Wednesday, July 04, 2007

Failing Welfare States

A Liberal bemoaned that the national debt increased during the presidency of George Bush, and sought to compare the United States unfavorably with welfare states, primarily European, which “take better care of their people.”

That same person, of course, wants the US to spend more on people, and less on defense.

So how does the US compare?

At the end of 2006, the national debt was $4.9 trillion. However, when you add what the government owes itself for Social Security, the total jumps $3.8 trillion (78%) to $8.7 trillion. Of course, that is only the total of the Social Security Trust Fund. The unrecorded liabilities for Medicare and Social Security would increase the total debt by a multiple of seven or eight, or more.

Since Medicare is already insolvent, and Social Security will be insolvent by 2018, these are relevant points to ponder.

We may be spending a lot on Guns, but we are spending a lot more on Butter.

And hiding the bill.

As every politician knows, guns may be necessary to defend us, but politicians spread the butter to get elected.

Democrats, particularly Liberal Democrats, want the government always in control of the mechanism of punishment and reward: taxes, and entitlements.

That’s why reforms such as replacing the IRS with a national sales tax, and privatizing social security and healthcare through personal investment accounts, are non-starters with the believers in big government.

These same politicians also believe that Americans can’t take care of themselves, and need nanny government.

Anyway, let’s look at the numbers:

Although public debt at roughly 64.7% of GDP (including Social Security) may seem high, it ranks the United States 35th in the world, below or equal to most industrialized nations: Japan (175.5%), Italy (107.8%), Greece (104.6%), Belgium (90.3%), Germany (66.8%), Portugal (65.7%), and France (64.7%).

Of course, if they recorded their comparatively vastly larger unrecorded welfare state liabilities, the rest of the industrialized nations, such as the UK (42.2%), Spain (39.9%), and the Scandinavian countries (percentages in the mid-40’s) would vault over the United States in terms of total debt compared to GDP.

The European welfare states actually have problems now, and in the near future, that make the problems of the United States pale in comparison.

Their economic growth is slower, and is forecasted to remain much slower than the US until unlikely fundamental changes are made.

Their population growth is stagnant, and many countries in Europe will soon, if not already, experience negative population growth.

No, or negative, population growth, coupled with rapidly aging populations, will destroy the fragile solvency of European welfare states.

Their tax rates are already high, so high they contribute significantly to slow economic growth, and rates of unemployment already double the US. Taxes will have to go a lot higher to continue their generous entitlement programs.

Of course, the ensuing economic damage caused by sky-high taxes will result in even worsening problems in financing social welfare programs, leading inevitably to their collapse or drastic reductions in services.

The United States should be thankful that our stronger economy, growing population, lower taxes, and smaller entitlements burden give us the breathing room to watch the socialist experimentation laboratory that is Europe, see their problems as they unfold and take down their economies, and learn from all their mistakes.

We’re not to dumb to do that, are we?

Think of these things when Liberal politicians tell you we need to follow the European welfare state example.

Then tell them where to put it.

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