It's high time the United States created a second political party. It's been too long since we had one -- one worthy of the name, anyway. Time was, voters could choose between the big-government Democrats and the small-government Republicans. By degrees, that choice has been whittled away to nothing, at least when it comes to economic matters.
We are all aware of the fiscal mess the federal government has created. The national debt, for example, is larger than ever and is growing rapidly as a percentage of GDP. It now stands at $9.3 trillion-plus. That works out to about $30,900 for every man, woman and child in the country, with no signs of slackening. Not one of the major candidates for president has a plausible plan for stopping, much less reversing, it. And not one has addressed the even bigger liabilities implicit in Social Security and healthcare entitlements.
It would be very easy to blame the American people for this situation. If they really wanted change, some claim, voters would cast the bums out. That may have been the case in the 1950s, the 1970s, even the 1990s. But today, the only choice voters have is between enormous and gigantic government. Only a handful of people dare argue in favor of drastically shrinking the government and its role in the economy.
It isn't that the idea is unpopular; it's that few people think politicians can actually get the job done. The system is rigged against change. At some point, bigger became better, and merely slowing the rate of government growth became "conservative."
It was not always so. The first U.S. party system pitted those in favor of small government against those in favor of tiny government. That's right, historians have gotten the story wrong. Alexander Hamilton and his Federalists wanted a government that was big and active only relative to what Thomas Jefferson and his Democratic-Republican Party sought.
Both Jefferson and Hamilton would find today's national debt appalling. Here too historians have erred. His critics' claims to the contrary notwithstanding, Hamilton did not want a large, perpetual national debt. All the fuss was about whether to repay the national debt over a few years, as Jefferson wanted, or over 30 years, as the "Little Lion" wanted. Hamilton rightly won that round. Returning 2% of the principal per year, an important feature of the early bonds that historians hitherto have entirely missed, was far preferable to distorting the economy with the heavy taxes that would have been required to retire the debt quickly.
