Comment: Social fabric will tear apart due to special interests.

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Social fabric will tear apart due to special interests.

An interesting excerpt from Parapundit:

I find the bigger context of sustained economic stagnation very important. Tyler Cowen argues that America needs continuing economic growth in order to buy off interest groups. Take away that economic growth and the social fabric will tear apart. Just what will that look like?

Japanese politics is less competitive and Japanese rent-seeking is less competitive than in the United States. Sustained near-zero growth in the United States would mean that interest groups tear apart the social fabric and grab too lustily at the social surplus. Whether we like it or not, we are "built to grow" and we use the fruits of that growth to buy off interest groups as we go along. Japan in contrast has greater capacity to stifle these grabs for new redistributions because their politics is more of an insider's game.

Suppose economic stagnation continues. The US is already in the biggest economic downturn since the Great Depression. Buy off interest groups? Revenue collapses at local governments are so severe that many cities are in the process of un-buying off interest groups. These revenue collapses mean most of the big state spending cuts still lie in the future. After pretending to produce a balanced budget the California legislature just passed a budget with a 11% deficit. Lots of states are at risk of default with California and Illinois the biggest fiscal basket cases. With huge unfunded retirement liabilities their problems are going to grow much larger even if the economy eventually recovers for a few years.

If you read nothing else, read this: A Contract Between Americans