Thursday, June 14, 2012

The Welfare State End-game

How will it all end?  Will we reform the welfare state and prune it back to a pragmatic level of entitlement?  Or will we go over the cliff?  The trouble is that a nation can go over the cliff and still not reform its welfare state.

Look at Argentina.  It went over the cliff in 2002, with a huge devaluation of over 50 percent.  Then it got the populist Nestor Kirchner.  But the politics of the last ten years has been relentlessly left wing, with intrusive regulation and now expropriations of corporations.  Greece is heading the same way.

We are learning is that welfare states cannot trim their entitlements, particularly their employee salaries and their pensions.  "Austerity" sends people into the streets.  In the US the conservative Tea Party is all for reducing government, but not Social Security and Medicare.

Sorry Tea Party.  Government spending pretty well is Social Security and Medicare--apart from education and welfare.

In today's Wall Street Journal Daniel Henninger talks with a young Italian woman.  Her best friend has a degree in electrical engineering, but "he is working for nothing in a hotel."  Other young Italians have already left for Brazil--or China, or Australia.  Henninger pleads with European voters to vote for salvation.
Would a European electorate, if given an honest chance to choose self-salvation rather than the bleed-to-death choices they've been given the past two years, vote to save themselves?
 I doubt it.  I expect European voters to vote for their entitlements.  That is what the French just did.  They voted for "growth" in government rather than austerity.  Voters vote their pocketbooks, right up until the day that the government closes the banks and devalues the currency.

What you can get voters to do is vote against some minority that is looting the public fisc.  So in Wisconsin last week the voters voted for the guy, Scott Walker, that was taking it to greedy government employees.  Voters will vote also against greedy bankers and greedy CEOs.  What they will not do is vote to trim their own benefits.

Why should they?  Most beneficiaries are older people like me, getting government pensions and health care.  They are cultural Keynesians, for Keynes (the childless homosexual) said that "in the long run we are all dead."

Today's European seniors are different from Keynes, of course.  They are childless heterosexuals.  And  they will all be dead in the short run.  So who cares?

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