it’s true a “deep state” means the ship of state turns slowly, acts as a kind of low-pass filter on the effect of political decision making and remaking, and therefore in a certain sense “restrains democracy”. 1/

but it also helps immunize the polity from the consequences of political noise, short-lived passions, momentary errors, accidentally electing a mad king. 2/

genuine democracies don’t naively presume that popular passions are always perfect. they build institutions that give effect to values and interests durably expressed by the public, but frustrate controversial sharp turns unless they persist and recruit broad consensus. 3/

with apologies to Mencken, democracy is not when the people get what they want good and hard, but when government is responsive to the people but able to distinguish signal from noise, without any king or higher authority arrogating the role of deciding what’s signal. 4/

it’s the institution. /fin

anything human is subject to variations of context, but "ceteris paribus", i think overall experience suggests that running indefinite trade imbalances is harmful to welfare. 1/

one channel is the politics that arise at breakdown. another channel is loss of tradables knowhow and capability for the deficit country. 2/

i can think of mitigations. for the US (at least until recently), the special role of the dollar, and the fact all debts are dollar denominated, reduces susceptibility to crisis and so harm through the first channel. 3/

other deficit countries enjoy this resilience to the degree they borrow in their own currencies, although absent a special international role, borrowers in their own currency usually eventually face limits from lenders. 4/

the sapping of tradables activity is something a wise government could overcome, by for example using fiscal flexibility foreign debt accumulation provides to sustain nonmarkets research and resilience organizations that sustain activity in tradables domains on largely a noncommercial basis. 5/

but in practice that kind of thing gas been very rare, and demands a lot of good calls by the state in terms of judging what capabilities to sustain and subsidize without market guidance. /fin

i think health care might be a low hanging fruit. it’s expensive — any intervention from a health-care “safety net” to full universal care will cost a lot of money, so create a lot of income and therefore domestic demand. 1/

but it’s not “welfarist” in the sense it enables people to opt out of work, become complacent or decadent or whatever people like Xi misproject on Western social democracy. it’s a complement to labor, never a substitute. 2/

right now, China is still hoping it can ride through the turbulence and continue to rely on global demand to pull out of stagnation. but if the US remains chaotically cold turkey and Europe refuses to take on much of its role, i think China will get there… 3/

with “there” defined as domestic demand stimulus, not necessarily through health care, but for the reasons above, maybe health care is a good bet. /fin