Thursday, January 13, 2011

The Welfare State Is The #1 Leading Killer Of Modern Nations

In modern history, the #1 killer of modern nations is the welfare state. The concept of the welfare state exists in many different forms such as Nazism, Socialism, Communism, or Progressivism. The common theme among the different variations of the welfare state is that it always fails in the end. Even states that attempt to mix different economic systems cannot survive long since it will be corrupted by its own welfare programs. 
The welfare state is a failure both in theory and application. It produces misery in so many different forms. It can come in the form of brutality, oppression, poverty, death, and misery as demonstrated by former Communist Russia, China, Eastern Europe, Cuba and North Korea.

It can also come in the form of reducing human beings to immature children as the nanny state looks to their every need and want. As a result, it robs human beings of the ability to be free to make decisions for himself. Immanuel Kant explains the tragedy of the welfare state:
"It is so easy to be immature. If I have a book to serve as my understanding, a pastor to serve as my conscience, a physician to determine my diet for me, and so on, I need not exert myself at all. I need not think, if only I can pay: others will readily undertake the irksome work for me. The guardians who have so benevolently taken over the supervision of men have carefully seen to it that the far greatest part of them (including the entire fair sex) regard taking the step to maturity as very dangerous, not to mention difficult. Having first made their domestic livestock dumb, and having carefully made sure that these docile creatures will not take a single step without the go-cart to which they are harnessed, these guardians then show them the danger that threatens them, should they attempt to walk alone. Now this danger is not actually so great, for after falling a few times they would in the end certainly learn to walk; but an example of this kind makes men timid and usually frightens them out of all further attempts.
Thus, it is difficult for any individual man to work himself out of the immaturity that has all but become his nature. He has even become fond of this state and for the time being is actually incapable of using his own understanding, for no one has ever allowed him to attempt it. Rules and formulas, those mechanical aids to the rational use, or rather misuse, of his natural gifts, are the shackles of a permanent immaturity."
However, the fundamental flaw of the welfare state is that it violates the immutable mathematical or economic laws of the universe. The philosophically behind the welfare is complete failure because it thinks it can overcome the inflexible rules of  nature. As a result, the welfare state is a story that never ends well. 

Marget Thatcher famously quipped that the "the problem with socialism is you run out of other people's money.” In other words, the ultimate fate of all welfare states is financial death. Whenever government extracts money from one segment of society and gives it to another segment of society, it is ultimately bound to fall. A blogger known as Ace explains why:  
As in France, we have let an enormous segment of our population -- perhaps as much as half -- fall into a state where they depend on government largesse for a substantial part of their income. This is not money they earned themselves, not wages or savings, but rather money squeezed from the more productive half of the country. Half of our citizens pay no income taxes at all. An increasing number will draw public-sector pensions, Social Security, and medical insurance (Medicare/Medicaid) in amounts that far exceed what they contributed to those plans. Half of the US population, in short, lives not by the fruits of their own toil but by the (coerced) charity of others, as filtered and distilled through the hand of the government. This can not -- it can not, by the laws of economics and simple physics -- continue. The mathematics of the problem trump even philosophical issues of fairness, of governance, of ethics or law. The mathematics simply will not allow it.
In other words, entitlement programs are mathematically unsustainable. Governments cannot get around the immutable laws of economics and mathematics. Period. Why? Ace provides the answer:
It is not wrong to wish that every citizen have free health care, free food, free housing, and some money to spend even if they have no job. It's not wrong; it's just impossible. Health care is a service that has huge costs associated with it. These costs cannot be "magicked" away just because we find them inconvenient. Food must be grown, transported, packaged, and prepared -- all costs that must be accounted for. Shelter does not precipitate out of thin air. We cannot delude ourselves into thinking that "the government" can provide these things to us at no cost, because "the government" must pay for these things just as individuals do, and because the government has only one source of wealth -- the citizens -- that's where it must go for the money. So if Bob is given 'free' health care, 'free' food, and a 'free' apartment, the government isn't paying for it; Tom, Jane, Howard, and Sue are paying for it. And at a vastly inflated cost due to the innate governmental inefficiency that dilutes every dollar that passes through their hands. Soon the social welfare costs eat up the money intended for good and necessary governmental expenditures like the military, the police, and infrastructure. Social welfare becomes a beast that eats everything.
America would do well to understand how that story ends.  Just as prophets who came to Jerusalem to warn its inhabitants of imminent dangers were ignored in Jerusalem, I fear that many of those voices who warn of imminent financial dangers are being ignored today.
Europe: The Canary In The Coal Mine
However, one doesn't have to receive messages from a heavenly source or be a financial wizard to know that America is on a dangerous course to financial collapse. We don't even need to look to the past or the future to see what might happen to us. All we have to do is look across the ocean to Europe. And we've been seeing the warning signs for a long time. 
Take a look at the chart on the right side of this article. It is a long list of government debt held by each European country. 

In 2008, Iceland was the first European nation to financially collapse. Greece almost fell until it received a bailout from other European nations. Ireland is also on the edge of a financial collapse and is looking for a bailout from Europe. Other countries like Spain, Portugal, France and England are also struggling with debt and may be next in line to need a bailout or face a financial meltdown. 

Europe is quickly realizing socialist programs do not work. They are finding that they must slay the entitlement beast by enacting austerity measures if they wish to survive. Which is why nations around the world are scrambling to reduce their debts. England is making huge budget cuts which have not been done since World War II while France faced some riots when Nicolas Sarkozy reformed the state's pension system and is working to reduce its debt. Voters in Latvia voted to reelect their government that cut public-sector workers' pay by 50 percent.

Another consequence of Europe's debt due to massive government programs and financial irresponsibility is that their credit rating gets down graded. Countries like France and Ireland have either had their credit rating lowered or are under threat of having their credit rating lowered by Moody’s Investors Service.

Even countries outside of Europe are recognizing that the welfare state is unsustainable. Especially the few countries who remain communist today.  Cuba is recognizing that its communist system is financially unsustainable. North Korea is flirting with capitalism since this welfare state cannot feed its own people. Those countries that have not engaged in financial reform are alive only because of brutal totalitarianism and outside economic assistance. For example, Communist Russia would not have lasted as long as it did had United States provided economic and agricultural assistance. 

The Economic Crisis In America  
What does Europe have to to with America's debt crisis? Well, the common denominator in Europe's financial woes is that each country was spending more money than they had on social programs. And that same problem that exists in Europe is the same problem that exists here in America.

Judd Gregg (R-Nh) is merely another voice who has raised concerns about the U.S. spending and how it contributes to the increasing U.S. deficit. He has recently stated that the financial future of the United States looks grim unless makes major changes in its spending habits:
Chief among Gregg's concerns is the massive deficit under which the U.S. is currently operating. Gregg says the economy is on an "unsustainable track" that, if continued at its current pace, "will double the federal debt in five years, and triple it in 10 years." Gregg compared financial problems here in the U.S. to those Greece is currently having, noting that while the U.S. is a "more vibrant nation, we are still on the exact same track" as the troubled country when it comes to finances.
Gregg insists we need to cut spending, especially as the nation gets ready to take on "70 million retirees" as opposed to the "35 million retirees" the U.S. is currently sustaining via Social Security, Medicare and Medicaid programs. 
In other words, the financial story of America will not end well unless we do something about it.  Social programs makes up the largest bulk of America's government spending as indicated in the pie chart below: 
No nation, business or family can survive financially when almost 60% of its budget is going  paying mandatory bills. If America does not find the will or courage to touch the third rail of American politics and either reduce or eliminate its entitlement spending, we will collapse financially. 

Any other budget cut  for another other program will not solve the problem. Even if you did cut all other programs, including the military, our nation will still be in debt due to our irrational commitment to entitlement programs. Why? Because if enlistment spending is left unchecked, it will become the beast that will consume all of our available finances at some point in the future as seen in the chart below:
Today, Moody's has expressed concern about our debt and may have to down grade our credit rating. Which is very bad news for America. As I said, we don't have to look into a crystal ball for what happens if we loose our credit rating because we were unable to get our entitlement spending under control. All we have to do is look to Europe.
Some people feel that we are witnessing the end of the welfare state in Europe and round the world as governments make a mad dash to avoid financial collapse. However, that remains to be seen. It could go either way. Some states will insist on maintaining the entitlement state while others will ditch it altogether.  
But a choice has to be made: either the entitlement programs die or the entitlement state dies. 
And there is no middle ground. Mix economies eventually fail too since they eventually morph into a welfare state and then its only a matter of time before they are on their way to financial collapse. In the end, they all collapse because the very programs that they use to support the people can no longer support the state.
America risks falling into same sad story of welfare states. The important question for America is whether or not we can let the story be written for us or do we dare to change the story? How do you want the great American story to end?

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