Tuesday, August 23, 2011

The Problem With Being Right

The awkward thing about being a fiscal conservative, these days, is I'm right whatever anyone says. The old order, in Washington, passeth away. So also the state governments, city councils and borough banditries. Either they run a much tighter ship, on all fronts of government spending, and shrink in proportion to the money that can be allotted them, or else governments are going to go broke. They are reenacting the old story of the goose that laid golden eggs.

It's an awkward time because I like the part about having being right all along, but on the other hand I dread the consequences when irate grannies riot in the streets because the Social Security checks didn't show up--older folk  can be quite spry for a little while if we take plenty of aspirin along with caffeine. More immediate dangers arise when the urban poor, who have been funded for so long by social welfare schemes that it now seems their right to continue to be so, decide to stir things up a bit. England lately had riots over small cuts in welfare entitlements--England, the land that gave us the very definitions of staid and stolid, and boring. What shall happen here, in the Home of the Brave?

I have suggested elsewhere that government bailouts of failing businesses--Wall Street, automotive or anything else--are categorically mistaken. Bailouts remove the disincentive for bad decision making and thus poison the marketplace. The bad decisions continue and the ground is not cleared for newer and smarter businesses.

"Too big to fail" translates to "Too inept and inefficient to make it, without special favors." I see a problem there. I actually see more than one.  The biggest one is it is not government's mandated role to pick winners and losers, that is, to take someone else's business losses and assign them to me and my fellow taxpayers, as our losses. The losses ought belong to those who stood to profit. That is the way our system of business works: by taking your chances, with the best ideas you have. It will not work on another basis. There is a system of government that wraps itself around the affairs of business, but it is a different system, with a different name and an odious history.

Our military spending problem--and here is a truly revolutionary idea--may be reduced by moving to a stance of territorial defense, using a system of local militias, cashiering our large standing armies, and using only small expeditions abroad. It does not cost a lot. It is effective because everyone fights hardest for his own turf. Let us be determinedly neutral, financially welcoming and a bit hard to read: You know, like the Swiss. Some will object that the USA will then no longer be the world's superpower. But I cannot see what being a superpower has gotten us. The world's thanks and love?

Like us, the Swiss passed through a period as military arbitrators of other people's squabbles: They were outsiders who came in on one side or the other. The Swiss got over doing that. I do not say their motives in going to war were better or worse than ours, but they thought of a better course at some point and followed it.

Let us be a superpower in inventions and industry, finance and agriculture. Let us maintain a stubborn independence from the rest of the world. Some of the world seems to have trouble with basic civilized ideas like honest voting, toilet paper and sensible budgets. Perhaps these are matters for them to work out for themselves.

We knew about sensible government budgets once. It's nothing we can't relearn. It will take a good deal of relearning, maybe the hard way. The President is taking a luxury vacation on Martha's Vineyard, playing golf.  The real America is keeping the country going with duct tape and baling wire. We are boiling the dog for dinner, while government expenditures pass any record in the history of the world.

We still can come to our senses. We can return to the common sense that made us formerly great. Earn more than you spend, save and invest, think of new products and services and farm the good earth. These are the American ideas. The rest of the world has little to offer America: We, still, today, have everything to offer it.

Wednesday, August 10, 2011

In The Belly of the Goose

What the European riots are about, at bottom, seems clear. The social welfare state is unsustainable and its clients are feeling that keenly. The recipients of various benefits need more largess from the government: more, though, is not to be had. They need more because in the present economic climate of inflation and unemployment and little growth, the dole doesn't go as far as it used to. While I was not the first to guess the direction things would take, I was accurate at least. If you rob Peter to pay Paul, Peter goes broke eventually, and then Paul turns rebel.

It's not only happening in Europe. We are beginning to get reports from America of the disaffected and disadvantaged acting out in similar ways. There is not a lot of press coverage: an incident at the Wisconsin State Fair, some peculiar events in Philadelphia. More incidents are, doubtless, coming soon.

The Western democracies are discovering the fundamental error in their thinking about social welfare spending. In America, the idea that we could promote tranquility by making payments to  the urban poor has long been questioned. We cannot get rid of the system, however, because it comes with its own built-in voting block of supporters, consisting of those who get the benefits, and it has another block of supporters, at least as dedicated: those who think "redistributive justice" (to use Obama's term) is somehow the fair and kindly thing, and not to do it is cruel.

Of course, we now see that the supposed moral questions are moot, since the system of social welfare spending must collapse under its own weight. We have done no favor to those whose expectation in life is that the government charity check will always be there--for it won't.

The elderly, who receive old age pensions through Social Security--well no one worries about them, so much, because old people do not riot in the streets, as a general rule. But of course they are prone to vote against cuts to Social Security. "Hey! I paid in all my life. Where's mine!?" If they were given the real answer to their question, they might take to the streets, old or no; Tylenol works wonders, for a little while.

So what we have, looking at welfare, Social Security and the myriad of other social benefit programs, is a system of payments that cannot endure and which we are unable to stop. We have bumped up against Stein's Law in one of its uglier manifestations. If you prefer old stories to modern maxims, we have become actors in a retelling of Aesop's story of the goose that laid gold eggs.

There is no help for it. The idea is too firmly entrenched: Government should draw money out of the productive economy, to help the poor. It is a thing thoroughly believed by all the deeply caring liberals and by nearly all the beneficiaries  of social programs.