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Is Greece the Future of America?
Sheldon Richman
Campaign
For Liberty
Thursday March 18, 2010
It may be possible to look into America's future. How? Watch
what's going on in Greece. According to the Washington Post,
"Greece needs to raise about €23 billion [more than
$31 billion] in April and May to pay debts coming due. Greek
officials say that either is impossible, or would require punitive
interest rates -- making it harder to bring the budget under
control -- unless Europe helps out." So the Greek government
awaits a bailout from Germany and France, but first it has to
impress them that it is serious about fiscal austerity.
The Greek welfare state's annual deficit is about 13 percent
of its GDP and its accumulated debt is 113 percent of GDP. Meanwhile,
the U.S. government's overall debt is now on track to reach
90 percent of GDP by 2020, more than $20 trillion. Just last
week the Congressional Budget Office said that over the next
decade, the annual budget deficit will be $1.2 trillion more
than the Obama administration has guessed. The ten-year figure
is now projected to be $9.76 trillion. The annual deficit is
about 10 percent of GDP.
Government spending is rising -- and the new entitlement called
health-care "reform" hasn't passed yet. That'll be
good for a couple of trillion over the next decade.
The economic consequences of all that are likely to be dire.
As the government tries to borrow more money, both to finance
its programs and to pay the old debt that's coming due, it will
have to promise a better return to nervous lenders, such as
China. But raising the interest rate will push other borrowers'
rates up, which in turn will put a damper on economic activity.
Unemployment will grow and revenues will shrink, but entitlement
programs, such as Medicare and Social Security, will keep growing.
They already face tens of trillions of dollars in unfunded liabilities
and are heading toward bankruptcy. Military spending will also
increase, along with most other government spending.
What will the politicians do when they find interest payments
swallowing the budget, leaving them less and less money to shower
on political supporters? They might resort to higher taxes,
which would further dampen economic activity. They might get
the Federal Reserve to monetize the debt through inflation;
but that would wreak economic havoc. Politicians aren't likely
to cut spending because it would jeopardize their careers. At
that point, the government might default on its debts, a step
that has much to recommend it.
Thus, the welfare state is a fiscal failure.
The welfare state has long been presented as the viable "third
way," a happy medium between laissez faire -- full separation
of state and economy -- and state socialism -- government control
of the economy. Advocates of individual liberty have emphasized
that the welfare state violates freedom because government takes
wealth from those who produce it and transfers it to favored
groups. Defenders have responded that the welfare state embodies
compassion: people with means give to those less fortunate.
But forced transfers through government are not true compassion.
A virtue like compassion requires free choice, but government
gives you no choice. So the compassion of the welfare state
is counterfeit. It's more about distributing goodies at others'
expense to win votes for politicians.
Historically compassion had little to do with government programs
for the poor and social insurance for the working and middle
classes. Beginning as far back as Queen Elizabeth I poor laws
were intended to control people who were potential sources of
social strife; and social insurance beginning in Bismarck's
German welfare state was calculated to make working people dependent
on the government. In both cases the free society was subdued
for the sake of those in power.
Now it is clearer than ever that the welfare state is not only
morally flawed, it is also fiscally unsustainable. Politicians
will always have an incentive to spend, while hiding the costs
or pushing them onto future generations through debt. But reality
doesn't go away. It comes back to bite in unexpected ways.
We're seeing it in Greece today. Tomorrow it will be other
European welfare states. Then, if nothing changes, it will be
America's turn.
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INFOWARS:
BECAUSE THERE'S A WAR ON FOR YOUR MIND
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