Tuesday, July 7, 2015

Meanwhile, the Malaise of the Welfare State

As welfare state politicians in the US and Europe dream of more ways to regulate, more ways to tax, more ways to spend, their economies seemed to have entered a stage of permanent stagnation.  The economic opportunities that once defined the US have been drowned in a sea of laws and regulations.

Incentives have been restructured to encourage people to leave the work force and retreat to the various entitlement programs that support a lifestyle without work.  Meanwhile minimum wage laws and the workforce litigation environment all but guarantee that the poor and the minorities have no leg up on the ladder into the middle class. 

Health care is now rationed by an unelected bureaucracy and there is no accountability as health insurance costs soar into the stratosphere.  Increasingly doctors are shuttering their practices or refusing patients from medicare and medicaid.  Health care for the poor and the aged are going to become increasingly inadequate and unavailable.

Assuming that extremist politics does not take over in the US, free markets will eventually find a way around the roadblocks that politicians have erected.  But, the danger, as in modern Europe, is that the failure of the welfare state will lead to ideological dictatorships from the right or left. The politics of modern Greece is instructive.

The issues in the modern welfare state are absurdly simple.  It is simply a question of arithmetic. An economy, like the US, with a GDP under $ 20 trillion cannot reasonably be expected to fund off-balance sheet obligations (in social security, medicare and medicaid) in excess of $ 100 trillion.  The numbers don't add up and a Greek-like ending with economic and political chaos is inevitable, unless some perception of reality sets in.

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