An agenda for the Federal Reserve’s review of its monetary policy framework


An agenda for the Federal Reserve’s review of its monetary policy framework



In Government America Must Trust

Often misread as an expression of national arrogance, “American exceptionalism” denotes a sociological fact. The United States differs from other advanced democracies in two respects above all — religiosity and suspicion of state power. The former moved to the centre of American politics in the decade just ended; the latter may well dominate the decade just begun. The lack of trust in government has framed, and weakened, the Obama presidency thus far. And rebuilding trust may well be the administration’s most important political task.

Consider the most recent survey conducted by CBS News and The New York Times. Only 19 percent of respondents — near the record low — said they trusted the government to do what is right all or most of the time. Only 29 percent thought they had much influence on what the government does, while 78 percent believed the government to be run by a few big interests, not for the benefit of the people.

Not surprisingly, these sentiments helped shape attitudes about the exercise of public power. Only 35 percent thought that government should do more to solve national problems, versus 59 percent who believed it already did too many things better left to individuals and the private sector. Some 56 percent would prefer a smaller government offering fewer services; only 34 percent favoured a larger and more active government.

These sentiments are not without precedent in U.S. history. From the beginning, doubts about government have been part of America’s cultural DNA. Around the middle of the 20th century, however, it was possible to believe that anti-statism was a thing of the past. Between 1933 and the mid-1960s, the federal government had fought the Great Depression, prevailed in the second world war, contained the Soviet Union, and presided over the greatest expansion of middle-class prosperity in human history. Little wonder that public trust in government reached 76 percent by 1964.

And then the tide turned. Influenced in part by perceptions of deceit over (and defeat in) Vietnam, trust in government fell to 53 percent in 1970. After Watergate, it fell again, to 36 percent, in 1974. After the Great Inflation of the mid- and late 1970s, it collapsed to only 25 percent by 1980. The economic recovery that began during the Reagan administration in 1983 moved trust back up for a while, but it stood at only 29 percent on the threshold of Bill Clinton’s presidency. After rising again during President Clinton’s second term and George W. Bush’s first, it fell rapidly after 2004 and stood at just 17 percent in the weeks before Barack Obama’s historic victory.

To the surprise of many — including, one suspects, the incoming administration — Obama’s inauguration did little to increase trust in government. While the American people had invested their hopes in a promising young leader, they had not withdrawn their reservations about the institutions from which the change he had promised would have to flow.

Nonetheless, the administration felt compelled early on to continue — and in some cases to adopt — measures that intensified mistrust. Justified as necessary to avert a second Great Depression, the bail-outs of banks, American International Group, Fannie Mae, Freddie Mac and the motor industry appeared to many as costly pay-offs to the very institutions whose ineptitude and recklessness had caused the crisis. The administration made matters worse by suggesting that the stimulus package would cap unemployment at 8.5 percent, a ceiling that was quickly breached.

In that context, the decision to push ahead with a massive overhaul of health insurance evoked widespread scepticism. Whatever its merits (and they are significant), the proposed legislation struck many Americans as too costly and intrusive, and doubt soon gave way to resistance.

As schoolchildren, most Americans encounter the ancient maxim, “Eternal vigilance is the price of liberty.” Within limits, it is. But taken too far, the spirit of vigilance yields what the late historian Richard Hofstadter termed the “paranoid style in American politics.” Most political observers dismissed last summer’s raucous town meetings and “Tea Party” demonstrations as an angry fringe phenomenon. That cannot be said today. In a CNN survey released two weeks ago, 56 percent endorsed the proposition: “The federal government has become so large and powerful that it poses an immediate threat to the rights and freedoms of ordinary citizens.” This is deeply troubling. Moderate anti-statism helps preserve liberty. But extreme anti-statism undermines democratic self-government.

To some extent this is correctable, even self-correcting. All else being equal, as economic growth resumes and unemployment declines, trust in government will increase. And the Obama administration has it in its power to bring promise and performance into closer alignment. It is better to under-promise and over-perform than the reverse; the mistaken optimism surrounding the stimulus package can and should be a one-off, not the administration’s modus operandi.

But there are deeper forces at work, and they offer less hope. Economic inequality in the United States stands at levels not seen since the 1920s, and polarization between the two principal political parties is deeper and more pervasive than at any time since the 1890s. Scholars have linked both these trends to intensified public mistrust.

This is bad news, given the challenges facing the United States. Over the coming decade, political leaders must convince Americans that the current fiscal course is unsustainable and that only unpleasant changes can rectify things. Trust is never more important than when citizens are asked to make sacrifices for a brighter future. Mistrust of the government making this request could be the harbinger — even the cause — of national decline.