From Randall Hoven:
The problem is government debts. Huge debts. Unsustainable debts and structural deficits, not just temporary ones to get through recession or war. And what is behind all these debts? The very programs we started setting up in the 1930s, our “social safety nets.” Feeling safe?
Blame it on Bush and Iraq or whatever you want. But Bush was not President of Greece. And Greece was not one of the thirty nations willing to admit to being part of the U.S.-led Coalition in Iraq. In fact, Greece was one of the more socialistic of the modern welfare states. The problem was debt. Debt caused by things like government retirement programs, government health programs, and government unemployment payments.
No one has a free market. I encourage you to look at the U.S. Statistical Abstract, Table 1324. That table tells us how much various governments spent as fractions of their economies. The U.S., the supposedly “free market” cowboy of the bunch, had a government that spent 38.6% of its country’s GDP in 2008. The lowest of the bunch was South Korea, at 30.9%, and the highest was France, at 52.5%. Five countries, of 28 listed, spent less than the U.S. did, including Australia and Switzerland. Greece was merely in the middle of the pack at 43.2%.
And that was the U.S. of 2008 — before the Wall Street Bailout, before Government Motors, before Porkulus, before ObamaCare, even before Obama. Now, in 2010, the U.S. is not even considered one of the “Free” countries in the latest Heritage Freedom Index.
We are all forty-percenters now, essentially spending forty-something percent of our GDPs on government. And we’re all going broke together. A bunch of broke blokes cannot save themselves from bankruptcy by lending money to each other that they borrowed from each other in the first place. At least not for long.
“But,” you say, “it was the free market that led to all this — you know, unregulated credit default swaps and derivatives and such.” No it wasn’t. You have no idea what caused the financial meltdown. While government regulators are quick to say that lack of regulation was the culprit, too much regulation was likely the real culprit.
You want specifics? OK, take the Recourse Rule, adopted by the U.S. and Europe in only the last few years before the Great Recession. It forced banks to invest more than they otherwise would have in mortgage-backed assets. Or how about “mark to market,” which came with Sarbanes-Oxley in 2002 and froze credit because banks had to valuate their assets based on temporary and unrealistic current market prices? Or maybe it was the way Andrew Cuomo, Bill Clinton’s HUD Secretary, forced Fannie Mae into the subprime mortgage market in the first place.
I just gave three specifics of over-regulation or government interference that might have caused or contributed to the financial mess. Can any late-night economists who blame it all on Bush’s deregulation tell me one thing that was deregulated by Bush?
In any case, the market was not free in the first place. The Federal Register of regulations was 2,620 pages (about two Bibles) in the middle of the New Deal. By 1992, it had 62,928 pages (about fifty Bibles). By 2002, it had 80,332 pages, or another fourteen Bibles added in one decade. Federal spending on finance and banking regulation approximately doubled (in inflation-adjusted dollars) over the last twenty years.
…Not to mention that the financial crunch was merely the last straw on the camel’s back, not the cause of all our problems. The GAO saw the unsustainable debt problem clearly in 2007, before anyone even thought the Great Recession was coming. I encourage you to look at this GAO presentation from April 2007. Even then it said, “The status quo is not an option: We face large and growing structural deficits largely due to known demographic trends and rising health care costs.”
We all knew this was coming. Republicans would try to do something about it every so often. Reagan had a bipartisan commission headed by Alan Greenspan to fix Social Security for a while. He did what the commission recommended and got blamed for the largest tax increase in history. The new Republican Congress tried to fix Medicare in 1995, but Clinton vetoed it. George W. Bush mentioned cuts to Medicare and “privatizing” a fraction of Social Security. He was accused of trying to kill Grandma.
Every time a Republican would try to talk responsible entitlement reform, Democrats said he was stealing Grandma’s Social Security and pushing her into the streets. The Democrats’ solution? Half a trillion dollars in new taxes and fees and half a trillion in Medicare cuts to pay for an expansion of Medicare of about another one trillion. Oh, and we’re probably going to need a VAT — the one thing Europe has that we don’t yet.
So here we are, with our government spending the largest fraction of our economy in our history, and the party in charge of the presidency, the House, and the Senate is calling those who complain about that anti-government nuts.
Well have at it. Raise tax rates on the rich. Start a VAT. Do whatever you want. You will not get the money. You’ve run out of other people’s money. There is no more piggy bank to rob.
The American voters completed the transition of the U.S. from an entrepreneurial and freedom-loving state to a full-fledged sclerotic European welfare state, just in time to join the Europeans in their collective collapse. Congratulations.
And for your next task, make sure our downfall is blamed on “the free market,” just like you did about 72 years ago.