Free Markets, Free People

welfare state

Why Conservatives Should Embrace Free Immigration

After the election, Righty circles are naturally engaging in some soul-searching, finger-pointing, and bickering.  Some of this is unproductive venting, but it’s also the start of the process of working out how to move on and improve, and there’s no time to waste.

My conversations with fellow Righty operatives and bloggers have spurred me to suggest several ways Republicans could simultaneously make the party more attractive (or less repulsive) to voters and achieve more conservative results.  This post is about immigration and reversing the trend of Hispanics rapidly abandoning the GOP; the next is about gay marriage; and the final post is about entitlement reform.

First, let’s dispense with the notion agreed upon by many on the Right: seal the border first, so that whatever follows is more controlled and orderly.  This is an expensive fantasy.  Conservatives need to apply their skepticism of huge, complex, market-distorting government plans to every issue surrounding immigration, starting with any plan to spend tens of billions of dollars on thousands of miles of fence, surveillance, unionized government employees, and a verification system forced on every employer in the country.

It’s a joke that the Republican Party, which is practically defined by marriage, babies, and mortgages, holds at arm’s length a whole demographic (Hispanics, especially foreign-born) that tends to be more religious, marry younger and longer, and have larger families than the average American voter.

Mass immigration could work for the GOP if the GOP went with the tide instead of trying to stop it.

  • If Republicans want school choice, they should have natural allies among those who are religious, have large families, and see their children suffer under the worst public schools.  When you hear complaints that Hispanic immigrants don’t speak English, suggest vouchers and education savings accounts for private-school English language instruction.
  • If Republicans want to revive farms and stop the population drain from rural areas, make legitimate cheap labor more available: open up a bunch of farm worker visas.
  • If Republicans want to cut the cost of new housing so that young people can form households and families, make legitimate cheap labor available for that too.  Heck, why not try to break various trade unions by inviting enough skilled immigrants to swamp or bypass their system?
  • So the entitlement system is a problem?  Yeah, Milton Friedman famously said you can’t simultaneously have free immigration and a welfare state.  Shouldn’t the Republican response be “Bring on free immigration“?  If math dooms Medicaid and the subsidized industrial-age hospital model, why not make the math even harder?
  • Conservatives have longed to shift taxes away from production and toward consumption.  Nobody wants to remove labor tax wedges (AHEM: the payroll tax) as much as someone in a labor-intensive business, the kind that tends to thrive when there’s a lot of cheap labor available.  That goes for both employers and the employees whose compensation is tilted toward wages rather than benefits; we know it suppresses the Hispanic savings rate.  And the payroll tax, of course, helps to maintain the accounting fiction that SocSec and Medicare are like savings.

Now, about the security problem: is it easier to pick out a genuine security threat in the crowd if everyone just has to pass a security check, or if hundreds of thousands of people are trying to cross the border undetected because the only legal route is a seven-year byzantine process?

Heather Mac Donald at NRO offers a potential counter-argument: Hispanics are more suspicious of Republicans for supporting class warfare than for opposing immigration according to a poll (from March 2011), and a majority favor gay marriage, so they’re not such a conservative bunch.  But:

  • Immigration may not be most Hispanics’ top concern, but it isn’t trivial either.  And because politics is so tribal, there are many ways to alienate a group without actually disagreeing on policy – many of which Republicans blunder into when discussing immigration.
  • Finally: social issues.  Mac Donald points out that a majority of Hispanics favor gay marriage.  I’ll argue in my next post that conservatives should proactively embrace gay marriage, which should resolve this issue nicely.

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

Why the Ryan budget is doomed

Over at Zero Hedge there’s a long discussion of the Welfare State. 

We have long argued that at its core, modern society, at least on a mathematical basis – the one which ultimately trumps hopium every single time - is fatally flawed due to the existence, and implementation, of the concept of modern "welfare"…

Love the term “hopium”.  It describes well the addictive drug that underpins the Welfare State.  And we have “long argued” exactly the same thing Zero Hedge has and we’ve even produced the math – many times.

But has that changed anything?  Even those who embrace and tout the Welfare State admit that mathematically it leads to huge deficits and eventual insolvency yet they resist any attempt to change it to prevent those outcomes.  See their reaction yesterday and today to the Ryan budget (which, by the way, at least takes a meaningful swipe at “entitlements”). 

Zero Hedge then quotes “The Privateer”, a subscription letter that bills itself as “the private market letter for the individual capitalist”.  To anyone on the left, the words “individual” and “capitalist” make what I’m about to quote immediately suspect.

For those who’ve spent years studying this problem, nothing that I quote from The Privateer is going to be a surprise.  But I did like the way it was done.  A little different twist on the discussion than you’ll usually see:

The Great Delusion – “Welfare”

For the best part of the last two decades, it has been accepted as an indisputable fact even by the mainstream media that the two great pillars of the welfare state – medicare and social security – will break the government which offers them. Today, every nation in the world makes at least some pretense of providing “welfare” to its citizens. Since the “developed” (or “rich”) nations are those where these systems are most “developed”, these are the nations most at risk of crumbling under their burdens.

Welfare has many antonyms, but “hardship” is particularly apt in this context. Wikipedia’s entry on “welfare” ends like this: “… this term replaces “charity” as it was known for thousands of years, being the act of providing for those who temporarily or permanently could not provide for themselves.” As usual, the defining characteristic is missed. Charity is voluntary. “Welfare” as practised by government is compulsory. This makes the two terms opposites. It also brings about the opposite results. Charity is a voluntary act made by those who have a surplus to assist those who do not. “Welfare” is a system guaranteed to end up in hardship for everyone but particularly for those who are forced to be “charitable”.

The insoluble dilemma of a “welfare state” is twofold. First, it results in a situation in which the majority of people who vote are partially or wholly dependent on the state for their sustenance. In every “advanced” nation today, those who vote for a living outnumber those who work for one. It is true that not everybody, or even a majority of those eligible in many cases, bothers to vote at all. It is equally true that the “wards of the state” have much more incentive to vote than do those who are to provide for them.

The second dilemma is the issue of the unfunded liabilities. The US government divides its budget into discretionary and NON discretionary items. The bulwarks of the welfare state, social security and medicare, fall into the second category. They are considered untouchable. There are only two problems here. First, the unfunded liabilities of these two programs are somewhere in the order of $US 80 – 120 TRILLION. Second, any talk of sharply lower annual deficits (let alone talk of a return to a budget balance) are puerile without MAJOR surgery being performed on medicare and social security. They are gigantic millstones around the neck of the US economy as they are on the economies of all other nations.

In the hands of government – “welfare” becomes its antithesis – “hardship”. Today, this is being illustrated in real time in Greece. But no nation can afford a welfare state in the long run.

I noticed yesterday that one of the first complaints about the Ryan budget is that it leaves defense alone for the most part, but goes after both Social Security and Medicare with plans to reform them in such a way that they are no longer the unfunded liabilities they now are.

Defense spending isn’t our problem.  It is a budget item.  It has to be funded every year.  Don’t have the money?  Cut the budget (and they’ve done that to the tune of $487 billion over the next 10 years – and that’s before sequestration).

But that’s not the case with “non discretionary” spending is it?  That isn’t a budget item in the sense defense is.  It can’t be cut under current law, can it?  Those are important points often left out of the discussion about “what to do”, especially when the distraction of defense spending is introduced into such a conversation.

That, however, is not why I wanted to discuss this today.  I could emphasize almost every line from the quoted piece.  It has that much substance.  The are a number of points I want to amplify.

One … welfare, as The Privateer notes, is not charity.   In fact, welfare is the opposite of charity as piece says.  And when the state becomes a welfare state, it usually pushes much of charity out of the way.  The major point, of course, is charity is a voluntary act by people who have a “surplus” they’re willing to part with in order to help those who need help.  There is nothing voluntary about welfare.   And the involvement of the state leads to outcomes like this:

Mayor Michael Bloomberg’s food police have struck again!

Outlawed are food donations to homeless shelters because the city can’t assess their salt, fat and fiber content, reports CBS 2’s Marcia Kramer.

Glenn Richter arrived at a West Side synagogue on Monday to collect surplus bagels — fresh nutritious bagels — to donate to the poor. However, under a new edict from Bloomberg’s food police he can no longer donate the food to city homeless shelters.

It’s the “no bagels for you” edict.

“I can’t give you something that’s a supplement to the food you already have? Sorry that’s wrong,” Richter said.

Of course it is wrong.  That’s just the latest example.  There are, as everyone knows, untold numbers of similar nanny-state rules that have been enacted over the years simply because of the Welfare State mentality that pervades much of government.  In NYC, in this example, a kind of years long charity has essentially been outlawed by the Mayor because he has decided that the state should be the decision maker as to what citizens of the city’s welfare regime put in their mouths, not charitable givers.  Result – you get to pay more for “welfare”.

But you need to move back a couple of clicks and take a broader look at what the Privateer calls the “insoluble dilemma” of the welfare state – any Western welfare state.  By design:

[I]t results in a situation in which the majority of people who vote are partially or wholly dependent on the state for their sustenance.

And that then leads to insoluble dilemma one:

In every “advanced” nation today, those who vote for a living outnumber those who work for one. It is true that not everybody, or even a majority of those eligible in many cases, bothers to vote at all. It is equally true that the “wards of the state” have much more incentive to vote than do those who are to provide for them.

That, in a nutshell, is the dynamic that both feeds and dooms the welfare state.  The creation of a class of people incentivized to perpetuate the Welfare State because the Welfare State has made them dependent.

It naturally leads to insoluble dilemma two, which, of course, is the creation of untouchable but also huge and unfunded future liabilities that no politician – who panders for votes for a living — is willing to address for fear of losing those “who vote for a living”.

That describes precisely what we’re seeing today in this country as well as the countries of Europe.  The end is inevitable.  The will to do anything about it doesn’t exist.

If you don’t believe me, watch the critiques of the Ryan budget over the next few days.

~McQ

Twitter: @McQandO

Davos elite: Capitalism is the problem

That is certainly the premise at work in Davos as “political and economic elite”, who’ve served us so well to this point, meet to plot discuss modifications to capitalism.

Economic and political elites meeting this week at the Swiss resort of Davos will be asked to urgently find ways to reform a capitalist system that has been described as "outdated and crumbling."

"We have a general morality gap, we are over-leveraged, we have neglected to invest in the future, we have undermined social coherence, and we are in danger of completely losing the confidence of future generations," said Klaus Schwab, host and founder of the annual World Economic Forum.

"Solving problems in the context of outdated and crumbling models will only dig us deeper into the hole.

"We are in an era of profound change that urgently requires new ways of thinking instead of more business-as-usual," the 73-year-old said, adding that "capitalism in its current form, has no place in the world around us."

Show me “capitalism” at work somewhere, please?  Social welfare, in its current form, driven by high taxation and deficit government spending, is what “has no place in the world around us”.

The dirty little secret these “elite” won’t admit was that their premise that capitalism could forever fund their social welfare states is absolutely wrong and failing.  They’ve killed the goose that laid the golden capitalistic eggs.  It isn’t “capitalism” that is failing.  It is their social welfare system that is “outdated and crumbling”.

These are just the same people who got us into this mess trying to shift the blame from unsustainable policies founded in socialism to something which has kept their socialist utopias functioning for more years than they would have had it not been there.

And we should also be precise about what it is that has kept them stumbling along this long … a mixed economy, not capitalism.  A mixed economy which has featured less and less capitalism as the years have gone by.  Capitalism in its defined form exists in few, if any places in this world.

Margret Thatcher’s warning that the only thing wrong with socialism is you eventually run out of other people’s money has come true … again.  The agony was only prolonged because some free market mechanisms were left to at least partially function over all these decades that the Europeans (and now Americans) were constructing their little social welfare houses of cards.  The elite simply refuse to see that reality and now seek another target to which they can shift the blame.  The ultimate in “can kicking”. 

The eurozone’s failure to get a grip on its debt crisis and the spectre this is casting over the global economy will dominate discussions.

"The main issue would be the preoccupation with the global economy. There will be relatively less conversation about social responsibility and environment issues — those tend to come to the fore when the economy is doing well," John Quelch, dean of the China European International Business School, told AFP.

"The main conversation will be about a deficit of leadership in Europe as a prime problem," he added.

The deficit in leadership isn’t just found in Europe.  It is found worldwide.   And it isn’t a deficit of leadership from capitalists, but instead a deficit of leadership within the ranks of the political elite.  They continue to do or try to do the same things that have gotten us into this mess and expect different outcome.   We all know how Einstein defined such activity.

It is interesting to note, too, that the Euro elite are now ready to pitch “social responsibility (however they define that – does that mean the welfare state?) and environmental issues” over the side.

But, in fact, it is more than just that which they should be considering abandoning.  The problems they face do not find their root in a capitalist system or within capitalism itself.   In fact, capitalism could be their savior, if they only gave it an opportunity.

However, they’d also have to abandon most of the social welfare state to do so.

No, their primary problem is to be found with the institution that has attempted to control their economies and which constantly gets in the way of any capitalistic successes in the name of social justice. 

Government.   And more to the point, government spending driven by high taxes and borrowing.  It requires a deficit in intelligence not to understand that.

In essence Davos will be the elite – the social welfare elite – trying their hardest to shift blame on a system they’ve done the most to try to kill over the decades (even while using it to extend the life of their social welfare states).

Controlling government, taxation that provides disincentives to business, labor rules that prohibit firing bad employees, mandated early retirement and generous welfare benefits are not the problem of capitalism.

They are the problem of large, intrusive and socialist leaning governments.

But, apparently, that won’t be a part of the discussion in Davos.

~McQ

Twitter: @McQandO

Ezra Klein: A larger welfare state might mean a smaller deficit

Honestly, that’s his premise.  You can read it here.  He bases his argument mostly in health care costs.  Obviously where he tries to go with it is toward a single payer system.  But he uses Germany as the model.  Anyone, does Germany have a single payer system?  No, it has a public health insurance program that covers 88% of the population.

Take Germany. They have a pretty big welfare state: pensions, health care, paid vacations, unemployment benefits equal to two-thirds of one’s income.

So that’s great and per Klein, who, like I said, wants you to believe by his vague general description, that Germany has a system like … Canada.

Don’t believe it?  Well it takes that sort of implication to make a statement like this:

To bring this across the Atlantic, you could argue that the United States’s debt burden is the product of an insufficiently large welfare state — at least with regard to health care. To see a stark illustration of that thesis, head to the Web site of the Organization of Economic Cooperation and Development and download their health-care statistics for Canada and the United States [emphasis mine].

Notice how apparently we transitioned seamlessly from a country with health insurance to a country with a single payer system without that being obvious?  In reality we’ve looked at the apple, now he plans on comparing it to the orange:

As recently as 1965, the cost of those two systems competed neck-and-neck. That year, Canada spent 5.9 percent of its GDP on health care. The United States spent 5.7 percent. But around that time, Canada was transitioning to its current single-payer system. Over the next four decades, the growth of health-care costs slowed in Canada while it accelerated in the United States. By 2009, Canada was spending 11 percent of its GDP on health care — and covering everyone. The United States was spending 17.4 percent of its GDP and leaving 45 million uninsured. In dollar terms, we’re spending $3,600 more per person, per year, than Canada.

Emphasis mine.  It’s a pretty ballsy attempt, I’ve got to say.  Here’s another question for those paying attention.  Can anyone tell me what began in 1965?  Anyone?  That’s right … Medicare.  Per Klein, we were actually spending less than Canada until the same year that Medicare and government intrusion into the health care market was made law.

Based on that extraordinarily flawed bit of reasoning which managed to factor out or ignore a major reason for the increase in US health care costs, Klein concludes:

If the United States had Canada’s health-care system, and Canada’s per capita health-care costs, we would have a much “larger” welfare state, but we wouldn’t have a deficit problem.

Really?  Seriously?  You really want to run with that one, Mr. Klein?

Perhaps a less rosy look at Canada might help temper that nonsense a bit. Here’s a Canadian economic analyst speaking about the Canadian healthcare system:

"There’s got to be some change to the status quo whether it happens in three years or 10 years," said Derek Burleton, senior economist at Toronto-Dominion Bank.

"We can’t continually see health spending growing above and beyond the growth rate in the economy because, at some point, it means crowding out of all the other government services.

"At some stage we’re going to hit a breaking point."

It means crowding out other government services or what? 

That’s right, deficits.

Well, except in Ezra Klein’s magic welfare state where one can happily spend whatever they want and there are no apparent consequences or … deficits.

~McQ

Twitter: @McQandO

Chinese lecture Europe on the corrosive effect of the welfare state

Irony of ironies.  The Chinese lecturing the supposed capitalist West on economics and the welfare state.  Of course, as we’ve discussed many times, Crony Capitalism and/or Corporatism aren’t Capitalism.   At best the West has a mixed economy with various levels of intrusion and market distortion caused by governments.  In effect, what this gentleman is saying to Europe is the intrusion and distortion levels are such that they have caused a cultural malaise which is finally coming home to roost:

"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.

"Why should, for instance, within [the] eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."

Jin Liqun, the supervising chairman of China’s sovereign wealth fund

Of course that just touches the surface of the problems Europe faces, but essentially Jin is saying that the system in Europe, i.e. state welfare, is not only unsustainable, but discourages hard work – a vicious and self-defeating cycle.

Go figure.   Most rational people understand that human beings respond to incentive.  And that a good portion will always choose the easy way.   Human nature 101.   So when given the option of hard work or being a slacker and getting paid to be one, those who tend to slack will always choose the latter if an incentive to do so is provided. 

His point about labor laws that require rules such as featherbedding for instance is true.  And, by dictating wages, etc., government intrudes on market dynamics which properly price labor.   Instead we see the distortion of labor’s worth, rules that cut into productivity and spiraling costs which kick up the price of goods and services beyond what a market would dictate.

And that’s just a very small part of the problem.  Europe decided decades ago that it could use a mixed economy to somehow pay for a large welfare state.  It thought it had it all figured out and then this crisis hit.  But it was clear to many that it isn’t this crisis that precipitated Europe’s current  financial problems, it just hastened them.  Much like the revenue shortfalls we see here for the trillions in unfunded obligations for Social Security, Medicare and Medicaid, Europe has seen those for years.  Its day of reckoning is at hand.

Greece was the weakest member of the Eurozone.  But Italy, Spain, Portugal and Ireland aren’t far behind.  What critics of the welfare state have said for decades can no longer be hidden.   And, unsurprisingly, the culture that sort of a state breeds is fighting tooth and nail to preserve it, even if they really know that’s not possible.

But the irony is unquestionable.  Lectures by communists on the dangers of the  welfare state.  Snowballs in hell are obviously possible.

~McQ

Twitter: @McQandO

London rioting–are we seeing the death throes of the welfare state?

Buried deep in the New York Times story about the ongoing riots in London, the inability of the police to contain them and the fact that they’ve now spread to other cities is this paragraph:

For a society already under severe economic strain, the rioting raised new questions about the political sustainability of the Cameron government’s spending cuts, particularly the deep cutbacks in social programs. These have hit the country’s poor especially hard, including large numbers of the minority youths who have been at the forefront of the unrest.

The underlying cause of the riots had to do with the shooting, by police, of a popular activist in London.  The spread, however, is presumably now because of the “spending cuts” the Cameron government has made in an effort to address it’s very serious deficit problem.   This on the heels of the same sort of unrest and rioting in Greece when social programs were cut.

The paragraph is intriguing because of the way it approaches the problem.   It doesn’t stress the debt or deficit the UK has or the fact that the level of spending the UK is committed too in order to fund the social programs is unsustainable, it instead addresses the “political sustainability” of such cuts.

That’s a very telling point.   Substitute “political will” for “political sustainability” and you get the picture.  And frankly, that’s what it boils down too everywhere.   Do the politicians in charge actually have the political will to do what must to be done to right the financial ship of state?

What has been built by the welfare states everywhere is crumbling.  There are large irreparable cracks in their foundations.  All are showing signs of unsustainability and that is leading to internal instability.  The recipients of the largess taxed from the producers and borrowed on their behalf isn’t going to be there much longer. 

That’s the problem.  Even the rioters know that the gravy train, in relative terms, is pretty much over.  Reality, not politicians, have said so.  In fact the politicians mostly have no choice – they either have the means to continue as they have in the past or hey don’t.   And the more severely indebted welfare states are hitting that wall.

Add this to the mix though and you see how very horrific this is for the UK:

Beyond such social challenges is the crisis enveloping London’s Metropolitan Police. Even before the outbreak of violence, the police have been deeply demoralized by the government’s plan to cut about 9,000 of about 35,000 officers and by allegations that it badly mishandled protests against the government’s austerity program last winter and failed to properly investigate the phone-hacking scandal that has dominated the headlines here for much of the summer. The force now faces widespread allegations that it failed to act quickly and forcefully enough to quell the rioting at its outset over the weekend.

And of course, citizens there are left not only to fend for themselves in many cases, but have been disarmed by government to boot.

As for the poor “disadvantaged youth” at the center of the rioting?  Well it seems they may not be quite as poor or disadvantaged as one would think:

Despite a build-up in the number of riot police officers, many of them rushed to London from areas around the country, gangs of hooded young people appeared to be outmaneuvering the police for the third successive night. Communicating via BlackBerry instant-message technology that the police have struggled to monitor, as well as by social networking sites like Facebook and Twitter, they repeatedly signaled fresh target areas to those caught up in the mayhem.

They coupled their grasp of digital technology with the ability to race through London’s clogged traffic on bicycles and mopeds, creating what amounted to flying squads that switched from one scene to another in the London districts of Hackney, Lewisham, Clapham, Peckham, Croydon, Woolwich and Enfield, among others — and even, late on Monday night, at least minor outbreaks in the mainly upscale neighborhood of Notting Hill and parts of Camden.

They’ve used technology to organize flash mobs of looters.   It’s anarchy and the police seemingly aren’t up to the job of stopping it.

The BBC and other British news organizations reported Tuesday that the police may be permitted to use rubber bullets for the first time as part of the government’s strengthened response to any resumption of the mayhem. David Lammy, Britain’s intellectual-property minister, also called for a suspension of Blackberry’s encrypted instant message service. Many rioters, exploiting that service, had been able to organize mobs and outmaneuver the police, who were ill-equipped to monitor it.

Rubber bullets, of course, only have an effect if police are where the rioters are.   And apparently, that’s not something they’ve been particularly successful in doing here lately.

Finally, harkening back to the fact that the UK has a serious debt and deficit problem and must cut spending, one has to wonder why it is involved spending money on things like this:

On Tuesday, the violence seemed to be having a ripple effect beyond its immediate focal points: news reports spoke of a dramatic upsurge in household burglaries; sports authorities said at least two major soccer matches in London — including an international fixture between England and the Netherlands — had been postponed because the police could not spare officers to guarantee crowd safety. The postponements offered a dramatic reminder of the pressures on Mr. Cameron and his colleagues to guarantee a peaceful environment for the 2012 Summer Olympic Games.

That $15 billion extravaganza will have its centerpiece in a sprawling vista of new stadiums and an athletes’ village that lie only miles from the neighborhoods where much of the violence in the last three days has taken place.

Bread and circuses?  The UK is laying off policemen and cutting defense spending, but has $15 bil to throw at the 2012 Summer Olympic Games?  One has to wonder about priorities.

All-in-all a very volatile situation which could, given the method being used by the criminals, get worse.  In the meantime expect the liberals on both sides of the Atlantic to denounce the cut backs in social spending and demand the rioting “youths” be placated.  Political will is a scarce commodity in this world.   It may indeed end up the the “political sustainability” of the cuts fall before the desire of politicians to maintain power.   Of course that won’t change the fact that the unsustainable spending bill will come due whether they or the rioters like it or not.   But perhaps, just perhaps, they can kick the can down the road just enough for them to escape the wrath and blame that will come when that can can’t be kicked anywhere any longer.

~McQ

Twitter: @McQandO

The death of the social democratic welfare state

Margret Thatcher boiled it down to its essence years ago – “the problem with socialism is you eventually run out of other people’s money”.

Janet Daley, writing the the UK’s Telegraph, hits a proverbial homerun with her macro look at the “situation” in which both the US and Europe find them selves.  It’s not a pretty picture, but quite accurate.   Per Daley, what we’re going through right now, at least on the European side of the pond, isn’t some esoteric debate about a crisis that will eventually be solved, it is the predictable endgame of the premise that a capitalist system can support an ever expanding social welfare state.  Per Daley, the  answer seems to be a pretty obvious “no”. 

Her reasoning for her conclusion is painful for those who want to believe that such a premise is actually attainable.  Let’s take a look:

The truly fundamental question that is at the heart of the disaster toward which we are racing is being debated only in America: is it possible for a free market economy to support a democratic socialist society? On this side of the Atlantic, the model of a national welfare system with comprehensive entitlements, which is paid for by the wealth created through capitalist endeavour, has been accepted (even by parties of the centre-Right) as the essence of post-war political enlightenment.

This was the heaven on earth for which liberal democracy had been striving: a system of wealth redistribution that was merciful but not Marxist, and a guarantee of lifelong economic and social security for everyone that did not involve totalitarian government. This was the ideal the European Union was designed to entrench. It was the dream of Blairism, which adopted it as a replacement for the state socialism of Old Labour. And it is the aspiration of President Obama and his liberal Democrats, who want the United States to become a European-style social democracy.

The left in this country can deny this all they wish, but Daley succinctly lays out the Democrat’s “ideal” in plain English.  Any attempt to deny that is simply counter-factual.  European-style social democracy has been the ideal of Democrats for years.   And the fight over entitlements makes the point.   The difference between the US and Europe is two-fold.   We thankfully began pursuing that ideal much later than did Europe and the basic difference in make up between Europe and the US is the primary reason:

But the US has a very different historical experience from European countries, with their accretions of national remorse and class guilt: it has a far stronger and more resilient belief in the moral value of liberty and the dangers of state power. This is a political as much as an economic crisis, but not for the reasons that Mr Obama believes. The ruckus that nearly paralysed the US economy last week, and led to the loss of its AAA rating from Standard & Poor’s, arose from a confrontation over the most basic principles of American life.

Contrary to what the Obama Democrats claimed, the face-off in Congress did not mean that the nation’s politics were “dysfunctional”. The politics of the US were functioning precisely as the Founding Fathers intended: the legislature was acting as a check on the power of the executive.

Precisely.  None other than Cokie Roberts noted the “problem” we have here that Europe doesn’t on one of the Sunday shows.  

 

That “problem” and a different but eroding view of the role of government.  And all though we’re on the precipice, that “problem” is  all that have kept us from sliding into the pit Europe has dug for itself over the decades. 

What is going on now is not the fault of the Tea Party, no matter how hard the spinners like David Axlerod and John Kerry attempt to make it so.  In fact, the Tea Party contingent actually represents that fundamental but eroding view of the role of government and the “problem” Cokie Roberts refers too.

The Tea Party faction within the Republican party was demanding that, before any further steps were taken, there must be a debate about where all this was going. They had seen the future toward which they were being pushed, and it didn’t work. They were convinced that the entitlement culture and benefits programmes which the Democrats were determined to preserve and extend with tax rises could only lead to the diminution of that robust economic freedom that had created the American historical miracle.

And, again contrary to prevailing wisdom, their view is not naive and parochial: it is corroborated by the European experience. By rights, it should be Europe that is immersed in this debate, but its leaders are so steeped in the sacred texts of social democracy that they cannot admit the force of the contradictions which they are now hopelessly trying to evade.

Facts are a stubborn thing.  They have a tendency to destroy beliefs and perceptions.  The belief and perception of the “premise” that a capitalist system could forever support an expanding social welfare state is in the throes of being dashed upon the rocks of economic reality.  That’s a harsh thing to see if it is your belief.  And we all know the various stages of grief.   Right now, the true believers are in the “denial” stage.  The only one’s dealing in reality are the Tea Partiers.  Like the canary in the coal mine, they’ve alerted us to a mortal danger that has been acted out in Europe and is now collapsing from within.  They’ve accurately pointed to our problem and how it will lead to the very same conclusion.  They’re demanding we stop pursuing that reckless and doomed “ideal” and return to our fundamental governing ideals – limited government, less costly government, less intrusive government.

And, of course, the true believers in the social welfare state, those who’ve gotten us into this mess and want to deny the problem and continue the pursuit of their destructive ideal are resisting with every fiber of their being and ironically, calling the Tea Partiers the radicals.

What the left can’t control though is the example of our future that Europe provides, like it or not:

No, it is not just the preposterousness of the euro project that is being exposed. (Let’s merge the currencies of lots of countries with wildly differing economic conditions and lock them all into the interest rate of the most successful. What could possibly go wrong?)

Also collapsing before our eyes is the lodestone of the Christian Socialist doctrine that has underpinned the EU’s political philosophy: the idea that a capitalist economy can support an ever-expanding socialist welfare state.

Phenomenally, while the problem becomes more and more undeniable, the solutions being considered are precisely the opposite of what is needed.

As the EU leadership is (almost) admitting now, the next step to ensure the survival of the world as we know it will involve moving toward a command economy, in which individual countries and their electorates will lose significant degrees of freedom and self-determination.

That’s right – those who, through the years, have managed to put us in this situation now think they need more control, intrusion and command, not less.  Those who’ve managed, through their policies and ideology, to wreck the best economies on earth, want more power.  They won’t let go of the belief, despite the reality.  Take for example the Democrats almost single focus on higher taxes.   They still believe they can have their cake (or your cake actually) and eat it too.

We have arrived at the endgame of what was an untenable doctrine: to pay for the kind of entitlements that populations have been led to expect by their politicians, the wealth-creating sector has to be taxed to a degree that makes it almost impossible for it to create the wealth that is needed to pay for the entitlements that populations have been led to expect, etc, etc.

The only way that state benefit programmes could be extended in the ways that are forecast for Europe’s ageing population would be by government seizing all the levers of the economy and producing as much (externally) worthless currency as was needed – in the manner of the old Soviet Union.

That is the problem. So profound is its challenge to the received wisdom of postwar Western democratic life that it is unutterable in the EU circles in which the crucial decisions are being made – or rather, not being made.

Daley speaks of the EU, but listen carefully to the left and the Democrats in this country.   They’re offering exactly the same “solutions” and this administration is attempting that solution by executive fiat through regulation.   Look at the health care grab as well.  We’re headed down exactly the same road Europe has traveled and the left in this country is telling everyone to ignore the road signs telling us so.

The Tea Party has figured that out as have many on the right.  But the left wants to go right on pretending it isn’t so:

We have been pretending – with ever more manic protestations – that this could go on for ever. Even when it became clear that European state pensions (and the US social security system) were gigantic Ponzi schemes in which the present beneficiaries were spending the money of the current generation of contributors, and that health provision was creating impossible demands on tax revenue, and that benefit dependency was becoming a substitute for wealth-creating employment, the lesson would not be learnt. We have been living on tick and wishful thinking.

Couldn’t agree more.  We ‘radicals’ who’ve been saying this for years have been proven to be factually correct.  It is an inconvenient truth the left doesn’t want to either accept or admit.   So the still hold on to the belief that if they could only make the ‘rich’ pay their fair share, they’d find utopia still achievable.  Reality, however, in the guise of the European experiment now imploding, already provides proof their theory has no basis in truth.

So what is the solution?  Well in the short term Daley prescribes some bitter but necessary medicine:

So what are the most important truths we should be addressing if we are to avert – or survive – the looming catastrophe? Raising retirement ages across Europe (not just in Greece) is imperative, as is raising thresholds for out-of-work benefit entitlements.

Lowering the tax burden for both wealth-creators and consumers is essential. In Britain, finding private sources of revenue for health care is a matter of urgency.

More importantly though:

The hardest obstacle to overcome will be the idea that anyone who challenges the prevailing consensus of the past 50 years is irrational and irresponsible. That is what is being said about the Tea Partiers. In fact, what is irrational and irresponsible is the assumption that we can go on as we are.

Dead on. Fundamental change.  Backing government out of our lives.  And we’re dead meat if we don’t heed and act on the fact that the social welfare state is a zombie (but doesn’t yet know it) and we need to finally and irrevocably kill it, never let it rise again, and return to the ways which made us great and are enshrined in our founding documents.

~McQ

Twitter: @McQandO

Deficit “super-committee”? Dead on Arrival

One of the smoke-and-mirrors aspect of this debt deal that experienced observers noticed immediately was the “super-committee” that would negotiate the cuts before the December 23 deadline.  If that committee doesn’t agree upon suitable cuts, then the meat-axe of across-the board cuts, mostly focused in the defense area, will take effect.

Everyone with any sense understands that part of the process of making meaningful cuts in spending and thus the debt must address entitlement spending.  But apparently the liberal left is fine with gutting defense instead. Nancy Pelosi has basically declared that any committee members she appoints will oppose all entitlement benefits cuts.

The debt limit fight is over, but the fight over entitlement programs will continue for months. In the weeks ahead, the leaders of both parties in both the House and Senate will name three members each to a new committee tasked with reducing the deficit by at least $1.2 trillion.

The ultimate makeup of that committee is key. It will determine whether this Congress will pass further fiscal legislation, and, thus, what the major themes of the 2012 election will be.

At a pre-recess press conference Tuesday afternoon, TPM asked House Minority Leader Nancy Pelosi (D-CA) whether the people she appoints to the committee will make the same stand she made during the debt limit fight — that entitlement benefits — as opposed to provider payments, waste and other Medicare spending — should be off limits.

In short, yes.

"That is a priority for us," Pelosi said. "But let me say it is more than a priority – it is a value… it’s an ethic for the American people. It is one that all of the members of our caucus share. So that I know that whoever’s at that table will be someone who will fight to protect those benefits."

Right.  “Benefits” make up their “value” and “ethic”, meaning  they’ll decide what you owe others and what you’ll pay for it and you just shut up, sit back and be quiet.  That’s their “ethic”.  Their “values” lie in redistributing wealth they don’t earn but they certainly find no problem in dividing yours out to those who they favor and/or who will vote for more “benefits” from your pocket book (or in this case, out of borrowed money).

Obviously Ms. Pelosi hasn’t yet quite figured out that the “benefits” that are key to her political agenda and provide her political power are no longer affordable.  Claiming she’s clueless is an insult to the really clueless of the world.   The welfare state has run out of money and all that is has promised is no longer affordable.

Until these people are replaced with people who actually understand the concept of limited government, property rights and the fact that they don’t have the right to anyone else’s earnings, nothing will change in DC or for us.

~McQ

Twitter: @McQandO