After America: Get Ready for Armageddon (14 page)

Just so. You were the mean and worthless subject of a cruel and mercu-rial despot but, even if he wanted to, he lacked the means to micro-regulate your life in every aspect. Yet what would happen, Tocqueville wondered, if administrative capability were to evolve to make it possible “to subject all of his subjects to the details of a uniform set of regulations”?

That moment has now arrived. Thanks to computer technology, it’s easier than ever to subject the state’s subjects to “a uniform set of regulations.”

Back in the 1990s, Bill Clinton famously said, “The era of Big Government is over.”94 What we have instead is the era of lots and lots of itsy-bitsy, teensy-weensy morsels of small government that cumulatively add up to something bigger than the Biggest Government of all—a web of micro-tyrannies which, in their overbearing pettiness, ensnare you at every turn.

Marge Murtha can make an apple pie. What can a regime that criminalizes such a pie make? That’s easy: Big Government makes small citizens.

Like to mull that thought over a cup o’ joe? Sorry, I’d love to offer you one, but it’s illegal. With its uncanny ability to prioritize, California, land of Golden Statism for unionized bureaucrats, is cracking down on complimentary coffee. From the
Ventura County Star
: Ty Brann likes the neighborly feel of his local hardware store.

The fourth-generation Ventura County resident and small business owner has been going to the B & B Do it Center on Mobile Avenue in Camarillo for many years. . . . So when he undreaming america 91

learned the county had told B & B it could no longer put out its usual box of doughnuts and coffee pot for the morning customers, Brann was taken aback.95

Dunno why. He lives in California. He surely knows by now everything you enjoy is either illegal or regulated up the wazoo. The Collins family had been putting a coffee pot on the counter for fifteen years, as the previous owners of the store had done, too, and yea, back through all the generations. But in California that’s an illegal act. The permit mullahs told Randy Collins that he needed to install stainless steel sinks with hot and cold water and a prep kitchen to handle the doughnuts. “What some establishments do is hire a mobile food preparation services or in some cases a coffee service,”

explained Elizabeth Huff, “Manager of Community Services” (very Orwellian) for the Ventura County Environmental Health Division. “Those establishments have permits and can operate in front of or even inside of the stores.”

Even
inside? Gee, that’s big of you. “Those establishments have permits”?

In California, what doesn’t? Commissar Huff added that there are a range of permits of varying costs. No doubt a plain instant coffee permit would be relatively simple, but if you wished to offer a decaf caramel macchiato with complimentary biscotti additional licenses may be required.

“We’re certainly working with the health department,” said Mr. Collins.

“We want to be in compliance with the law.”

Why?

When the law says that it’s illegal for a storekeeper to offer his customer a cup of coffee, you should be proud to be in non-compliance. Otherwise, what the hell did you guys bother holding a revolution for? Say what you like about George III, but he didn’t prosecute the Boston Tea Party for unlicensed handling of beverage ingredients in a public place.

This is the reality of small business in America today. You don’t make the rules, you don’t get to vote for people who make the rules. But you have to work harder, pay more taxes, buy more permits, fill in more paperwork, 92

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contribute to the growth of an ever less favorable business environment, and prostrate yourself before the Commissar of Community Services—all for the privilege of taking home less and less money.

The prohibition of non-state-licensed coffee is a small but palpable loss to civic life—a genuine community service, as opposed to those “Community Services” of which Elizabeth Huff is the state-designated “Manager.”

Randy Collins and the other taxpayers of Ventura County pay Commissar Huff’s salary. I would wager that, like most small business owners, the Collins family work hard. They take fewer vacations and receive fewer benefits than Commissar Huff. They will retire later and on a smaller pension. Yet they pay for her. Big Government requires enough of a doughnut to pay for the hole: you take as much dough as you can get away with and toss it into the big gaping nullity of microregulation. And it’s never enough. And eventually you wake up and find your state is all hole and no doughnut.

★ ★ ★ ★ ★

BuLLS in a china Shop

What do we have to show for the political class’ disruption of every field of endeavor? From education to energy, health care to homeowning, the Conformicrats bungled everything they touched. You can see the impact of the regulatory state in the structural transformation of the American economy. From 1947 to the start of the downturn in 2008, manufacturing declined from 25.6 percent of the economy to 11 percent, while finance, insurance, real estate, and “professional services” grew from 13.9 percent to 33.5 percent.96 Much of that last category is about the paperwork necessary to keep whatever it is you do in compliance with the Bureau of Compliance.

Of the remainder, the financial sector ballooned in support of the Age of Credit, and real estate was the one thing you could always rely on—“safe as houses,” right?

So how are those growth “industries” doing today? A headline from the

New York Times
:

undreaming america 93

Real Estate’s Gold Rush Seems Gone for Good
97

Which is a problem. For all the novelty junkies twittering about the Internet age and virtual reality, the principal asset of most Americans remains the most basic of all: the bricks and mortar of their rude dwelling. For all the analysts proclaiming society’s transition from manufacturing to the “knowledge economy,” for the majority of Americans the surest way of building wealth at the dawn of the twenty-first century involved neither knowing nor making anything: you bought a house, and, simply by doing nothing but eating, sleeping, and watching TV in it, your net worth increased.

Not anymore. Dean Baker, of the Center for Economic and Policy Research, calculates that it will take two decades to recoup the $6 trillion of housing wealth lost between 2005 and 2010.98 Which means that in real terms it might never be recouped. In the early Seventies, the United States had about 35 million homes with three or more bedrooms, and about 25 million two-parent families with children. By 2005, the number of two-parent households with children was exactly the same, but the number of three-or-more-bedroom homes had doubled to 72 million. As the Baby Boomers began to retire, America had perhaps as much as a 40 percent over-supply of family-sized houses.99 As Mr. Baker puts it, “People shouldn’t look at a home as a way to make money because it won’t.”100

Oh. So what does that leave?

The “financial sector”? In the
Atlantic Monthly
, Simon Johnson pointed out that, from 1973 to 1985, it was responsible for about 16 percent of U.S. corporate profits. By the first decade of the twenty-first century, it was up to 41 percent.101 That’s higher than healthy, but the

“financial sector” would never have got anywhere near that size if government didn’t annex so much of your wealth—through everything from income tax to small-business regulation—that it’s become increasingly difficult to improve your lot in life through effort—by working hard, making stuff, selling it. Instead, in order to fund a more comfortable retirement and much else, large numbers of people became “investors”—

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albeit not as the term was traditionally understood. Like homeowning, it was all very painless: you work for some company, and it puts some money on your behalf in some sort of account that somebody on the 12th floor pools together with all the others and gives to somebody else in New York to disperse among various parties hither and yon. You’ve no idea what you’re “investing” in, but it keeps going up, so why do you care?

That’s not like a nineteenth-century chappie saying he’s starting a rubber plantation in Malaya and, with the faster shipping routes out of Singapore, it may be worth your while owning 25 percent of it. Or a guy in 1929

barking “Buy this!” and “Sell that!” at his broker every morning. Instead, in both property prices and retirement plans, an exaggerated return on mediocre assets became accepted as a permanent feature of life.

It’s not, and it never can be. In Sebastian Faulks’ novel
A Week in
December
, set during the great unraveling of 2008, the wife of a hedgefundy type muses:

The essential change seemed to her quite simple: bankers had detached their activities from the real world. Instead of being a “service” industry—helping companies who had a function in the life of their society—banking became a closed system.

Profit was no longer related to growth or increase, but became self-sustaining; and in this semivirtual world, the amount of money to be made by financiers also became unhitched from normal logic.

It’s one thing to have a financial sector that provides a means for wealth creators to access equity to advance economic growth. But, by the time you’re using the phrase “credit default swap” without giggling, by the time you’re trading not only in derivatives of derivatives but in derivatives of derivatives of derivatives (seriously), you’re several links unhitched from any tangible reality. Tom borrows money from Dick, who turns a nice profit by selling Dick’s debt to Harry, who covers himself against the risk of Dick’s undreaming america 95

failure to repay by insuring the debt with Nigel, who mentions it over lunch to Peregrine, who writes it up in his Moneywatch column as a sign that confidence is returning to the markets. Only when Peregrine brings it up with Ahmed, the affable imam who lives next door, does anybody rain on the parade. The Prophet Mohammed, among his many strictures, enjoins the believers to have no truck with the frenzied infidel trade in Xeroxed IOUs. Which may be why (in the financial sector’s in-house version of the demographic Islamization of Europe) the Age of Credit also saw sharia-compliant finance plant itself in the citadels of the West.

We’re in a worse state than Jonathan Swift’s banker—we cannot reliably say who has our bonds and therefore our souls. Thanks to the packaging, repackaging, subcontracting, and outsourcing of even routine mortgages, millions of home “owners” have no idea who really holds their property or the terms by which they can be expelled from it. And nor do the banks.

According to the Office of the Comptroller of the Currency, by 2010 the U.S. financial system “owned” more than 230 trillion dollars’ worth of derivatives—or about four times the entire planet’s GDP.102

It was Polonius who advised, “Neither a borrower nor a lender be,” and America at the dawn of the Obama era was approaching that blessed state.

A man who borrows $400,000 for a house he cannot afford isn’t really a

“borrower,” is he? After all, by 2008 every politician agreed that the priority was to keep people in “their” homes, and the Congressional Progressive Caucus was soon calling for a “moratorium on foreclosures,” which is a polysyllabic way of saying there’s no need to make your monthly payments.

In what sense then is such a man “borrowing”?

And the banker who loaned the 400 grand isn’t a “lender” of anything terribly real, is he? Not in an era of banking as performance art. “We refused to touch credit default swaps,” the author and investment adviser Nassim Taleb said. “It would be like buying insurance on the Titanic from someone on the Titanic.”103 But a lot of people did just that. The Canadian commentator Jay Currie, waxing lyrical, put it this way: “If two people make a bet on the fall of a raindrop and each puts up, say, their shoes, the bet is a real 96

after america

bet. If they put up cash it is very close to a real bet. IOUs are not much of a bet. Someone else’s IOUs? Still less of a bet. A good deal of imaginary money is going to money heaven, which is sort of like saying that your stuffed animal is dead.”104

Except that many people made real-world decisions with their dead imaginary money. You thought the house you bought for a hundred grand was now worth a quarter-mil and so you took out a home-equity loan to buy a camper or to send your kid to private school. Your stuffed animal has died, but you’ve still got a real vet’s bill to pay.

And then, just to pile on, the government steps in to replace all that dead imaginary money with real (or realish) money. Having, in effect, colluded in the destruction of meaningful risk-evaluation, Washington decided it was obliged to act—not to prevent a Thirties-style “credit crunch” but to prop up an unsustainable form of mock credit that had led to the crisis in the first place. The state’s response to the downturn was to insist that we needed to re-inflate the credit bubble. If someone punctures your balloon, you can huff and puff into it all you want, but you’re never going to get it up in the air again. The Obama administration blew a trillion dollars of

“stimulus” into the punctured credit balloon, and it flew out the gaping hole in the back, dropped into the Potomac, and floated out to sea.

“Borrowing,” continues Polonius, “dulls the edge of husbandry”—and that goes double for government, whose husbandry is dulled in the best of times. The state spends too much. So the individual spends too much. The state hires too many people on whom it lavishes too many benefits. So those foolish enough to remain in the private sector have to pay for the benefits of the public sector, and fund both their basics (housing) and their baubles (plasma TVs) through debt. At the start of the Reagan administration, America was the world’s largest creditor nation and its citizens had a 10 percent savings rate.105 Not today: By 2007, the average U.S. household had debts equivalent to 130 percent of income.106 Keynes’ view of the economy derived from the premise that a government treasury was not a family purse, and so the state, unlike the household, could borrow to undreaming america 97