The Slow Road to Serfdom

About four months ago, while the stimulus bill was being debated, I did a pretty nerdy post about it that generated a lot of controversy. The key points were that the spending would very likely either: (i) come too late to do much more good if we had a normal length recession, or (ii) represent a significant shift in the structural budget that would move the U.S. a significant distance toward a European social welfare state if we had something more like a decade-long slowdown. Under either scenario, I argued, this law would near-permanently lock in programs that have long been on the wish list of the left-wing of the Democratic Party. I saw it as a huge ideological shift masquerading as emergency relief. I think events have, so far, vindicated this point of view.

Keith Hennessey, who was the senior White House economic advisor to President George W. Bush, has a fascinating post that broadly confirms this view, and more importantly provides a view of the inside baseball that produced this outcome. He tends to see the Obama Administration as having been taken by the Congress. For all I know, this may be true, but it’s not clear who did what to whom when.