Monday, June 22, 2009

The state of affairs in economy

A long term reckoning on the way

Robert Samuelson comments on the current state of affairs, and the runaway welfare state of America [note: italics mine, hat tip Instapundit]:

In theory, expanding public welfare could offset eroding private welfare. President Obama’s health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.

Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today’s welfare — present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.

The U.S. welfare state is weakening; insecurity is rising. The sensible thing would be to decide which forms of public welfare are needed to protect the vulnerable and to begin paring others. Our inaction poses another dreary parallel with GM. It was obvious a quarter-century ago that GM the auto company could not support GM the welfare state. But the union wouldn’t surrender benefits, and the company acquiesced. Inertia prevailed, and the reckoning came.

The same cycle, repeated on a national scale with sums many multiples higher, would be correspondingly more fearsome.

With these underlying realities, it gives new light to the congressional threats Obama used in order to pass his budget and stimulus, and the subtle way he gifted unions in the auto takeovers. Take another look at the debt proposed by this administration -- what is now appearing as a best case scenario:

The best economists are saying even this untenable offer is going to be much worse. One has to ask: Are we are witnessing a collective will to destruction in America?

Is there a way to reverse this decline?

What does revelation say?


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