By Robert Samuelson
When the history is written, I suspect the brutal budget battle transfixing the nation will be seen as much more than a spectacular partisan showdown. Careful historians will, I think, cast it as a symbolic turning point for post-World War II institutions — mainly the welfare state and the consumer credit complex — that depended on strong economic growth that has now, sadly, gone missing. The story behind the story is that prolonged slow growth threatens historic changes to our political and social order.
Economic growth is a wondrous potion. It encourages lending because borrowers can repay from rising incomes. It supports bigger government because a growing economy expands the tax base and makes modest deficits bearable. Despite recessions, it buoys public optimism because people are getting ahead. The presumption of strong economic growth supported the spirit and organizational structures of
Everyday life was transformed. Credit cards, home equity loans, 30-year mortgages, student loans and long-term auto loans (more than 2 years) became common. In 1955, household debt was 49 percent of Americans’ disposable income; by 2007, it was 137 percent. Government moved from the military-industrial complex to the welfare state. In 1955, defense spending was 62 percent of federal outlays, and spending on “human resources” (the welfare state) was 22 percent. By 2012, the figures were reversed; welfare was 66 percent, defense 19 percent. Medicare, Medicaid, food stamps, Pell grants and Social Security’s disability program are all postwar creations.