November 7, 2012 10:44AM

A Nation in Decline?

Der Spiegel, the German magazine, argues that the recent election campaign is evidence that the United States is a nation in decline. Certainly the political system is having its problems, but Der Spiegel's prescription of going further into debt to build high-speed trains and other European follies is a dubious way to fix those problems.

The real decline is in the Republican Party, which couldn't manage to capture the White House or the Senate despite high unemployment and other economic problems. Given the economy, this election was the Republicans' to lose, and lose it they did. They began shooting themselves in their collective feet early in the last decade when they made immigration a big issue, thus earning the enmity of Latinos, the nation's fastest-growing and second-most important ethnic group.

Unfortunately, our two-party system too often limits voters to a choice between a social & fiscal liberal vs. a social & fiscal conservative (or, worse, a social & fiscal liberal vs. a social conservative & fiscal liberal). A large percentage of potential voters don't feel comfortable in either party, and the libertarian side of me thinks, or hopes anyway, that many of those "independents" are socially liberal but fiscally conservative.

By focusing on fiscal issues, the tea parties seemed to provide an alternate route, one that set social issues aside. But, as Marian Tupy notes, too many Republican candidates made social issues a major part of their campaigns, thus alienating both Democrats and independents. Romney, who was neither a true fiscal nor social conservative, didn't help by offering an inconsistent message, as often criticizing the president for cutting budgets, such as medicare and defense, as for spending money.

So the next two years look to be the same as the last two: Democrats in the White House and controlling the Senate while Republicans hold the House. Does that mean more gridlock, with Republicans opposing any tax increases and Democrats opposing any budget cuts?

In the face of a fiscal cliff--meaning automatic budget cuts and tax increases if Congress doesn't find another resolution--Obama hopes for a Grand Bargain in which Republicans accept some modest tax increases in exchange for some modest budget cuts. However, I suspect Republicans are immediately going to regroup for 2014 and 2016, and won't want to commit themselves to such a bargain. Moreover, most of the push against a Grand Bargain is coming from liberals, not conservatives. So I suspect we will be seeing two more years of gridlock.

Take my issue, transportation, which Congress has to deal with again in 2014, the year the 2012 transportation bill expires. What would a Grand Bargain look like for reauthorization of the gas tax and the spending of those tax revenues? A five-cent increase in gas taxes in exchange for cuts in some of the worst examples of pork? It doesn't seem likely; increased gas taxes would just feed the pork barrel, and any cuts in pork would probably be restored in annual appropriations. Fiscal conservatives have nothing to gain by supporting such a Grand Bargain.

Does that mean the U.S. is in decline, as Der Spiegel says? Not necessarily. Elections today are no more contentious than they were between 1876 and 1900, when several presidential elections were decided by less than a percent of the vote and at least two of the electoral college winners lost the popular vote. Politics then were dirtier, or at least as dirty, as any time in American history.

The real threat to the future of the country is not political polarization but the huge fiscal hole Congress has dug, which means the real question is whether our economy can recover enough to ever fill up that hole. The standard free-market answer is that the uncertainty created by Obama's overregulation and inconsistent attitudes towards business will prevent such a recovery. We can only hope that this is wrong.

If they are to participate in this recovery, Republicans must drop the emphasis on social issues (which aren't really decided at the national level anyway) and their hostility towards immigrants. I hate to think that America's future depends on Republicans coming to their collective senses, but the alternative of Democrats suddenly becoming fiscally conservative seems even less likely.