congress for an additional $24 billion to keep payrolls padded – of course they want more – and again are claiming “emergency.”

Last week, in a shocking development, the House actually removed another multi-billion-dollar giveaway to states from a funding bill. Carolyn Lochhead of the San Francisco Chronicle reported, ‘Gov. Arnold Schwarzenegger joined 46 other governors in demanding that the Senate restore the funding.” Of course they want more.

Yesterday, the Senate put the additional billions for local governments back into a funding bill, exempt from fiscal discipline because it’s an emergency! Voting down and then voting up the same handout enables members of Congress to appear to be on both sides of this issue, depending on what groups they are speaking to – “Some of my friends are for it, some of my friends are against it, and I support my friends,” as Boss Tweed is said to have said.

In the last few years of federal politics, regardless of whether Republicans or Democrats run Congress or hold the White House, funding that is presented to the public as a temporary measure becomes the new norm, from which even greater giveaways are demanded. Endlessly exempting appropriations from discipline by using the word “emergency” encourages this mindset.

Calling nearly all federal spending “emergency” spending not only is a dodge of accountability – this is happening at a time when there is no national emergency. The United States has problems aplenty, chief among them the unemployment rate and the fighting in Afghanistan and Iraq. But there is no national emergency – nothing that threatens the survival of the nation, while most Americans are in good material circumstances, if nervous.

What if a true emergency began — another Hurricane Katrina-style event, an asteroid strike, a second major terrorist attack? We’ve held nothing in reserve, borrowing to the hilt at a time when the country is mainly fine. If a true emergency begins, the bogus “emergency” borrowing will have left the United States no place to turn.

POINTS THAT DIDN’T QUITE MAKE THE MAIN COLUMN

* Barack Obama has directed federal agencies to plan for cutting budgets five percent – not make actual cuts, mind you, merely to “plan” for fiscal discipline. The president may allow agencies that cut their budgets to keep half the savings. The political scientist Mancur Olson, who died in 1998, was an advocate of this idea, contending government agencies know any money they save will merely be wasted by another agency, giving them no incentive to reduce spending. Budget-cutting-on-commission surely is worth a try, and Obama is wise to consider this idea.
But note the president has asked his agencies to identify for possible cuts their “least critical” missions. Beyond the non-grammatical nature of that phrase, the words suggest everything government does is super-ultra important. Most federal agencies spend at least as much on featherbedding and empire-building as on any legitimate roles. Rigorous thinking about government budgets is not possible until agencies shed the make-believe that every Associate Deputy Acting Administrator for Administration is critical to the nation.
* In his State of the Union Address, the president said, “We’ve already identified $20 billion in savings for next year.”  If the White House has “already indentified” such savings, why don’t they take effect immediately? Because we’ll lose weight next year! We promise!
* The recent health care reform legislation claims to pay for itself by about $90 billion annually in savings – all to be imposed in future years. Last week, Congress quietly cancelled a $23 billion reduction in Medicare physicians’ fees that had been scheduled under a previous attempt at health care cost containment. So while this year’s  reform bill promised vague, unspecified savings at unknown future dates, the one specific federal health care cost that might have declined in 2010 instead has been converted into higher payments. But we’ll lose weight next year! We promise!

For at least a generation, commentators have declared that Americans buy too much and borrow too much, chaining themselves on a stressful treadmill of work-and-spend. Wouldn’t it be nice, this thinking went, if we learned to buy a little less and save a little more. Maybe then we’d be happy.

We are about to find out – because hidden in economic data is a mild decline in the American obsession with spending money. People are spending somewhat less, even when unemployment isn’t an issue. Americans are paying down credit-card debt, the worst kind of debt, while saving somewhat more. As growth rebounds, we may awaken to a new economic reality in which consumer demand mildly slackens on a long-term basis. This is exactly what social philosophers said would be good for us!

Consider:

–According to Federal Reserve figures, household debt in the United States dropped slightly in 2009, the first drop since 1945. Some of the decline was keyed to housing foreclosure (which can eliminate mortgage debt), but even taking this into account, household debt went down. Credit is tight – but maybe, as well, Americans are beginning to learn to resist that urge to buy like crazy right now.
–The Bureau of Economic Analysis reports that personal saving as a percent of disposable income hit 3.6 percent in April, the highest such figure since 1998. In April, Americans saved $399 billion – money they might have spent, but didn’t. This seems significant because it is the employed who have extra income they decided not to spend.
–The mean amount a household owes in credit-card debt is now $3,900, down from $4,900 a year ago, according to this Associated Press-GfK Poll. This suggests that Americans are becoming cautious about credit-card use – which is not only smart personal finances, but likely to reduce money stress.
–Since 2007, retail sales are down about 6 percent; household income is down about 1.6 percent in the same period, so retail sales have fallen more than income. Prior to the decline that began in 2008, retail sales had risen 27 consecutive years.
–Last November, the typical Black Friday shopper spent $330, versus $390 (in today’s dollars) in the peak year of 2006.
–Electricity consumption declined from 2007 to 2009, though has risen slightly this year. Unlike gasoline demand, which trends up or down roughly in sync with larger economic movements, electricity demand had been rising steadily since World War II ended. The recent decline in electric power demand began before the 2008 financial-sector meltdown. Now the Energy Information Administration projects – see the table on page 5 — that per-capita U.S. energy use will remain in shallow decline for at least the next two decades.

Obviously these leading indicators can’t be driven solely by an outbreak of awareness of the virtues of not over-spending. Conservation technology is a big factor in electricity demand, for example, while last fall’s Black Friday occurred at a time when consumer confidence was low. Confidence is back, so perhaps Black Friday 2010 will be crazy. But for a long time – basically, for the lifetimes of readers of Reuters.com – trend lines involving materialism, spending and personal debt have almost always been up. Now that’s moderating.

Shouldn’t this mean a less-frantic lifestyle awaits us – more walks in the park or picnics, fewer day-spa trips and fancy meals? Social commentators (including me, in my 2003 book The Progress Paradox) have been saying Americans would become happier if they spent somewhat less and saved a little more. That appears to be happening. Is it a blip, or the beginning of a long-term transition?
Now consider two other forecasts.

The Organisation for Economic Cooperation and Development, with a reputation for being guarded, just said the global recession has concluded and that growth is back. But not rip-roaring growth. Check the numbers the OECD projects. They represent “slow growth,” exactly what commentators of the go-go 1990s said would cure many ills of society. When strip malls and townhouse blocks were rising so fast it made your head swim, slow growth sounded awfully good. If what you favored was slow growth, looks like now we have it. Perhaps without ever meaning to, the United States and the European Union have embraced a slow-growth future.

Meanwhile Christina Romer, President Barack Obama’s chief economic advisor, believes 9.9 percent unemployment does not result from any structural change in the economy, rather, from soft demand. In that case, assuming Americans voluntarily are moderating demand and saving more, employment may recover much more slowly than the economy overall.

A guiding assumption among economists and policy-makers has been that replacing factory employment (which is declining owing to rising productivity, not offshoring – factory employment is down in China, too) is the leading economic challenge to be faced. If consumer demand has entered long-term mild decline, entry-level employment may become the first problem. Fewer big-box stores will be good for our souls, bad for the job rolls. Our psyches may be better off with less spending, but retail employment and job creation may be slack for a long time.

POINT THAT DIDN’T QUITE MAKE THE MAIN COLUMN:
Total U.S. household debt in 2009 was $13.5 trillion – almost exactly the same number as U.S. federal debt in 2009. This must mean something. If only I knew what!