·
A mentality that there is a government solution
to almost every possible real and imagined issue that some person or group or business
identifies or embraces
·
In that process, fundamentals leave the arena –
fundamentals such as setting priorities; balancing budgets; directing
government toward those limited priorities and a constant philosophy of
discipline – discipline the citizenry and, more important, disciplining the
government
·
Once fundamentals leave, the vacuum created is
filled with welfare state concepts – great society; war on hunger; war on
poverty; equal opportunity for all; better education; endless, affordable
health care and spreading democracy to everyone to name just a few
·
Laws multiply – lawyers multiply – lawsuits
multiply – lots of groups try to get into the game – get their piece of the
action – government employment multiplies and budgets are no longer balanced so
debt rises until the only buyer of the debt is the government itself. They print money. And it devalues. Business – making something; growing
something finds more attractive surroundings elsewhere
·
Finger pointing – aka the blame game – supplant
discussion and debate that used to focus on the fundamentals. Now it focuses on who did what to whom and
rhetoric replaces rationality – if something goes wrong there must be someone
to blame as long as it is not me/us
·
Once rhetoric rules – examples would be
political correct nonsense; hope and change; best times ahead of us; and references
to economic theories (Keynesian, Austrian, Bulgarian, monetarism, socialism, etc.) all is
lost – the welfare state is now firmly established
We actually got a brief reprieve in the 90’s because of the
so-called technology revolution. New
products, services, efficiencies, businesses – all came along just as we
Americans were embracing the welfare state.
The timing was good and not good.
Good for those who wished to believe that we could ignore fundamentals
and build this great society and that we were on top of our game and our best
days were ahead of us. Bad because it
was temporal – passing and once it ran its brief course all we had were the
fixed costs of the welfare state. The
costs were firmly in place; the revenues; the money to pay for all the welfare
goodies didn’t/couldn’t keep up.
Any economic model for business or government includes revenues
and expenses and the revenues must be adequate to pay for both the fixed and
the variable costs. And fixed costs are always the problem – they
exist even if there is no revenue. The
variable costs at least only show up when there is revenue. You can only do as much as you have the
revenues to cover the costs.
America doesn’t. The
larger the welfare state – in pure numbers, the more discipline required of
welfare state operators. China could not
run a welfare state – neither can India; Indonesia, Russia and even large
portions of Europe cannot afford high cost welfare states. The business model doesn’t work – not enough
revenues to cover the costs. The costs
are mostly fixed.
If you wish to build a welfare state, keep it small – think
Switzerland or Sweden or the Netherlands.
Japan built one and it is dying.
The United States built a big one – Clinton thinks he had it solved when
he was in office. He owes it all to the temporary
benefits of the technology bubble. Bush
II can thank the real estate bubble until it burst during his last year in
office. Obama is foolish enough to think
all we need do to get it back on track is raise taxes on the well to do.
If only it were true.
The solution to our problem?
Simple – we need a new technology revolution or some other bubble –
Bernanke is trying to build one in the stock market and endless government
bureaucracy. Maybe someone can invent a
formula to convert sea water into oil or perhaps friendly space aliens will
arrive with robotic slaves dedicated to meeting our needs and then some. You get the idea.
Next time you want to build a welfare state, run the
business model first. And, watch out for
those fixed costs.
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