Free Markets, Free People

Daily Archives: February 13, 2012


Greece goes cold turkey

And no, that’s not a joke about Turkey.  What you’re seeing in Greece is what you see in any drug rehab program … the results of withdrawal.  In this case, the addiction isn’t to heroin or cocaine, but other people’s money.  And Greece passed the tipping point of dependency years ago, decades ago.

But the money has finally run out and the addict doesn’t have the necessary money for the next fix.

Result?  Violence, denial and the refusal to accept the treatment.

More than 40 buildings were set ablaze in an orgy of looting that left scores injured as protesters vented their anger at the caretaker government and parliament’s ordering of a further €3.3bn of savings by slashing wages and pensions and laying off public sector workers.

[…]

But the scenes of mayhem on the streets of Athens and all across the country leave big questions unresolved regarding Greece’s capacity to stick with the savage austerity. The country is in its fifth year of recession and has little prospect of halting a steep decline in living standards.

[…]

Meanwhile street battles between police firing rounds of teargas and demonstrators hurling firebombs and marble slabs left Syntagma square, the plaza in front of the parliament building, resembling a war zone.

Rubbish bins burned and plumes of smoke and asphyxiating clouds of toxic chemicals filled the air.

The explosions were so loud, they could be heard inside parliament and the teargas drifting across square reached the debating chamber. The buildings that were set on fire included cinemas, banks and a number of shops, and Greek television reported that dozens of citizens and at least 40 police officers had been injured.

Why?  Because the caretaker parliament has, of necessity, tried to do what is necessary to return the country of Greece to fiscal sanity.  And that entails drastically reducing or eliminating decades of entitlements that the government granted but which was obvious the country couldn’t afford.   Among them:

Parliament backed drastic cuts in wages, pensions and jobs on Sunday as the price of a 130-billion-euro ($172 billion) bailout by the European Union and International Monetary Fund …

That included a roll back of Greece’s minimum wage.   This doesn’t settle anything though.  Although the vote was important, EU leaders are still not convinced that implementation will ever happen:

The EU welcomed the vote, but told Greece it had more to do to secure the funds and avoid a disorderly default next month that would have "devastating consequences."

Euro zone finance ministers meet on Wednesday, and the fragile ruling coalition of Prime Minister Lucas Papademos has until then to say how 325 million euros of the 3.3 billion euros in budget savings will be achieved.

A government spokesman said political leaders also had until Wednesday to give a written commitment that they will implement the terms of the deal, reflecting fatigue in Brussels over what EU leaders say have been a string of broken promises.

So this has turned into a series of attempts and votes and “guarantees” and failures leading to this latest attempt to keep Greece afloat – something the rest of Europe, according to reports, deems as critical.

There’s also a vote in April, a month after the demand that the deal agreed upon is scheduled to be implemented.  Many observers believe the vote will be driven to the extreme left or right by these events.  That, of course, would set up political polarization which will be difficult, if not impossible, to overcome.  A preview of that problem was seen after this vote:

The leaders of two of the three major political parties in Prime Minister Lucas Papademos’s interim coalition government — the Socialists and the center-right New Democracy party — agreed on the new round of austerity after days of tense debate, maneuvering and threats. The leader of the third, the right-wing Popular Orthodox Rally, refused to endorse the measures and later withdrew from the coalition.

In the debate on Sunday night before the vote, Mr. Papademos appealed to lawmakers to do their “patriotic duty” and pass the measures, saying they would be saving Greece from bankruptcy in March, when a bond issue comes due that Greece cannot repay without foreign help.

In a sign of how the crisis has frayed the political order in Greece, the three leading political parties all moved swiftly to expel lawmakers who had broken ranks with leaders in the voting.

Although we’re likely to deny any applicability of the crisis there to our circumstances, our country is headed in the same direction, albeit later and more slowly.  But the end-state will be the same.  The difference is just a matter of degree, not design.  Greece is simply the first of many countries who’ve tried to redistribute income to support a socialist inspired lifestyle from a diminishing pool of workers. 

It is our future, if we don’t change our ways … drastically.

~McQ

Twitter: @McQandO


Government dependency climbs aided by Republicans

If you haven’t seen the Heritage Foundation report on government dependency for this year, you need to spend some time at least perusing it.   Some of the charts will shock you. 

I’m planning on looking at different parts of it over the next few weeks as appropriate and I get the time.

We often hear the Democrats cited as the reason we’re in this mess today, but that’s a cop out.  The right in the guise of the Republican party are just as guilty as the Democrats.  In fact, I’d argue they’re more guilty.  The reason we’re in this mess today is because over the years the Republicans have accommodated the Democrats by compromising their principles. 

The most recent examples are Medicare Part D and No Child Left Behind – two huge government programs one of which put a new entitlement in place and the other which increased federal control of education (at an equally huge cost).

Here’s a quote from the Heritage Foundation report I’d like you to focus on:

The last decade has seen a significant expansion of benefits provided by Medicare, including the new prescription drug benefit created under Medicare Part D. From 2004 to 2010, Part D was responsible for $214 billion in federal spending.[26] Though the role of competition in its defined-contribution model has caused estimates of its 10-year cost to drop 41 percent from initial CMS projections, the program has added substantially to health care entitlement spending.[27] Additionally, the publicly funded Part D program has crowded out private coverage alternatives. Research by economists Gary Engelhardt and Jonathan Gruber suggests that before Medicare Part D was enacted, 75 percent of seniors currently receiving public coverage held private drug coverage. Part D also increased average spending on prescription drugs by seniors, an expense that is funded by an increase in public spending of 184 percent, accompanied by a reduction in seniors’ out-of-pocket spending of 39 percent and private insurance plan spending of 37 percent.[28]

First, remember that we’re talking about the “richest” demographic in our country when we talk about seniors.  Yes, everyone knows that, like every demographic, there are exceptions, but for the most part, seniors are pretty well set.

Now, notice the effect that this program has had.  It has “added substantially to health care entitlement spending”    It has “crowded out private coverage alternatives”.  And it has “increased the average spending on prescription drugs by seniors … funded by an increase in public spending of 184%”.

So A) it increased public spending in an ear in which we can’t afford increased public spending, B) it basically destroyed a market that was apparently working prior to its implementation  C) the taxpayer is on the hook for more spending as seniors, who now pay less out of pocket, shift the cost to them.

This wasn’t a program supported just by the left, folks.  This was negotiated, passed and signed into law with the blessing of a Republican President.

THIS is why we’re in the mess we’re in.  THIS is where the precedent for ObamaCare was set. 

As much as the other candidates want to hit Mitt Romney on RomneyCare (and they should), one should remember that Rick Santorum voted for Part D (although he now says that was a “mistake”) and Newt Gingrich lobbied for it.

It is those sorts of compromises and accommodations which have put us in the mess we’re in today.  The party of smaller government has consistently caved in to larger government programs all the while hollering about the left.

This is one reason there’s so much disgust on the right with the party, at least among activists and Tea Party types.

As I said, I’m going to be spending some time on this report, but this is one area that needs to be illuminated and discussed.  If the GOP ever wants to recover its soul, it has to quit compromising its principles and find a way to explain, in a compelling way, why programs like this are the wrong way to go.  They managed that with ObamaCare.  They need to take that lesson and translate it into all future actions.

They need to back away from the trough of federal money and truly embrace smaller less costly government.   In terms of entitlement and dependency, if we’re not at a tipping point, we’re very close.  The critical nature of this upcoming election can’t be over emphasized.

If ObamaCare becomes law, we’re sunk.  I believe it was Margaret Thatcher who said the reason she wasn’t able to accomplish as much as Ronald Reagan was because of the National Health Service. 

Unfortunately, since Reagan’s time subsequent Republican administrations have helped build one here.  

~McQ

Twitter: @McQandO

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