Yavapai College - Newsletter 1

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home : blogs : general news and politics August 2, 2014

General News and Politics
By Jim Barber, Camp Verde, Arizona
Current news and political discussion
Friday, December 23, 2011

FACING FACTS

 The Barbershop

One ordinarily doesn'tfind the Washington Post being the voice of reason concerning governmententitlement spending, but Robert Samuelson's piece (AZ Republic,Opinions,12/6/11)should be required reading for those who believe that simply taxing at higherrates can indefinitely postpone our day of economic reckoning.

Samuelson points outthe two critical requirements for a welfare state (yes, just like Europeancountries, we qualify for that designation) to survive. One, continual, rapideconomic growth and, two, a young population to support the old.

Obviously, constant,rapid economic growth is wishful thinking. Economies are in constant flux.Markets change, technology advances, trade becomes more complex, recessionsoccur to wring out inefficiencies. Governments' attempts to control theireconomies by fiat are doomed to fail.

In the case ofWestern Europe, after World War II, the various countries were able to prosperunder the defense umbrella of the United States. Unworried by heavy defensecosts, they were able to devote a large percent of their national income togovernment spending. Before the start of the 20th Century, thepercent of national income for government spending for the U.S. was 7.3%,Britain 9.4%, Germany 10% and 12.6% in France. By 2007 the amount of governmentspending had ballooned - U.S. 36.6%, Britain 44.6%, Germany 43.9% and France,an amazing 52.6%. In the beginning of the major expansion of the welfare state,1950's and 1960s, Europe's rich nations had economic growth averaging 4.5percent, "compared with a historical rate since 1820 of 2.1 percent.Unfortunately, the bubble burst and, from 1973 to 2000, Europe's economies settledback to 2.1 percent and have moved lower recently.

The secondrequirement to continue the welfare state, a young population to support theold, is also based on wishful thinking. Modern nations have seen their rate ofreproduction drop as living standards have risen. Most modern countries findthemselves with aging populations with fewer young workers to support them.

Americans, today,suffer from A.I. (avoiding issues). With the specter of the looming collapse ofthe European Union before us, we choose to believe it to be strictly theirproblem. Our politicians tell us what we want to hear in order to getre-elected. With nearly half our population not paying any income tax at all,politicians play the "class warfare" game, telling us that if the "rich" wouldjust pay their "fair share", our coming economic crisis will pass. In truth, ifwe tax the "rich" 100% - take every dime - it will not save us. We have beenspending like drunken sailors. Unlike drunken sailors who, when they run out ofmoney, quit spending, we borrow against our future - 40 cents of every dollarwe spend. A crash is coming - is unavoidable. Will it be a free-fall or will itbe controlled?

The expansion of government to include welfarespending preempted a stable approach to funding for healthcare, retirement and theeconomic ups and downs that every society faces. Once politicians convincedvoters that there really was such a thing as a "free lunch" they have been loathto tell the truth - welfare states only survive as long as good economic timesexist and there remains enough ignorant young workers to spread the cost enoughto not wake them to the fact that they won't live to enjoy the feast.




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