How to Turn a Recession into a Depression

How to Turn a Recession into a Depression - Victor Davis Hanson - National Review Online

Destroy business confidence, cozy up to socialists abroad, send deficits through the ceiling ― that should do it.

It is hard for a president to turn a recession into a long-term downturn in the United States, given the inherent resiliency of private enterprise and America’s open and free markets. But if you were to try, you might do something like the following.

First, propose all sorts of new taxes. Float trial balloons about even more on the horizon. Subordinates should whisper about a VAT/national sales tax. Other aides should revisit campaign talk about lifting the caps on income subject to payroll taxes. A centerpiece of the effort would be to insist on bringing back the Clinton income-tax rates — but this time targeting only high earners and not putting commensurate caps on federal spending. For insurance in making things worse, raise capital-gains taxes. And why not add a new health-care tax surcharge? Let inheritance taxes kick back in. Hope that the states do their synergistic part by raising their own taxes at the same time. The trick is to dissuade businesses from taking risks, by making clear that any new profits are illegitimate and therefore will go to the government.

Second, business expansion is predicated on confidence in the future. Destroy that, and depression can become far easier to achieve. Often the decision to hire or to buy new equipment is psychological in nature — predicated on hope in the larger business climate. So to ruin that landscape, you might unleash a barrage of anti-business, anti-wealth rhetoric to remind job creators that they are already too rich from exploitative practices. The president himself might lead the attack against Wall Street, CEOs, doctors, and insurers. Now and then it would be wise to spice it up with a nice socialist quip such as “I do think at a certain point you’ve made enough money” — or digs about the wealthy needlessly jetting to the Super Bowl or Las Vegas. Try out lines like “keep the boot on their necks” and “know whose ass to kick.” Turn Koch Industries in the public imagination into something akin to IG Farben. Make the Chamber of Commerce the equivalent of Enron. Create a pantheon of good capitalists like George Soros, Bill Gates, and Warren Buffett, who never speculate, hedge, or seek monopolies, and set them against bad ones like Charles and David Koch. Remember, the aim is to let businesses know on a very visceral level that you simply do not like them.

Third, create an artificial economic divide of them/us. Pick an arbitrary figure, say $250,000 in annual income. Families above that figure are suspect and need to pay far more of their ill-gotten gains in income taxes — their “fair share” — to “spread the wealth” and achieve “redistributive change.” Once the capital of small businesses is demonized, they will either stop making any more or hide what they have. Either way, the economy fortunately slows.

Fourth, if one is really serious about undermining business confidence, then attack the very structure of law, statute, and custom. Reverse the legal order of creditors in the Chrysler bailout case to favor labor unions. Call the investors and creditors “speculators.” Pick a big number — why not $20 billion? — for BP to fork over for the Gulf oil spill. Have your labor secretary go on record as saying that illegal immigration is not really illegal; e.g., “Every worker has a right to be paid fairly, whether documented or not.” Sue the state of Arizona for trying to enforce immigration laws. Excuse sanctuary cities that openly flout such laws. Apologize to foreign governments, like the authoritarian Chinese, for Arizona, and then encourage other nations to join in on law suits against Americans. Again, the point is to fire a volley across the bow of businesses, letting them know that social awareness and progressive ideology trump strict enforcement of legal statute — and so they had better make the necessary adjustments.

Fifth, bring as many academics into the administration, and as few people from private enterprise, as possible. The point is to assure the private sector that those who are tenured and for most of their lives have been given guaranteed annual pay raises, who pontificate and theorize rather than create and build, will oversee their antitheses in the business community. Then just when their entire Keynesian blueprint is operative — have them all quit their jobs and return to places like Berkeley, Harvard, and the Council on Foreign Relations. If the image of hostility does not work in slowing down private enterprise, this impression of incompetence — and even cynicism — surely will.

Sixth, overregulation is a powerful tool for prompting a depression and should not be ignored. Promise to go well beyond passing cap-and-trade energy taxes (“an extraordinary first step”); convince businesses (“who can afford it”) with “price signals” that if higher taxes cannot take all their profits, their new energy bills most certainly will. Again, the point is to assure the business community that all that pop socialist talk on the campaign trail was serious stuff. If the president once joshed that energy bills were going to rise dramatically, now in a recession is the time to remind employers that, in fact, they will. Dovetail new energy regulations with vast new health-care and financial regulations. Once again, the message is that the wasteful, cruel private sector must be corralled by the far better public sector.

Seventh, gorge the beast. Try to get annual federal deficits up to the $1.3–$1.5 trillion range. Reagan tried to “starve the beast” — that is, to lower federal spending by lowering taxes. Why not do the inverse and borrow so much money, pile up so much debt, that even fiscal hawks will concede that higher taxes are necessary? It is a win/win/win/win/win proposition: Bigger deficits mean more federal spending, which means more federal employees, who will find more regulations to impose, which will cost employers more money and require higher taxes.

Eighth, take over as many private businesses as possible, the bigger the better — auto manufacturers, banks, insurers. Heck, absorb the entire student-loan program while you’re at it. Remind private businesses that their once-comfortable world of free-market capitalism isn’t so free any more. Dream up a cash-for-clunkers program that destroys the used-car market and lets government borrow billions to buy up old automobiles. “You’re next” is a valuable tool in warning businesses to keep a low profile and slow things down.

Ninth, do not forget to reset foreign policy. Let it be known that socialist systems abroad are no longer suspect. Reach out to Iran, Syria, Cuba, and Venezuela; snub free-market Israel and Colombia. Pick a fight with Germany over borrowing. Run down the value of the dollar. Talk about Keynesian deficits as a proper global model. Mimic the social policies of the European Union. Talk of protectionism and trade wars with China to come. Oppose free-trade agreements.

Tenth, assure businesses that they need more unions. Elevate the profile of the SEIU and ACORN. Get Andy Stern into the White House as much as possible. Make sure Hilda Solis over at Labor keeps up with those videos about exploited illegal aliens coming to her for help. Remind everyone how the UAW’s pensions, wages, and benefits are now protected by Government Motors. Ensure that in campaign appeals you list special-interest groups — “black folks,” young people, unions — to the deliberate exclusion of employers and businesses.

If this ten-step program were to be followed, we might just get unemployment up to near 10 percent, consumer confidence down to historical lows, food-stamp use to record highs, the dollar to a new low, and annual budget deficits at levels previously unimaginable. That way we will never waste a crisis, since all sorts of new possibilities open up once we turn a normal recession into a genuine old-fashioned depression.

— NRO contributor Victor Davis Hanson is a senior fellow at the Hoover Institution, the editor of Makers of Ancient Strategy: From the Persian Wars to the Fall of Rome, and the author of The Father of Us All: War and History, Ancient and Modern.

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