Nicholas Wapshott

David Stockman makes a good Cassandra. His The Great Deformation: The Corruption of Capitalism in America is a popular account of why all economic policy since Calvin Coolidge and Herbert Hoover has been wrongheaded. It is a contrarian’s delight. The New Deal “did not end the Great Depression or save capitalism from the alleged shortcomings which led to the [1929] crash.” Richard Nixon’s decision to unharness the dollar from the gold standard was “a sin graver than Watergate.” Milton Friedman, once a conservative saint but recast by Stockman as “a supposed hero,” is dismissed as “foolish.” He assaults Paul Ryan’s budget as “another front in the GOP’s war against the 99 percent.” He even accuses his old boss Ronald Reagan, a conservative paragon, of being fatally mistaken about slashing personal taxes and about encouraging “the highest peacetime spending share of GDP.”

In brief, Stockman believes Keynesian economics is pernicious and has seduced America away from the true path of capitalism. His tract is long on abuse (he scathingly assaults Republicans as well as Democrats, and gives a pass only to Dwight Eisenhower and John F. Kennedy) and short on economic analysis. The theoretical roots of his thinking are missing. The laissez-faire absolutist Ayn Rand is mentioned only in passing to goad those, like Paul Volcker and Alan Greenspan, who brushed up against her. Ludwig von Mises gets a single name-check for his work on the credit boom cycle in 1911. Friedrich Hayek, the inspiration for most of today’s anti-Keynesians, does not even warrant a footnote. Stockman’s failure to anchor his instinctive aversion to deficits, public spending and government borrowing in a cogent intellectual framework undermines his case. His faith-based economics reflects, perhaps, the fact that he became Reagan’s director of the Office of Management and Budget armed only with what he had learned at Harvard Divinity School.

Stockman has, however, found a ready audience for his take on the past 80 years of economic policy because he is a rare bird: a conservative purist prepared to argue that when the financial markets froze in 2008 we should have let the market rip and lived with the consequences. When the stock market began to wobble five years ago, then crashed, tripping a wholesale financial disaster that slowed economic activity, caused businesses to fail and threw millions out of work, it was hard to find an economist of standing to defend the alternative to federal intervention: letting the banks and AIG go bust and allowing the market to find its own level.

While the George W. Bush administration concocted the Troubled Asset Relief Program (TARP) to shore up the banks and an old school Keynesian stimulus to keep the country’s businesses afloat ‑plans followed to the letter by the new president, Barack Obama ‑ the big guns of conservative economics remained conspicuously silent. “I thought we all agreed that Keynesianism doesn’t work,” complained Chris Edwards of the Cato Institute. “With the new stimulus package before Congress, all these Keynesians have come out of the woodwork and I’m wondering where all the theorists are that oppose the Keynesian system.” Robert Lucas, the 1995 Nobelist from the conservative economics redoubt at Chicago University, was less coy. “I guess everyone is a Keynesian in a foxhole,” he explained.

Stockman, for his part, is prepared to speculate on what an alternative economic future might mean, and it is not pretty. Nor, he says, is it practical. In an op-ed last weekend he argued his remedy “would be so radical it can’t happen.” His prescription would entail “sweeping constitutional surgery” giving the president and Congress single six-year terms; the end of Citizens United payola and its replacement with 100 percent public financing of candidates; restricting banks to taking deposits and granting commercial and private loans only; putting the Federal Reserve in a straitjacket; and much more. Since, as he says, no one would dare to implement the political and economic revolution he proposes, Stockman avoids having to estimate what his remedy would cost in lost jobs, collapsing house prices, business bankruptcies and all the rest.

Whatever the Supreme Court decides, it seems same sex marriage is here to stay. As the cover of Time put it, “Gay Marriage Already Won. The Supreme Court Hasn’t Made Up Its Mind – But America Has.”

Even some social conservative rabble-rousers have conceded defeat. Fox News’s Bill O’Reilly, who in the past has compared gay unions to marrying a goat or a dolphin, has flipped, saying his views have “evolved.” “The compelling argument is on the side of homosexuals,” O’Reilly said last week. “The other side hasn’t been able to do anything but thump the Bible.” Rush Limbaugh, too, is reluctantly resigned to the change. “I don’t care what the Supreme Court does, this is now inevitable,” he said.

Few social liberals thought marriage equality would be as easy as this, but public support has been so swift that politicians of both stripes have rushed to endorse the legitimacy of same sex marriage. Even President Barack Obama and Bill and Hillary Clinton were left playing catch-up.

Isolationism is back in the news. The big thinkers of the Tea Party, in their pursuit of slashing taxes, lowering public spending, and severely shrinking the size and power of the federal government, have revived an idea that has not been respectable among senior Republicans for more than 70 years. Senator Rand Paul of Kentucky believes that, to encourage more young people to vote for the GOP, the party should stop chasing divisive social issues, like incarcerating people for petty drug offenses, and take up civil liberties issues, like protecting American suspected terrorists on American soil from being summarily executed by American drones.

But that is just a start. According to a recent speech in Cincinnati, Paul thinks that, for the GOP to win younger voters, “even bigger to me than the social issues is the idea of war.” “If we didn’t have to be everywhere all the time, if maybe we tried to reserve it for when our national interests were impacted or a vital interest of ours was . . . [he left the thought unfinished] — and if Republicans didn’t seem so eager to go to war — I think we’d attract more young people.” He would prefer it “if we had a less bellicose approach, if we were for a strong defense but a little bit less aggressive defense around the world.” Paul is not suggesting pacifism. What he means by “a less aggressive foreign policy” is that he wishes America would stop taking its international responsibilities so seriously because it costs taxpayers a lot of money.

This is an extraordinary about-face for a leader of a party that in the post-war world has always proudly defended America’s right to intervene with force when and wherever it wishes. The GOP has always been the natural home for isolationists. The “Irreconcilables” that kept America out of the League of Nations were overwhelmingly Republican and it was largely Republican isolationists who advocated the neutrality laws in the Twenties and Thirties. Robert Taft nudged the party towards isolationism in his many failed bids to become the Republican presidential candidate through the Forties and Fifties. And rogue isolationist Patrick Buchanan gave the GOP establishment a scare when in both 1992 and 1996 he prospered in early primaries.

The comedian Peter Cook once joked, “I could have been a judge, but I never had the Latin.” Instead, he became a coal miner. “They only ask one question. They say, ‘Who are you?’ And I got 75 percent for that.” As the laughter subsided, Cook added a satirical kicker. “Being a miner, as soon as you are too old and tired and sick and stupid to do the job properly, you have to go. Well, the very opposite applies with the judges.”

It seems that Supreme Court Justice Anthony Kennedy may have been listening to some of Cook’s old records. Ahead of this week’s landmark hearings in which the Supremes hear two cases in which they are being invited to decide whether same-sex marriages are constitutional, Kennedy made a sharp and surprising critique of the role the court has played in recent years in settling awkward matters that would have been far better decided by Congress. “A democracy,” he declared, “should not be dependent for its major decisions on what nine unelected people from a narrow legal background have to say.”

It is a strange admission for a Supreme Court justice. Cook made fun of the fact that senior judges are mostly old and doddery, and the older and more doddery they become, the more detached they are from normal life. Many who believe that justice should be impartial welcome the rarefied atmosphere in which judges tend to live and make their decisions. Kennedy, meanwhile, is suggesting the opposite ‑ that if justices have to be brought in to decide issues that would better have been solved by Congress, they should be more of an age and closer to the backgrounds of the ordinary Americans who must live with their decisions.

The most recent episode in the long-running Punch and Judy show between Sarah Palin and Karl Rove is shedding light on the schism between old-school Republicans and the Tea Party insurgents who are steadily pushing them aside. It appears it is not merely Palin’s personal antipathy to Rove that drives her spleen but a contempt for the dark arts he employs.

It is no surprise, perhaps, that the anti-intellectualism that underpins many of the Tea Party’s most absurd and offensive stances – the insistence that evidence of global warming is invented; the notion that women who are raped do not conceive; the belief that Darwin’s theory of evolution is contradicted by the Bible; the failure to understand that all economics is Keynesian; and so on – also informs Palin’s assault on the science practiced by Rove and every other established political strategist around the world.

In a zinger directed at Rove, Palin blamed Mitt Romney’s defeat on the “top-down political process” directed by a “permanent political class” in “permanent political mode” in Washington that is “busy worrying about their own political future.” “Now is the time to furlough the consultants, and tune-out the pollsters, send the focus groups home and throw out the political scripts, because if we truly know what we believe, we don’t need professionals to tell us,” she declared.

The outcome of the sequester ultimatum appears to have taken everyone by surprise. Two long summers ago, when the president and House speaker John Boehner conjured a prospect so terrible that even spending on defense would be deeply cut, they both assumed Congress would buckle rather than approve such a blow to the nation’s pride. According to Bob Woodward’s The Price of Politics, Boehner said, “Guys, this would be devastating to Defense. This is never going to happen.”

But neither man appears to have taken account of the clearly stated views of the Tea Party. There are few better ways of appreciating how the Republican Party has transformed in the last two years from a party of defense hawks to a party of deficit hawks than tracking how the sequester has turned from a threat to the nation’s defenses to an unparalleled opportunity to bring the government to heel.

If Obama and Boehner had taken heed of the strident voices offstage, they might have guessed their ostensibly idle threat to the Pentagon would be taken as a chance to reduce the size of the federal government. They didn’t, and the sequester is upon us, promising, according to the Central Budget Office and IMF, to throw 750,000 out of work and slow down already anemic economic growth by 0.6 points. No surprise there: If you take money out of an economy, activity flags and the economy shrinks.

The United States is on the threshold of comprehensive immigration reform. Between the president and the coalition in the Senate, it looks likely it will pass, which means that within a few years we shall have 11 million new Americans with full voting rights. What will their emergence from the shadows do to our economy? And, perhaps more importantly, what will it do to our politics? Who stands to gain from this enormous influx of new blood into our democratic system?

The numbers who are here illegally have gone down since John McCain last tried to introduce reform measures in 2007. As the economy slumped after the financial crisis of 2008–09, migrant workers stayed at home and undocumented workers who could not find work began to repatriate themselves. Record numbers were also deported. Today, according to the 2010 census, 11.1 million illegals are in our midst. Assuming that Congress, led by a bipartisan coalition in the Senate, responds to the president’s appeal to seize the moment, in the next few years we will welcome them as full citizens. That means 11.1 million more people to be taxed and buy health insurance, and 11.1 million more able to vote.

Contrary to the common perception, a majority of illegal immigrants both pay taxes and make Social Security payments. The term “undocumented workers” is a misnomer. To get a job legally they need papers, which entails assuming identities to get official papers or obtaining forged documents. Either way, they are not the out-and-out shirkers opponents of immigration make them out to be. According to the most recent figures of the Congressional Budget Office, compared to the commonplace tax-dodging techniques employed by documented Americans, the majority of illegals are already model citizens.

To understand how far the republic founded by the famously truthful George Washington has become a mendacious nation, you need look only as far as the Weather Channel. According to a report, the meteorologists there deliberately and routinely tell untruths about the prospect of rain so that when it turns out to be sunny the network’s viewers feel unexpectedly happy. The practice, it seems, is widespread among weather forecasters. Joe Sobel, a meteorologist for Accuweather, tells his audience it will rain when he knows the likelihood is small because “when the forecast is for good weather and it’s bad, I certainly will get more grief than if the forecast is for bad weather and it’s good.”

When the accuracy of even weather forecasting, a once factual, rigorous, scientifically determined service relied upon by everyone from farmers to sailors, is compromised for fear of causing offense, America has reached a state of quotidian deceit even George Orwell did not reckon on. Lying over the weather is not the compulsive lying of Richard Nixon: “People have got to know whether or not their President is a crook. Well, I’m not a crook.” Or the visceral lying of Lance Armstrong, who even lied when he confessed to Oprah Winfrey, using the lying words, “I can’t lie to you …” and “I’m not going to lie to you or to the public …” Nor is it even the crooked lies of the price-fixing bankers who misled the markets and cost us all a pretty penny when they concocted the Libor lending rate to suit themselves.

Lying about the weather to please the masses is not so much lying as pandering on a prodigious scale. Bowing down before the voters has become so commonplace in Washington that when someone says something from the heart that is likely to provoke contemplation or discussion, they are dismissed as foolhardy. The president’s second inaugural address was full of soaring language and high ideals that reflected his ambitions for the nation. But Barack Obama was so liberal in his vision that the speech was derided by opponents as un-presidentially divisive and absurdly idealistic. The same charge was made against Ronald Reagan’s first inaugural address from the Democratic side. How dare the president say what he believes and where he is heading? Tell us what we like to hear, or at the least say something that will not offer hostages to fortune. Please pander more and stop talking like a leader.

Immigration reform is being discussed again on Capitol Hill. At his inauguration, President Barack Obama declared, “Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity.” Senior Republicans, too, seem ready to make a deal. They sorely need to do so, because Mitt Romney’s damaging policy of self-deportation ensured that Hispanics voted overwhelmingly for Obama, and demographic changes mean unless the party changes tack fast it will keep losing. But there is an enormous gulf between what the Republicans need to do and what the base will go along with. What is at stake is whether the GOP remains a party of government or becomes a mere protest movement.

Although he does not have a majority in the House, the president appears in no mood to compromise. He wants to help create a more tolerant America and believes he has the country behind him. Recent polling confirms that his views on gay marriage, gun control, abortion, immigration and other social issues all chime with a majority of the electorate, and he is determined to press his case. His inauguration speech spelled out the direction he is heading in, and his Feb. 12 State of the Union address is expected to chart the course. He appears to be relishing the chance to embarrass the Republicans if they stand in the way of progress. Catching Obama’s new sense of purpose, House Speaker John Boehner has become convinced the president wants “to annihilate the Republican Party” and “shove [it] into the dustbin of history.”

Senior Republicans appear to be aware that they are out of step with America and need to make significant changes to policies and their public image if they are to stand a chance of winning the midterm elections in 2014 or the White House in 2016. Former Secretary of State Condaleezza Rice believes “the Republican Party certainly has to stop turning off large segments of the population” and urges it to face “the big issue,” immigration reform. Says Senator Lindsay Graham (R.-S.C.): “We’re in a death spiral with Hispanic voters because of rhetoric around immigration.” Senator John McCain (R-Ariz.), who burned his fingers pushing for immigration reform in 2006-07, thinks “we have to do immigration reform … There is no doubt whatsoever that the demographics are not on our side.” Conservative commentator Seth Mandel suggests it may be too late: “When they arrived here with nothing but the clothes on their back, desperate for a chance at a better life for themselves and their children, one party said, ‘Come on in,’ and the other said, ‘Turn around and go back.’”

When the 2012 Nobel Peace Prize was awarded to the European Union, jaws dropped from Belfast to Belgrade. The citation said the EU had helped transform Europe “from a continent of war to a continent of peace,” and that its “most important result” was “the successful struggle for peace and reconciliation and for democracy and human rights.” Many think that is a strange way of interpreting the last 100 years, given that the maintenance of a free Europe since the end of World War Two is due more to the thankless diligence of NATO and the unsung generosity of the United States.

The timing of the award was also puzzling. The very existence of the European Union is under severe threat as it struggles to maintain its common currency, the euro. To protect the euro, EU bureaucrats in Brussels and political leaders in Berlin and Paris have made the poorer member nations the target of austerity measures that threaten to undermine those nation’s democracies. Instead of celebrating the EU as a benign force for peace and trans-national cohesion, the Nobel Committee might just as easily have condemned it for using the global financial crisis as a pretext to double down on its grand plan to forge a single European state. The award by the notionally apolitical Nobel Committee – whose host country, Norway, chose in 1972 and again in 1994 not to join the EU – appeared to be a desperately needed vote of confidence for an ambitious dream that has turned into a divisive nightmare.

Neither awards nor plaudits will save the European Union. Central bankers alone won’t fix it, either. That’s because a lasting remedy for what’s ailing the region must be political as well as financial. The modern history of Europe largely revolves around the bitterly fought and seemingly eternal contest between France and Germany, with Europe’s third great power, Britain, sometimes wisely and often mischievously maintaining the balance. Both of the 20th century’s ruinous world wars and several other destructive conflicts stemmed from Franco-Prussian enmity. It was primarily to bring this perennial conflict to an end that the EU founders – French diplomat Jean Monnet, French statesman Robert Schuman and the Belgian premier Paul-Henri Spaak – envisioned a Europe in which the nations were bound ever closer by an economic pact. The other unstated aim was to create a single European state to rival the United States in population and wealth, and, as time went on, to compete with the burgeoning economies of India, China, Russia and Brazil.