Monday, December 10, 2012
The West is signing its own death sentence
Capitalism is, by its nature, dynamic. Attempts to engineer the 'perfect society’ undermine the logic of the free market
Comment from Britain. George Osborne is Britain's fiscal manager ("Chancellor of the Exchequer")
When the Edward Gibbon of the 22nd century comes to write his History of the Decline and Fall of the West, who will feature in his monumental study of the collapse of the most successful economic experiment in human history? In this saga of the mass suicide of the richest nations on earth, there may be particular reference to those national leaders who chose to deny the reality that was, from the vantage point of our future chronicler, so obviously looming. Or maybe the leadership of our day in Washington, London and Brussels will appear to have been swept helplessly along by irresistible forces that originated before their time.
But for us, right here, right now, it matters that Barack Obama and George Osborne are playing small-time strategic games with their toy-town enemies while the unutterable economic truth stares them in the face. (The political leadership of the EU seems to have passed through the looking glass into a world where the rules of economics do not apply, so their statements and actions are beyond analysis.) Mr Obama is locked in an eye-balling contest with a Republican Congress to see who can end up with more ignominy when the United States goes over the fiscal cliff. It is clear now that the president will be quite happy to bring about this apocalypse – which would pull most of the developed world into interminable recession – if he could be sure that it would result in long-term electoral damage to his opponents.
Meanwhile, Mr Osborne takes teeny-tiny steps in the direction which is the only plausible one: little bitty reductions in the welfare programme to “make work pay” which are barely enough to push those who are actually working in the black economy off the unemployment rolls, and fiddly adjustments (almost too small to notice in day-to-day life) to lessen the burden of tax that bears down on people who are scarcely self-sustaining, let alone prosperous. Supposedly from opposite sides of the political divide, the US president and the British Chancellor come to a surprisingly similar conclusion: it is not feasible to speak the truth, let alone act on it. The truth being, as this column has often said, that present levels of public spending and government intervention in the US, Britain and Europe are unsustainable. The proportion of GDP which is now being spent by the governments of what used to be called the “free world” vastly exceeds what it is possible to raise through taxation without destroying any possibility of creating wealth, and therefore requires either an intolerable degree of national debt or the endless printing of progressively more meaningless money – or both.
How on earth did we get here? As every sane political leader knows by now, this is not just a temporary emergency created by a bizarre fit of reckless lending: the crash of 2008 simply blew the lid off the real scandal of western economic governance. Having won the Cold War and succeeded in settling the great ideological argument of the 20th century in favour of free-market economics, the nations of the West managed to bankrupt themselves by insisting that they could fund a lukewarm form of socialism with the proceeds of capitalism.
What the West took from its defeat of the East was that it must accept the model of the state as social engineer in order to avert any future threat to freedom. Capitalism would only be tolerated if government distributed its wealth evenly across society. The original concept of social security and welfare provision – that no one should be allowed to sink into destitution or real want – had to be revisited. The new ideal was that there should not be inequalities of wealth. The roaring success of the free market created such unprecedented levels of mass prosperity that absolute poverty became virtually extinct in western democracies, so it had to be replaced as a social evil by “relative poverty”. It was not enough that no one should be genuinely poor (hungry and without basic necessities): what was demanded now was that no one should be much worse (or better) off than anyone else. The job of government was to create a society in which there were no significant disparities in earnings or standards of living. So it was not just the unemployed who were given assistance: the low paid had their wages supplemented by working tax credits and in-work benefits so that their earnings could be brought up to the arbitrary level which the state had decided constituted not-poverty.
The paradoxical effect of this is that the only politically acceptable condition is to be earning just enough to maintain independent life – and not a penny more. Everybody is steered by the penalties of the tax system or the gradual withdrawal of benefits into that small space in the middle between being “rich” (earning over about £40,000 a year) and being (relatively) poor. As detailed analysis has made clear, the only group spared by Mr Osborne’s tinkering last week were standard rate tax payers. Neither rich nor unemployed, these paragons are perfect exemplars of “fairness”: surviving on an income which makes life just about bearable but remaining careful always not to allow their aspirations to propel them beyond their station and its acceptable earnings level.
This picture of the perfect society – in which disparities of wealth are eradicated and economic equality is maintained through a vastly complex and expensive system of state intervention – has been the explicit goal of the EU virtually since its inception. It had an on-again, off-again history in Britain until it was locked firmly into the political infrastructure by Gordon Brown. More unexpectedly, it has now taken root in the American political culture, where Mr Obama seems determined to exploit it in his blood-curdling contest with the Republicans. Once ensconced, this concept undermines the logic of the free-market economy which funds it.
Capitalism is, by its nature, dynamic: it creates transitory disparities of wealth constantly as it reinvents itself. Fortunes are made and lost and, as old industries are replaced by new, the earnings that they create rise and fall. Punishing those who exceed some momentary average income and artificially subsidising those who fall below it – as well as providing for a universal standard of living which bears no relation to merit or even to need – has now reached the unavoidable, unaffordable end of the line.
So who will tell the truth – and then act on it? Who will say not just that welfare must be cut, but that in future the NHS will need to rely on a system of co-payments? That people will have to provide for their own retirement because the state pension will be frozen? That without a radical reduction in government intervention, the free and prosperous West will have been a brief historical aberration?
Is America Headed Into An Intentional Recession?
“Mah fellow Americans, inflayshun is ow-uh friend…”
If you can pronounce the phonetic wording above – and if it sounds vaguely familiar – then for better or worse you probably grew up watching “Saturday Night Live” like I did. The line comes from a late 1970’s skit wherein funny guy Dan Aykroyd was impersonating President Jimmy Carter.
During his one term as President, Carter addressed the nation numerous times to try and quell people’s fears about inflation, the economic malady that defined the era. During those years, Carter announced several anti-inflation policy measures. He urged Americans to “tighten their belts” and consume less, in an effort to decrease the demand for goods and services and, therefore, to get prices to decline (consumption, by the way, was actually quite stagnant even as prices rose – hence the problem of “stagflation”). And as he got closer to his re-election date he looked increasingly anxious, as though he was trying to convince Americans that he was doing as well as any President could.
In the midst of this, “Saturday Night Live” delivered the definitive presidential satire. With his impeccable imitation of the President’s “southern gentlemen” accent, Aykroyd – as President Carter – addressed the nation one fine Saturday night and told Americans that “our economy is screwed, blued, and tattooed,” but noted that we could stop fighting the battle against inflation- because “inflation is our friend.”
Aykroyd was hilarious because his character’s statements were absurd - no adult in their right mind and certainly no U.S. President would “embrace inflation” or regard it as a “friend.” President Carter was desperately trying to assure us that he was ending inflation, and Aykroyd’s routine illustrated just how desperately the President was trying to remain in our good favor.
But that was in the 1970’s. Today, just three weeks away from 2013, there is reason to believe that our President and his Administration – and perhaps his party, as a whole – is “embracing” recession, as though it is an appropriate means to a necessary end.
Ron Scherer, Staff Writer at the Christian Science Monitor, was one of the first to catch-on. He noted in a November 30th news story that in the midst of the “fiscal cliff” tax rate negotiations, President Obama had begun to speak on the campaign trail about another $255 billion stimulus package. Scherer surmised that the President was proposing more stimulus spending as a means of “offsetting” the impact of his own proposed tax hikes.
But what, precisely, would need to be “offset,” if President Obama’s agenda prevails? He just completed a successful re-election campaign claiming that raising taxes on “rich people” would be good for the economy, yet it now appears that he wants more stimulus spending as a means of saving our economy from his own economic policies. This would seem to be, at the very least, a tacit admission from the President that raising taxes on individual people – even those awful “rich people” among us – does, indeed cause a slowdown in economic activity, and may very well bring about a recession.
Shortly after the President began his new stimulus push, former Democratic National Committee Chairman (and former presidential candidate) Howard Dean made some extraordinary remarks of his own about the economy. In an interview at MSNBC, Dean stated that he wants the across-the-board income tax increases entailed in the “fiscal cliff” scenario, and welcomed the resulting outcome. “Will it cause a problem?” he asked rhetorically. “Yes. There will be a short recession, and it will be painful.” Yet despite the “painful recession” that will ensue, Dean expressed exuberance for the higher tax rates and the cuts in military spending that will result as well.
In a recession, individuals and families often lose. They often lose jobs, careers, and homes, and sometimes families are torn apart. Governments that truly prioritize the wellbeing of the citizenry, usually try to avoid recessions - for these, and other reasons.
But when governmental leaders prioritize their own power and agenda over and above the wellbeing of the citizens they serve, a “painful recession” is an acceptable means to an end. You and I may lose our home or job in an upcoming Obama recession, but that is of little concern. The President and his party have made it clear that their goal is to control more private wealth, spend that wealth as they see fit, and make the citizenry more dependent on government services.
When I was a kid, it was laughable to think that even the inept President Jimmy Carter was regarding inflation as “our friend.” Today, all Americans should be sobered by the reality that our President may be quite intentionally sending us in to recession, as an acceptable means of accomplishing his objectives.
The Truman Doctrine and Obamacare
"Answered Prayers" was the title of the much-discussed and never-completed last novel of Truman Capote, based on his notion that having one's dearest wish granted can be even more painful that having it never come true.
This new Truman Doctrine is about to be tested in the next months and years for the Democrats. They had their prayers answered in seeing Obamacare pass, seeing it given a pass by John Roberts and then given reprieves anew by the recent election. They now face the ordeal of seeing this huge, complex and unpopular act carried through in the face of its own contradictions, 30 unhappy Republican governors, and the sullen resistance of much of a public that never embraced it and likes it now less than it did before.
What woes could now spring up to haunt them? Here are just a few.
Obama won on the claim we had come through the worst of the crash and recession, and that things would slowly but surely start to improve. But wait for the downturn that's likely to hit when smaller business embark on a new wave of cutbacks, to avoid moving north of Obamacare's 50-employee limit, above which the federal mandates to provide workers with health care kick in. New hires will not happen, full-time employees with benefits will become part-timers without out them, and some jobs may even be axed. For two years, businessmen have postponed their decisions -- now they will make them. Wait until voters find their jobs, their hours cut, their premiums rising, their insurers going out of business and their employers dropping health coverage because of Obamacare.
And wait till the crunch comes on implementation -- which, on the evidence, is not going well so far. Only 14 states have agreed to expand Medicaid since the Supreme Court allowed them to opt out. Only 17 states have committed to run their own insurance exchanges, six want a mixed or state-federal model, and the rest are in no hurry to help things along. The states drag their feet, the Department of Health and Human Services sputters, and you have a mess, which is bound to get even messier. Which is what the liberals fear.
Answered prayer No. 1 was for health care to pass, but it led to the Tea Party, the loss of Democrats' filibuster-proof edge in the Senate and a shattering loss of the House.
Prayer No. 2 was the Supreme Court decision, which also came with the cost-free exception from the expansion of Medicaid, which may lead to a lingering death, not a quick one.
Prayer No. 3 was Obama's re-election, with a substantial attrition in his vote totals. This leaves to Obama the problem of implementing Obamacare in a political climate where Gallup found, for the first time since the question was asked, that voters feel that securing health care for everyone is not the government's obligation.
"What matters now," says pollster Scott Rasmussen, "is not how the law was passed, but how it will be perceived in the future." That is to say, it all depends on how well or how poorly implementation works out.
If all goes smoothly and on schedule, and if costs come down as promised, it will vindicate the Democrats' view that government is the solution. If the opposite happens, which now seems more likely, it will prove that this new Truman Doctrine was right.
For more blog postings from me, see TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCH, POLITICAL CORRECTNESS WATCH, FOOD & HEALTH SKEPTIC, AUSTRALIAN POLITICS, IMMIGRATION WATCH INTERNATIONAL, EYE ON BRITAIN and Paralipomena . GUN WATCH is now put together by Dean Weingarten.
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)
Posted by JR at 12:06 AM