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.
[…]
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.
Greece illustrates the bind. To gain loans from other European countries and the International Monetary Fund, it embraced budget austerity. Average pension benefits will be cut 11 percent; wages for government workers will be cut 14 percent; the basic rate for the value added tax will rise from 21 percent to 23 percent. These measures will plunge Greece into a deep recession. In 2009, unemployment was about 9 percent; some economists expect it to peak near 19 percent.
If only a few countries faced these problems, the solution would be easy. Unlucky countries would trim budgets and resume growth by exporting to healthier nations. But developed countries represent about half the world economy; most have overcommitted welfare states. They might defuse the dangers by gradually trimming future benefits in a way that reassured financial markets. In practice, they haven’t done that; indeed, President Obama’s health program expands benefits. What happens if all these countries are thrust into Greece’s situation? One answer — another worldwide economic collapse — explains why dawdling is so risky.
Sure. But that’s all so dark cloudyish. And, you know, down the road.
Meantime: FREE SHIT!
The selfish gamble implicit in the welfare state is that, though most people know on some level that spending in excess of revenue isn’t a very fiscally responsible long-term plan on which to build a stable society, many are willing to bet that resources won’t run out in the short term — which means these types of voters believe they will still get theirs so long as they continue to “vote in their own economic interests.”
Future generations? Not their problem.
And besides. If their kids don’t like being poor, let them do what everyone does to climb out of poverty: get a government job.
(h/t sdferr)
I have tried to convince my dad that SoSec is going to kill the country and should be stopped, cold turkey, like heroin. His response – “but I paid in!”
” His response – “but I paid in!” ”
Indeed, he did, and in a sense it would be absurd for him not to cite the fact. We all know when we’ve been had by a ruse, and put up a stink precisely because we’ve been had. The misfortunate accidental last “holders of the worthless bag” in a pyramid scheme aren’t wrong to complain. But their just complaint can’t relieve them of the necessity of suffering.
Much of the entitlement program’s outyears funding problems, the ones that threaten the long term debt of the US the most, stem from the ponzi-like nature of the schemes themselves.
It’s like all of FDR’s and LBJ’s uber-smart policy wonks never considered what would happen during periods of declining birthrates-like when the public at large embraced the notions of “the population bomb” and abortion on demand.
Or maybe they did, and just had a long-term Cloward-Piven effect in mind.
“Or maybe they did, and just had a long-term Cloward-Piven effect in mind.”
I’m inclined to think what we’re seeing is far more like an Hayekian emerging [dis]order, than the result of conscious planning.
But don’t worry all. I’m sure my Navy pension will be cut before social security at large. I mean, more voters and all…
Although the majority of seniors seem to be “dangerously” conservative of late.
I guess too many hippies died on a bathroom floor in the 60’s and 70’s.
Increasing economic entropy.
We all have to realize that social security payments are just taxes, and that many of us will never see that money. I certainly don’t expect to get any of it. They will have to means-test it and raise the retirement age significantly if they want to save it. It isn’t what people expect, and it doesn’t meet the terms as set by the government, but there really isn’t much that can be done. The current system will fail, there is no way it cannot.
That which cannot continue eventually will not continue.
At Belmont Club.
Don’t know how that happened.
Broken link is broken.
http://pajamasmedia.com/richardfernandez/2010/05/08/r-utah/#more-8944
I just don’t know how that happened with the Text Formatting Toolbar. I messed up somehow I expect.
That’s happened to me before geoffb, but it’s rare as all get out. I’ve suspected a delayed but then instantaneous cursor selection in the text field occurring at the same moment of hitting the say it button, but I’m not at all sure of that.
Anyways I was wanting to get that quote out there. That all of the social-welfare states are now “running out of OPM”.
A litte taste of Greece in Motown: http://www.detnews.com/article/20100510/BIZ/5100335/1001/Landscapers-find-workers-choosing-jobless-pay
You’re just wrong, Jeff. Welfare states are enlightened, ergo, if something goes wrong, it’s the fault of the troglodyte capitalists and their greed.
Besides, when I say “pepper,” I mean salt, and screw you for passing me the pepper.
The HTML compiler has inproperly interpreted your meaning.
It is a textualist, you know.
Besides, when I say “pepper,” I mean salt, and screw you for passing me the pepper.
A: ‘No, um, sorry, I meant the salt.’
B: ‘You said pepper.’
A: ‘I misspoke, sorry, I meant the salt.’
B: ‘You said pepper. Pepper means pepper.’
A: ‘Yes, my bad… can you hand me the salt?’
B: ‘No.’
A: ‘What?!’
B: ‘Tough shit. Put the pepper on your eggs.’
A: ‘But I’m allergic to pepper!’
B: ‘Then you shouldn’t have asked for it.’
No, no, NO!
If I mean to ask for salt and I accidentally say “pepper,” then “pepper” means salt IN AN ABSOLUTE SENSE AT THE TIME OF THE UTTERANCE!
YES or NO, YOU EFFING FRAUD! YES or NO!
If I were Greece, a shitload of pissed-off Germans who think I’m stealing from them would scare me more than default.
#19 – did I wander into Patterico’s? Let me out! LET ME OUT!
#20 – fortunately for Greece, they are generally the older Germans who are most upset…however, right now I wouldn’t give odds on the Bundeswehr being able to take the Hellenic Army. What I saw of the Germans in Bosnia and Afghanistan showed me that they have gone downhill a long way since the Wall fell. Which might be a good thing, in the long run, right?
[…] As Jeff Goldstein points out, The selfish gamble implicit in the welfare state is that, though most people know on some level that spending in excess of revenue isn’t a very fiscally responsible long-term plan on which to build a stable society, many are willing to bet that resources won’t run out in the short term — which means these types of voters believe they will still get theirs so long as they continue to “vote in their own economic interests.” […]
1. Comment by Ella on 5/10 @ 10:51 am #
I have tried to convince my dad that SoSec is going to kill the country and should be stopped, cold turkey, like heroin. His response – “but I paid in!”
The problem when old timers give the ol’, “I paid in!” – and I say this respectfully, because I have the same runaround the block with my own seniors – is that old timers know in the scheme they paid in at 6.5% for 35 to 40 years, they’re getting not more, but two-to-three times more, out of it by living on the dole for twenty years at a 40% annual dividend.
This subsidization nominally wouldn’t be too much of an issue with historical 3.5% – 4.5 % annual GDP economic growth. But the problem with economic growth is that those enterprising folk who put more into making it grow tend to get disproportionally more out of it than doled folk, including salaried bureaucrats. So then they clamor for subsidized medicine, subsidized drugs, subsidized transportation, subsidized groceries, subsidized senior centers, subsidized lotto, property tax relief, because of the unfairness that they’re priced out of the good life. So we have enabled Admins, and militant, political, pseudo-environmentalists who are not interested in economic growth.
Kinda like how the Enron “poor employees” never beefed when their granted shares were selling at 95 bucks a whack.
The solution to all the political agendas regarding SocSec – except for the federal gov’s sacred annual cash grab, er, trust – is to send out post-dated, yet transferable T checks – or bonds – directly every year for the amount of said employee’s annual contribution.
I know, I know, I’m not saying anything no one doesn’t already know.
—–
Oh, and to all the morally high-minded who keep and keep asking, “Where did all the money go?” re: Bernie Madoff: The first 15-18% in the racket got it all in the fake yields that were fed by nothing other than the back 80% buying in.
That would be the “greatest generation”.
Also the rate since the mid 80s has been roughly 15%. Doesn’t make it less of a Ponzi, just that that rate made/makes it harder to put away for retirement when 15% is skimmed off the top. Like how it is hard to pay for private schools when the Public ones get first dibs through taxes before you can pay for the private one.
Democrats tax policy is to keep the working class poor and dependent on them while rewarding their government union buds. Win-win.
I can’t escape the notion that the real gamble behind the debtfare state is that the last generation will expire soon. With no creditors left to collect from of the absent debtors, big government will have worked!
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