Opinion Root canal politics

We baby boomers in America and Western Europe were raised to believe there really was a Tooth Fairy,whose magic would allow conservatives to cut taxes without cutting services and liberals to expand services without raising taxes. The Tooth Fairy did it by printing money,by bogus accounting and by deluding us into thinking that by borrowing from China or Germany,or against our rising home values,or by creating exotic financial instruments to trade with each other,we were actually creating wealth.

Greece,for instance,became the General Motors of countries. Like GM’s management,Greek politicians used the easy money and subsidies that came with European Union membership not to make themselves more competitive in a flat world,but more corrupt,less willing to collect taxes and uncompetitive. Under Greek law,anyone in certain “hazardous” jobs could retire with full pension at 50 for women and 55 for men — including hairdressers who use a lot of chemical dyes and shampoos. In Britain,everyone over 60 gets an annual allowance to pay heating bills and can ride any local bus for free. That’s really sweet — if you can afford it. But Britain,where 25 per cent of the government’s budget is now borrowed,can’t anymore.

Britain and Greece are today’s poster children for the new post-Tooth Fairy politics,where baby boomers will have to accept deep cuts to their benefits and pensions today so their kids can have jobs and not be saddled with debts tomorrow. Otherwise,we’re headed for intergenerational conflict throughout the West.

David Willetts,a British Conservative candidate told me that the Tories’ most effective campaign ad was a poster showing a newborn baby under the headline: “Dad’s eyes,Mum’s nose,Gordon Brown’s debt.” Beneath was the caption: “Labour’s debt crisis: Every child in Britain is born owing £17,000. They deserve better.” What is most striking about the British election,said John Micklethwait,editor-in-chief of The Economist,was that it may be the first Western election “based on pain.” All the leading candidates warned voters that “cuts are coming,” but none were even close to honest about how deep.

Too bad no party won a majority mandate in the British elections to do this job. After 65 years in which politics in the West was,mostly,about giving things away to voters,it’s now going to be,mostly,about taking things away. Goodbye Tooth Fairy politics,hello Root Canal politics. It’s no fun. Just ask Greek parliamentarians,who,in the wake of announcing radical austerity measures,found their Parliament besieged by rioting anti-austerity protestors.

My takeaway is that US and European politicians — please don’t laugh — are going to have to get a lot smarter and more honest. To be the Regeneration,they’ll have to figure out how to raise some taxes to increase revenues,while cutting other taxes to stimulate growth; they’ll have to cut some services to save money,while investing in new infrastructure to grow economic capacity. We have got to use every dollar wisely now. Because we’ve eaten through our reserves,because the lords of discipline,the electronic herd of bond traders,are back with a vengeance — and because that Tooth Fairy,she be dead.