Wall Street Journal columnist Holman Jenkins:
To call Greece First World may be a stretch, but Greece has defaulted once already, and it is only a matter of time until Greece defaults again. Welcome to default-o-rama, the next chapter in the First World’s struggle for fiscal sustainability.
Japan is piling up debt in the manner of a nation beyond hope. France, Belgium, Spain and Italy are defaults waiting to happen unless Europe can somehow generate the kind of growth that has eluded it for decades.
America’s fiscal cliff is an artificial crisis. We have no trouble borrowing in the short term. But at some point the market will demand evidence that long-term balance is being restored. President Obama said in his first post-election press conference that he doesn’t want any proposals that “sock it to the middle class.” He knows better. A long-term socking is exactly what’s coming to the middle class, which must pay for the benefits it consumes.
A few years ago, when the economy was humming, a common estimate held that federal taxes would have to rise 50% immediately to fully fund entitlement programs. Today, a 50% tax increase would be needed just to meet the government’s current spending, never mind its future obligations.
One way or another, then, entitlements will be cut. Don’t call it default. The correct term is entitlement reform.
You saw this day coming and saved for your own retirement. Don’t call it default when Washington inevitably confiscates some of your savings, say, by raising taxes on dividends and capital gains. Taxpayers accept the risk of future tax hikes that may make the decision to save seem foolish in retrospect.
According to economists Robert Novy-Marx and Josh Rauh, state and local taxes would have to increase by $1,385 per household immediately to make good the pension promises to state and local workers, including firefighters and cops. That’s not going to happen given all the other demands on taxpayers. Default, in this case, is the proper word for cities and states using bankruptcy to repudiate their pension obligations.
It gets worse. Jenkins sees the Fed deliberately stoking inflation to pay down the debt in cheaper dollars. And when the crunch comes for Medicare, the president will play off the young against the old as the battle for scarce health care dollars intensifies.
“If cutting subsidies for Big Bird is unthinkable, a joke, how much more so cutting benefits for middle-class voters?” asks Jenkins. The answer is, the joke is on us for believing that our current entitlement culture could be sustained indefinitely.
This will not be a direct tax or massive cut in benefits. Instead, it will be inflation that will eat away at our retirement funding. Prices will increase but benefits will not. The young believe that capping benefits will shelter them from this supposed generation theft that is SSI, but in a final ironic twist, their elderly parents will be living in their basements and eating their food.
We The People are, in 2012, reaping windfalls created by “savvy” We The Elite People of Washington DC politicos since 1929′s “Great Depression.”
1807 and 1929…same situation, same causes…government excessive spending.
1929 to 1939=Great Depression. Hoover, then FDR did:
1)Higher wages (Obama likewise)
2)Public works(Obama stimulus)
3)2 to 3 million unemployed
4)Coordination b/t business and government. (Obama’s Business Czar)
Today, there are:
1)4.3 million on welfare
2)47 million on food stamps (SNAP)
3)5.6 million unemployed.
4) 1 in 5 children, are “poor”
5)21 million american children received lo-cost help
6) 1/2 of single moms kids live in poverty
7)US has highest rate of poverty in developed world.
Credit card use (or some form of debt):
2011= $48 billion in new debt
424% more than in 2010
577% more than in 2009
You judge the future!!!Pray. Amen.
Wow, I knew it was bad, but? Good, informative post.j
I’m just going to lay down a marker–I have no issues with raising some taxes to mitigate some things right now, but the entire ediface is unsustainable and Democratic core constituencies just need to accept they will not be getting what they think they need, or deserve, or whatever it is.
We could nationalize and appropriate the private property of everybody and everything and I don’t think it would make one bit of difference for our long term solution, ledger-wise. Therefore, when the moment comes, I want our side to be clear that we were willing to be reasonable and the otherside just wanted to demagogue in order to obtain a never-ending supply of benefits without needing to show improvement or any ability to ever reach the ability to self-generate wealth.
At it’s heart, the entire Democrat Entitlement Machine is simply the largest Ponzi Scheme in all of history. They can’t cut a thing, they’re incapable of this. So they keep taking and taking from the shrinking numbers of the productive, to keep feeding the ever increasing appetite for “Free Stuff” that they themselves have engendered a taste for in their constituencies.
At some point in time, it will all come crashing down, making Bernie Madoff look like an amateur by comparison.
Stop blaming the Democratic Utopia Committee. This is like in “The Hunt for Red October” when the torpedo turns on it’s own sub. We have all done this to ourselves through the politicians we’ve elected and re-elected. Through living on credit not ability. By tolerating Godlessness in our government and institutions. Even if it is a myth, I’ll take a myth with Virtue any day over this.j
A little poison or a lot of poison is still poison. Stop kicking the can down the road. It is still going to hurt. Lets all take some Oxycontin. No, stop the spending. Stock up. Save cash. Great learning experience for children about frugality. First, adults have to admit to themselves how broke we/they are, then prepare your family.j
Oh dear, “we were willing to be reasonable…”
This is the House GOP Leadership attitude and governing policy, isn’t it? Boehner is even worse that Bob Michel. Reagan’s domestic agenda was crushed by Michel and the Republican minority leadership – far more than Tip O’Neill and his dysfunctional majority. Frankly, I think Boehner would be far happier if he were Minority Leader instead of Speaker of the House.
Nancy Pelosi, like her or not – and I don’t – will go down in history as being responsible for socializing and destroying American health care. That is quite an achievement – one for the history books.
Speaker Boehner? He will be remembered as a “reasonable man.” Of course, that means he will not be remembered for anything – nothing – nada – loser.
After all, does anyone remember Bob Michel. He was a reasonable man too.
Anonymous, the Democrats are not interested in wealth creation, self-generated or not. Their core constituencies are rent-seekers, whether multi-millionaire lawyers, teachers or the growing welfare class. Democrats are interested only in power and privilege. Obama is the perfect leader for the Dems – an utter and complete phony who “climbed to the top” and is now perpetually wealthy and privileged.
Demagogues are not interested in reason. This is all too depressing. I am reminded of this famous movie clip with Kevin Bacon at the end of Animal House.
http://www.youtube.com/watch?v=zDAmPIq29ro
This is the governing attitude of the GOP. The GOP leadership is Kevin Bacon. Odd, for a party born and seared on the principal “all men are … endowed by their Creator with certain unalienable Rights”. So, what exactly is the guiding principal of our GOP leadership? Why power and privilege of course.
Where is Tom Delay when you need him? I know they ran him out of Texas, he would do well to return. The GOP is home counting their coins as usual. The Republic is toast. Move to Texas. I am thinking the hill county.j
Democracy is not compatible with redistribution of wealth.
Absolutely right. We can either have a European-style quasi-Socialist state or we can be a Constitutional Republic. We cannot be both and we cannot remain a lame hybrid of the two for very long. I would much prefer that we become honestly, openly socialist than that we keep up this kabuki theater version of America that we currently inhabit. At least we wouldn’t embarrass our patrimony by pretending to be something we are not.
Rick, you have missed the ball here. You clearly do not grasp the magnitude of deflection going on from the left. They have dismantled the Constitution piece by piece, and are destroying our economy. Do you think for a second they are allowing one iota of blame to fall on their heads? REALLY??? They have mastered the art of lying to such a degree that Bush, (and the GOP generally) are to blame for all things bad and unpleasant, while all things good are resultant from their own policies!! Don’t you see that? Do you think for an instant that they will stand by as the curtain is pulled back on this monstrosity we call Obamacare? they already know what they will say when the perennial *^*()_ hits the fan. No, you missed it on this one. As long as the drones have their Obamafones and food stamps, it will be the GOP’s fault when the doctors quit and people start dying. Mark my words.