The Death Spiral of the Welfare State

Greece is just the beginning of the unfolding financial disaster in Europe.

What we're seeing in Greece is the death spiral of the welfare state. This isn't Greece's problem alone, and that's why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven't fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies. . . .

And what happened in Greece is not too different from what is happening in California.

Canadian Human Rights Advocate Mark Steyn explains some of the ways the world is changing. Click to full screen mode after starting the video you select below. If you're the impatient type, just go with the Chapter 4 or Chapter 5 video. Interesting ideas, whether or not you agree with them.

Chapter 1 Breaking down the numbers: why the West is dying
Chapter 2 Unsustainable habits of the West
Chapter 3 Civilizational exhaustion
Chapter 4 Response to critics
Chapter 5 Comparing Europe and America

Grecian Formula: How Public Sector Unions Broke California

Depressing.   Follow the link to the City Journal article. And Doug Ross paints a grim picture about the financial situation of Greece, with lots of charts and graphs.

Greece's story will have a series of European Vacation sequels as Italy, Portugal, Spain and other countries also tremble under the strain of crushing debt.

Earlier, VDH gave a 4-step "Grecian Formula" for decline in the post linked here. And Mark Steyn has also compared Greece and California.

VDH again, with commentary by Wretchard - bringing bankruptcy in the UK into the picture.

Are you preparing, personally, to weather the turmoil which seems inevitable, eventually? I'm starting to take these developments seriously.

The End of Trust, the End of an Economy?

I heard an interview of Victor Davis Hanson by Ray Appleton today on KMJ. Evidently, he has a book manuscript now undergoing editing (by the publishers of the Harry Potter series) about ancient precedents for many of today's political developments, even those we consider to be innovative.   Should be good.

They spoke about the europeanization of the United States and its implications for the psychological health of Americans and the financial health and future of the entire world.  They also discussed some similarities between Greece and California.  The governments of both Greece and California face severe  financial difficulties caused by over-spending.  And the natural blessings (and blessings left by past generations)  in both Greece and California allow unrealistic spending to continue longer than in less-beautiful climates and less-blessed regions.

Taxes are so high in Europe that ordinary citizens are becoming as adept at tax evasion as, say, the typical nominee for President Obama's cabinet.  People don't seem to think about the long-term consequences of their actions, because "the government" will take care of everything.  They think  (something also pointed out by Mark Steyn).

Victor Davis Hanson spoke so plainly and clearly. Everything he said made sense. I wish everyone I know could have heard it.  However, he has written a short piece which I can recommend, which covers some of the same topics.  And Wretchard has written a wonderful commentary on a second piece by VDH in which VDH reports his observations while riding a bicycle around rural California, not far from us, and compares what he saw to what he sees and hears in more prosperous parts of the state.  These pieces cover topics which involve us very personally, as people who live in the most economically-depressed part of California and who are participants in the state pension system.

The first piece which increased my understanding of the world is called  "The End of Trust".   It starts out with the financial debacle in Greece as it relates to the sudden disclosure that the books were cooked concerning public pensions in California. Shortfalls come to about half a trillion dollars.   He also discusses other manifestations of the end of trust in financial dealings. 

The world is getting a little edgy when very few investors are willing to buy Greek bonds — given what they know about Greek politics and productivity. . . .

California, take note. Some Stanford economists and analysts just refigured the cooked books at the various California public pensions and found a $500 billion shortfall. The state is already broke. Its taxes are the highest in the nation, the flight of its wealthy per week unsustainable — and its teachers apparently (please explain this?) furious that their salaries are the highest in the country and their students among the worst. So we either float more bonds, or ask retirees to take a cut or freeze. The latter is not even being discussed. . . .

From what the administration announces almost daily, from the radio ads blaring now in the popular culture, and from congressional promising, I think I get the new narrative. “Trust” is an archaic construct established by capitalists to ensnare the more noble poor. When you buy that blue-ray DVD player or plasma TV (saw lots of that today at Best Buy in Fresno), in lieu of a catastrophic insurance plan, and add to it a night out at the Macaroni Grill and the multiplex, it is not all that certain you will have to pay all of that charge back. As you go from one maxed-up credit card to another, there will be a new company waiting to renegotiate your debt, and a demagogic congress person to explain why you were snookered into doing what you did.

“Walking away” is suddenly not defaulting, but a smart move when the house you were betting would go up went down in value. Note that we didn’t have any law suits five years ago against new “greedy” homeowners who woke up each year with thousands of dollars in “equity” that magically appeared out of nowhere. No one wished then to sue the speculative homeowner that banked rightly on his investment; instead, on the way down is where we get the human interest stories about greed — and the need to violate the trust of an obligation. It is all sort of analogous to the Old West stereotyped saloon scene, in which the confident would-be card player struts up to the card game, starts losing, and then overturns the table, guns blazing.

There are dangers to all this.

He then recounts prior similar events in classical history. Read the whole thing.

Wretchard's brilliant commentary:

Two articles, one by Christopher Booker describing the impending bankruptcy of the UK and another by Victor Davis Hanson describing the catatonic walk over the financial edge by California are united by a single theme: the power of denial.

You will learn a lot if you read both of the links above before you read Wretchard's "I want my MTV".

VDH in California: "Are We Parasites?"


Christopher Booker in the UK: "Don't let the voters know we face bankruptcy"


Wretchard in Australia:

Until recently the difference between the First and Third Worlds was that the Western future was real. The Western tomorrow was a definite quantity; loans would mature at a certain date, elections would be held at scheduled times and the pension check would arrive in the mail every 15th and 30th of the month. By contrast the Third World timescale had only the present. Tomorrow was ink on a calendar. Only things you could touch, take or use now were real. Checks in the future were as unreal as rocket ships and rayguns.

What a whole generation of Western political leaders have done is abolish the future. Comprehensively and perhaps irretrievably. And since that hasn’t happened in two generations, very few can even come to terms with it. Victor Davis Hanson describes the bewilderment of Californians who find that, for the first time in living memory, tomorrow isn’t coming. It’s so absurd people treat the fact with disbelief. People continue to act rich even though they’re poor. They live as if that check will arrive tomorrow even though no one can give a reason why it should. . . . 

Were you brave enough to read these articles?  Worried yet? Any ideas how to protect our future?

Greece, California and the Statist Transformation of America

Nothing makes an individual more selfish

than the socially equitable communitarianism

of big government

Mark Steyn:

While President Obama was making his latest pitch for a brand new, even more unsustainable entitlement at the health care "summit," thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split screen - because they're part of the same story. It's just that Greece is a little further along in the plot: They're at the point where the canoe is about to plunge over the falls. America is further upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter 20 (total societal collapse): The Greeks are at Chapter 17 or 18.

What's happening in the developed world today isn't so very hard to understand: The 20th century Bismarckian welfare state has run out of people to stick it to. In America, the feckless insatiable boobs in Washington, Sacramento, Albany and elsewhere are screwing over our kids and grandkids. In Europe, they've reached the next stage in social democratic evolution: There are no kids or grandkids to screw over. . .

So you can't borrow against the future because, in the most basic sense, you don't have one. Greeks in the public sector retire at 58, which sounds great. But, when 10 grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don't have to go to Greece to experience Greek-style retirement: The Athenian "public service" of California has been metaphorically face-down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book "America Alone," I put the Social Security debate in a bit of perspective: On 2005 figures, projected public pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent. In other words, head for the hills, Armageddon, outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn't going to have a 2040 - not without a massive shot of Reality Juice.

Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: "A government big enough to give you everything you want is big enough to take away everything you have." Which is true enough. But there's an intermediate stage: A government big enough to give you everything you want isn't big enough to get you to give any of it back. That's the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people's response is: Nuts to that. Public sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months' work - for many of them the workday ends at 2:30 p.m. When they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

We hard-hearted, small-government guys are often damned as selfish types who care nothing for the general welfare. But, as the Greek protests make plain, nothing makes an individual more selfish than the socially equitable communitarianism of big government. Once a chap's enjoying the fruits of government health care, government-paid vacation, government-funded early retirement, and all the rest, he couldn't give a hoot about the general societal interest. He's got his, and to hell with everyone else. People's sense of entitlement endures long after the entitlement has ceased to make sense. . .

Think of Greece as California: Every year an irresponsible and corrupt bureaucracy awards itself higher pay and better benefits paid for by an ever-shrinking wealth-generating class. And think of Germany as one of the less profligate, still just about functioning corners of America such as my own state of New Hampshire: Responsibility doesn't pay. You'll wind up bailing out anyway. The problem is there are never enough of "the rich" to fund the entitlement state, because in the end, it disincentivizes everything from wealth creation to self-reliance to the basic survival instinct, as represented by the fertility rate. In Greece, they've run out Greeks, so they'll stick it to the Germans, like French farmers do. In Germany, the Germans have only been able to afford to subsidize French farming because they stick their defense tab to the Americans. And in America President Obama, Nancy Pelosi and Harry Reid are saying we need to paddle faster to catch up with the Greeks and Germans. What could go wrong?

Read the whole thing. As Steyn note elsewhere, it's hard to get people in a European-style welfare state to take the need for reform seriously before brutal tyranny rears its ugly head, because a country like this can be a very pleasant place for a majority of people, while it is in the beginning stages of collapse.

J.P. Morgan Chief: California is at greater risk of default than Greece.

More: Follow the links concerning Europe and California here.

What VDH has learned from studying Ancient Greece while living in Modern Greece and California, concerning the dangers of big government.

The ever-cheerful Spengler concerning the choices faced by America.

Obamacare: Worth the Price of the 2010 Election

Mark Steyn, with more on the President's unseemly push for the Democratic health care bill, even at the likely cost of the 2010 election:

So there was President Obama, giving his bazillionth speech on health care, droning yet again that "now is the hour when we must seize the moment," the same moment he's been seizing every day of the week for the past year . . .

Why is he doing this? Why let "health" "care" "reform" stagger on like the rotting husk in a low-grade creature feature who refuses to stay dead no matter how many stakes you pound through his chest?

Because it's worth it. Big time. I've been saying in this space for two years that the governmentalization of health care is the fastest way to a permanent left-of-center political culture. It redefines the relationship between the citizen and the state in fundamental ways that make limited government all but impossible.  . . 

The result is a kind of two-party one-party state: Right-of-center parties will once in a while be in office, but never in power, merely presiding over vast left-wing bureaucracies that cruise on regardless.

 Republicans seem to have difficulty grasping this basic dynamic. . .  .  The Democrats understand that politics is not just about Tuesday evenings every other November, but about everything else, too. . . 

 Nobody has ever attempted this level of centralized planning for an advanced society of 300 million people. Even the control-freaks of the European Union have never tried to impose a unitary "comprehensive" health care system from Galway to Greece. The Soviet Union did, of course, and we know how that worked out. . . 

. . . Congresswoman Louise Slaughter, D-N.Y., justifies her support for Obamacare this way:

"I even had one constituent – you will not believe this, and I know you won't, but it's true – her sister died. This poor woman had no dentures. She wore her dead sister's teeth."

Is the problem of second-hand teeth a particular problem in this corner of New York? I haven't noticed an epidemic of ill-fitting dentures on recent visits to the Empire State. . . Yet, even granting Congresswoman Slaughter the benefit of the doubt, is annexing the equivalent of a G7 economy the solution to what would seem to be the statistically unrepresentative problem of her constituent's ill-fitting choppers? Is it worth reducing the next generation of Americans to indentured servitude to pay for this poor New Yorker's dentured servitude?

Yes. Because government health care is not about health care, it's about government. Once you look at it that way, what the Dems are doing makes perfect sense. For them.

Read the whole thing. It's full of great examples.  Think about it. Then, you might want to consider this piece on the Consent of the Governed (and what to do when it is ignored) again. And this video. The best points are at the end.

By the way: Ezra Klein pretty much admits that Steyn is right. though he wishes the shift to the left went further.

The great mystery of the health care debate is why liberals, who don't trust doctors, hospitals, pharmaceutical companies or insurers, trust Congress and federal bureaucrats.

 Darleen suggests that a new ObamaPress bill might be in order to regulate Mr. Klein's business.  Of course, Campaign Finance laws have been passed to impose stringent regulations of this type for non-journalists (though a recent Supreme Court ruling has recently negated some of these regulations).  And the Democrats are considering something along these lines for journalists, too.   Sean Penn has something even more dramatic in mind for regulating journalists.  Totalitarianism IS tempting.

 I'm waiting for price controls on attorney's fees. At least there would be SOME constitutional basis for this. What with all the bright young college kids who will be going into law instead of medicine, SOMETHING will have to be done.