Friday, June 11, 2010

The Ultimate Irony is That Barrack Obama (the Most Liberal POTUS in Three Decades) is Presiding Over The Death of the West’s Social Welfare Society...

As Frank Drebbin (the character from The Naked Gun flicks) was fond of saying, “Irony can be pretty ironic sometimes.”

And one of those times is NOW.

In 2008 America’s Left thought they’d put one over on the American people. A war-weary America, outraged by a mortgage meltdown they rightly saw as “government-made,” ousted the ruling Party – the Republicans and elected a fresh-faced “political outsider,” who ran as Reagan (tax cuts, reducing the Deficit and, of course, ending two incredibly costly wars), but whose associations belied a far more leftist tilt.

The irony is that after 8 long years of reckless and irresponsible spending - and not just war spending, G W Bush spent more (even adjusted for inflation) on social spending than LBJ did – there wasn’t much left to spend.

But the Obama administration didn’t assess that fact accurately...I know, how could they miss THAT?!

In the space of 18 months, the Obama administration spent more than half of what the Bush administration spent in eight! In the process they’ve driven the National Debt from 63% of GDP to over 85% of GDP!

This hasn’t gone unnoticed. Recently the great Robert Samuelson wrote, “What we're seeing in Greece is the death spiral of the welfare state. This isn't Greece's problem alone, and that's why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven't fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies.

“Americans dislike the term "welfare state" and substitute the bland word "entitlements." Vocabulary doesn't alter the reality. Countries cannot overspend and overborrow forever.”

Robert Samuelson is absolutely correct, and America’s eschewing the word “welfare,” opting for the cheerier “entitlements” only makes our deeply systemic problem harder for us to see.

Mr. Samuelson notes, “Countries everywhere already have high budget deficits, aggravated by the recession. Greece is exceptional only by degree.”

And that is, without question very true. We see it right here in the northeast where government worker’s Unions are fighting a Governor who is facing a revenue shortfall that cannot be fixed with new taxes. That state’s Municipal pensions are woefully much so that it’s unlikely they can ever be brought up to even. Still, like in Greece, New Jersey’s state workers demand their neighbors be saddled with higher property taxes, that sales taxes be hiked, that income taxes be raised “on the rich” (those who earn more, because their skills are more valuable)...ANYTHING but cutting their salaries and benefits.

What’s worse is that there are no easy solutions and no way out of the state we’re in that isn’t going to be hideously painful for many of us.

Again, according to Samuelson’s observations, “The welfare state's death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day - no one knows when - doubt governments' ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder.

Greece illustrates the bind. To gain loans from other European countries and the International Monetary Fund, it embraced budget austerity. Average pension benefits will be cut 11 percent; wages for government workers will be cut 14 percent; the basic rate for the value-added tax will rise from 21 percent to 23 percent. These measures will plunge Greece into a deep recession. In 2009, unemployment was about 9 percent; some economists expect it to peak near 19 percent.”

Can such draconian “remedies” be applied here and throughout the West?

There may actually be no way to avoid this. Imagine pension buy-outs for Municipal workers the way Ford and GM bought out their pensioners...for pennies on the dollar.

Think it can’t happen to government workers?

Who do you think set up that out for Ford and GM?

Hint: It was the government.

Worse still is that since practically the entire West is facing the same predicament, there’s no cooperative way way for a “group bailout,” and the idea that “China won’t allow the Euro and the Dollar implode is wishful thinking. China certainly sees the long-term advantage in taking some short-term pain.

Again, Samuelson sees this as well, “If only a few countries faced these problems, the solution would be easy. Unlucky countries would trim budgets and resume growth by exporting to healthier nations. But developed countries represent about half the world economy; most have overcommitted welfare states. They might defuse the dangers by gradually trimming future benefits in a way that reassures financial markets. In practice, they haven't done that; indeed, President Obama's health program expands benefits. What happens if all these countries are thrust into Greece's situation? One answer - another worldwide economic collapse.”

No one among the political class wants to take any hard steps. They believe that an unrealistic public won’t accept that and they’ll pay with their own sinecures.

What the political class seems to fail to understand is that THEY’RE the ones who’ve encouraged and stoked the public’s unrealistic viewpoint. Our elected officials have acted devoid of reality for so long, that the people believe that “reality has changed.”

It hasn’t...and the piper will eventually have to be paid. Not too far down the road, Greece’s current unrest may seem quite tame by comparison.


Joe said...

Well said!

The ultimate goal of President BO's administration seems to be: Take it all from the citizens and give it back to them in accrodance to their "worth."

I've head a variation of that somewhere.

Trouble is, of course, the "give back" part would come from taxes collected from the people to whom it would be given back.

That's untenable, of course.

JMK said...

The inherent flaw in the redistributionist model is that EVERYONE (including the redistributionist theorists) acknowledge that "SOME skills are MORE VALUABLE than OTHERS."

Given that fact AND the fact that people "respond to incentives," when productivity is punished....or when being a janitor pays as much as being a thoracic surgeon, people eschew learning applying the "hard to master" skills and the economy and society itself falls apart.

What dopey utopianists fail to realize is that the entire edifice of civilization exists upon such disparities.

American Ideas Click Here!