Robert Samuelson long ago distinguished himself as one of the best things about the soon-to-be-late Newsweek. Here he is on a subject nobody in the administration wants to talk about: the coming collapse of the social-welfare democracies — including, alas, our own:
WASHINGTON — What we’re seeing in Greece is the death spiral of the welfare state. This isn’t Greece’s problem alone, and that’s why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven’t fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies.
The demographics are brutal, and have been for some time: the western world is gradually committing suicide through a combination of low birthrates and widely available abortion, without so much as a thought as to where the next generations of taxpayers — you know, the ones named Peter we’re fleecing today to pay Paul — are going to come from. One second thought, maybe they have: mass immigration, whether legal or illegal, is meant to hide the decline.
Americans dislike the term “welfare state” and substitute the bland word “entitlements.” The vocabulary doesn’t alter the reality. Countries cannot overspend and overborrow forever. By delaying hard decisions about spending and taxes, governments maneuver themselves into a cul de sac.
Budget deficits and debt are the real problems; and these stem from all the welfare benefits (unemployment insurance, old-age assistance, health insurance) provided by modern governments.
Aging populations make the outlook worse. In Greece, the 65-and-over population is projected to go from 18 percent of the total in 2005 to 25 percent in 2030. For Spain, the increase is from 17 percent to 25 percent.
The welfare state’s death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day — no one knows when — doubt governments’ ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder.
… developed countries represent about half the world economy; most have overcommitted welfare states… What happens if all these countries are thrust into Greece’s situation? One answer — another worldwide economic collapse — explains why dawdling is so risky.
Read the whole thing. Then get mad and do something about it. After all, you’re “entitled.”
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