Are We All Greeks Now?

Thursday, May 13, 2010 \AM\.\Thu\.

Hattip to Ed Morrissey at Hot AirAnother fine econ 101 video from the Center for Freedom and Prosperity.   Government debt is rapidly becoming the major issue of our time, both here and abroad.  The welfare states erected throughout the world have always had a resemblance to Ponzi schemes,  and all Ponzi schemes ultimately collapse, which is what is happening around the globe.  Robert Samuelson nailed it this week in the Washington Post:

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.

Americans dislike the term “welfare state” and substitute the bland word “entitlements.” The vocabulary doesn’t alter the reality. Countries cannot overspend and overborrow forever. By delaying hard decisions about spending and taxes, governments maneuver themselves into a cul de sac. To be sure, Greece’s plight is usually described as a European crisis — especially for the euro, the common money used by 16 countries — and this is true. But only up to a point.

Euro coins and notes were introduced in 2002. The currency clearly hasn’t lived up to its promises. It was supposed to lubricate faster economic growth by eliminating the cost and confusion of constantly converting between national currencies. More important, it would promote political unity. With a common currency, people would feel “European.” Their identities as Germans, Italians and Spaniards would gradually blend into a continental identity.

None of this has happened. Economic growth in the “euro area” (the countries using the currency) averaged 2.1 percent from 1992 to 2001 and 1.7 percent from 2002 to 2008. Multiple currencies were never a big obstacle to growth; high taxes, pervasive regulations and generous subsidies were. As for political unity, the euro is now dividing Europeans. The Greeks are rioting. The countries making $145 billion of loans to Greece — particularly the Germans — resent the costs of the rescue. A single currency could no more subsume national identities than drinking Coke could make people American. If other euro countries (Portugal, Spain, Italy) suffer Greece’s fate — lose market confidence and can’t borrow at plausible rates — there would be a wider crisis.

But the central cause is not the euro, even if it has meant Greece can’t depreciate its own currency to ease the economic pain. Budget deficits and debt are the real problems; and these stem from all the welfare benefits (unemployment insurance, old-age assistance, health insurance) provided by modern governments.

Countries everywhere already have high budget deficits, aggravated by the recession. Greece is exceptional only by degree. In 2009, its budget deficit was 13.6 percent of its gross domestic product (a measure of its economy); its debt, the accumulation of past deficits, was 115 percent of GDP. Spain’s deficit was 11.2 percent of GDP, its debt 56.2 percent; Portugal’s figures were 9.4 percent and 76.8 percent. Comparable figures for the United States — calculated slightly differently — were 9.9 percent and 53 percent.

There are no hard rules as to what’s excessive, but financial markets — the banks and investors that buy government bonds — are obviously worried. Aging populations make the outlook worse. In Greece, the 65-and-over population is projected to go from 18 percent of the total in 2005 to 25 percent in 2030. For Spain, the increase is from 17 percent to 25 percent.

The welfare state’s death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day — no one knows when — doubt governments’ ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder. Read the rest of this entry »

Advertisements

November 2009, Stupak Never Intended to Vote No on ObamaCare

Monday, March 22, 2010 \AM\.\Mon\.

Last November during a town hall meeting near the Upper Peninsula Representative Bart Stupak of Michigan, an alleged “pro-lifeDemocrat that recently voted for government funding of abortion, made it clear that he was never going to vote “No” on ObamaCare.

Biretta tip to Sydney Carton and Alicia Colon.


Now This, This Would be a Sign of the Apocalypse!

Wednesday, January 13, 2010 \AM\.\Wed\.

A Republican may be elected to serve out Ted Kennedy’s unexpired term?  It could happen! Public Policy Polling, a Democrat leaning polling outfit shows the election a toss up between the Democrat Coakley and the Republican Brown.  Scott Rasmussen, the best political pollster in the business in my opinion, shows Coakley up by two.  Last week he showed her up by nine.  On Monday Brown raised over a million dollars in one day in internet donations.

If Brown wins the Senate race in the Peoples’ Republic of Massachusetts, it will send a political shock wave across this country the like of which hasn’t been seen in many a year.  If Ted Kennedy’s senate seat isn’t safe, what seat is safe for the Democrats?  Oh, I don’t believe that I should call it Ted Kennedy’s seat per Mr. Brown.


Of Tea and Elections

Monday, September 14, 2009 \AM\.\Mon\.

I have had my eyes on the tea party movement protesting government spending since the beginning of the movement.  On Saturday a huge national tea party protest was held in Washington.  Estimates of crowd size range from 500,000 to 2.3 million.  Some organs of the mainstream media are attempting to downplay the significance of this event.  Politicians on both sides of the aisle are not so gullible.  They realize that a political storm is brewing.  Perhaps even more significant than this show of strength by the forces opposed to the drunken sailor spending of the Obama administration are the state tea parties taking place each week.  For example in the completely blue state of Illinois, my home state, there was a tea party at New Lennox near Joliet last week that drew 10,000 people.   This weekend a tea party at Quincy, Illinois drew 12000 people.   Receiving scant coverage from the national media, these parties are are becoming a real factor in the 2010 elections.

Charlie Cook is one of the best political prognosticators in the business.  Here is what he is seeing:

 

“Even in the best of times, Congress is unpopular. And now voters see Obama as having sent suggestions rather than proposals to the Hill, staking his future and reputation on a body that they hold in low regard. (On foreign-policy matters, where Congress plays a small role, Obama’s job-approval ratings remain quite good. It’s on the domestic side that his numbers are dismal.)

With 14 months to go before the 2010 midterm election, something could happen to improve the outlook for Democrats. However, wave elections, more often than not, start just like this: The president’s ratings plummet; his party loses its advantage on the generic congressional ballot test; the intensity of opposition-party voters skyrockets; his own party’s voters become complacent or even depressed; and independent voters move lopsidedly away. These were the early-warning signs of past wave elections. Seeing them now should terrify Democrats.”


Spending Spree

Tuesday, September 8, 2009 \AM\.\Tue\.

Broke Uncle Sam

 

Hattip to Instapundit.  John Steele Gordon has a first rate article here detailing how we landed in the debt morass our nation is now bogged down in.    His last sentence is a completely accurate assessment of our options: ” Only necessity will force Congress to control long-term spending on its own.  And unless the body politic forces the needed changes, that necessity in the form of overwhelming debt is inescapable.”


Congress Feeling the Heat

Sunday, August 2, 2009 \PM\.\Sun\.

town-hall-2

Hattip to Instapundit. Democrat Congress beings are reporting here that they are encountering angry constituents at their townhall meetings.  Now why would their constituents be so angry?

red-ink

Oh yeah.

There is a political storm brewing in this country of immense proportions.  If some members of Congress aren’t aware of it yet, they will be after they return from the August recess.


How to Get There from Here

Tuesday, July 28, 2009 \AM\.\Tue\.

There’s been much discussion of late about what other country’s health care apparatus the US should consider emulating, and in such discussions France is often mentioned. Now, all cheerful ribbing against the French aside, their health care system is not nearly as “socialized” or nearly as afflicted by treatment denials and waiting lists as those of the UK or Canada. It is also rather more like the system that the US already has, in that it is a hybrid public/private system, though in their case there is a guaranteed base level of coverage everyone has through the government (funded via a hefty payroll tax — not unlike Medicare) which most people supplement with private coverage. Most doctors are in private practice, and 25% do not even accept the public plan, just as some practices in the US do not accept Medicare. However, everyone does have that minimum level of coverage, and the French spend a lower percentage of their GDP on health care than the US (11% versus 16%) which when you take into account that France’s GDP per capita is a good deal smaller than that of the US (which is the polite, economist way of saying it’s a poorer country) works out to the US spending about twice as many dollars per person on health care, while still not having universal coverage.

So what are we waiting for? Why don’t we go enact the French system here right now? Why doesn’t Obama put on a jaunty beret, dangle a cigarette coolly from the corner of his mouth, hoist a glass of wine, and just say, “Oui, nous pouvons.”
Read the rest of this entry »