Free Markets, Free People

blue state model

So what would happen if Dems got all they want?

California, of course:

“The California Republican Party is functionally dead. And how is California doing, now that liberals have successfully terminated the state’s remaining conservatives?” #1 in debt, #1 in welfare, #1 in taxing the rich. And hoping for a federal bailout, I suspect. As is Illinois, which is in similar straits for similar reasons. “One-third of all the nation’s welfare recipients live in the state, despite the fact that California has only one-eighth of the country’s population. That’s four times as many as the next-highest welfare population, which is New York. Meanwhile, California eighth-graders finished ahead of only Mississippi and District of Columbia students on reading and math test scores in 2011.”

You can warn people till you’re blue in the face (no pun intended) how the blue state model is going to end up, but sometimes it is instructive to just let it happen.  Of course that assumes that those observing the train wreck try to understand how it happened and work to avoid it elsewhere.  I’m not so sure that’s the case in this nation.  But fair warning, given the fiscal road we’re on California is as much in our future as Greece:

“For a century or so, guided by brilliant private sector leadership, California was a beacon to the world, a land of opportunity such as never had existed in human history. Unimaginable wealth was created. Yet it required only 40 years of liberal governance to bring the whole thing crashing down. Today, California is the most spectacular failure of our time. Its government is broke. Productive citizens have been fleeing for some years now, selling their homes at inflated prices (until recently) and moving to Colorado, Arizona, Texas and even Minnesota, like one of my neighbors. The results of California’s improvident liberalism have been tragically easy to predict: absurd public sector wage and benefit packages, a declining tax base, surging welfare enrollment, falling economic production, ever-increasing deficits. Soon, California politicians will be looking to less glamorous states for bailout money. Things have now devolved to the point where California leads the nation in poverty.”

California is a state which has modeled blue government for decades, despite warning of where it’s continuance would lead.

And, shockingly to the left, it has ended up right where it was predicted it would end up.  Yet, they blindly and willfully continue to march along as though the reality will change and economic laws will disprove themselves if they just persist in their actions.

California is our future.  Our near future.  See, it’s pretty much as simple as this:

If a country runs a deficit (as a percentage of GDP) that is equal to its growth rate, the debt level will remain constant. This year U.S. GDP will be a little less than $16 trillion, and its historical growth rate is 3.25%. That works out to what we might call a “safe” deficit of $520 billion, or even $600 billion if you allow for a little inflation. Last year, however, the U.S. deficit was $1.1 trillion — or roughly $500 billion too much.

That gap could be closed by ending all tax cuts, tax breaks and stimulus payments for everyone, according to the Tax Policy Center. But two-thirds of the burden would fall on the middle class — something both political parties want to avoid. All the proposed tax increases on the wealthy, however, even combined with the end of the payroll-tax cut, would raise only $295 billion. So unless there were spending cuts twice as big as the ones currently scheduled, the deficit would still be too large.

Those sorts of cuts aren’t even being discussed.  Imagine, if you would, radical cuts in the size and scope of our current federal government.  Imagine subsidies of all sorts being eliminated.  Imagine backing government out of many of the areas it has no business.  Imagine simplifying the tax code and giving business a warm fuzzy feeling about the business atmosphere by freezing regulation and in some instances rolling them back.  Imagine all of that, because none of it is going to be done.

Instead, the solution is to “tax the rich”.

So let ‘em have it (only if they repeal the Hollywood tax cut).  Tax the rich.  And when it doesn’t work, and it won’t (in fact, I’m not sure what “work” means in this particular case since the amount to be collected is a mere drop in a 1.6 trillion dollar ocean of debt that’s planned each year for the foreseeable future), they’re left with a lot fewer excuses, huh?

Not that they won’t try to point fingers when their grand plan crashes.

Yup, in the end it all looks like we’re headed to California.  Apparently we’re going to have to recreate that debacle on a national level before the blinders come off of the public and the realization that you can’t spend more than you have forever finally sinks in.

Whether or not it will too late to salvage the country at that point, remains to be seen.

~McQ

When the beast starves

I tend to be more optimistic than Dale about the near-to-intermediate future for the economy and for the culture. This may be unusual for a libertarian, but I’m heartened by many of the ways in which our opponents’ system is unsustainable.

Let me start by saying that, given a certain size of central government, libertarians could do worse than spending almost two-thirds of the budget on a few wealth transfer programs (Social Security and Medicare, both mostly funded by flat taxes, plus Medicaid, which gets much of its funding from the states) and a military like ours.  Imagine if that money was spent employing domestic police and busybodies.

But even that government is fiscally unsustainable, so we expect our government to eventually be forced to give up some of its “responsibilities.”  Assuming the country avoids a sovereign debt crisis, that adjustment might not be so bad for libertarians. Continue reading