Winston Churchill once said, “The biggest argument against democracy is a five-minute conversation with the average voter.” Today, the truth of that observation is being determined in democracies around the globe. In the U.S., with politicians sharply divided along partisan lines on how to solve our fiscal crisis, voters will decide on the path forward. Are they up to the task? Will they buy the perpetual prosperity pitch or insist on belt-tightening? With the chips down, will Americans both recognize and reject political absurdities or is Churchill right? Will they be as foolish as some of their currently elected officials?
The prospect of perpetual prosperity can be alluring. This enticement lies at the heart of Obamanomics, which promises endless entitlements for some through higher taxes on others. But, as the demand for entitlements increases through larger aging populations and expanding social services to many more, the price tag grows exponentially. This necessitates a bigger and bigger revenue pot or deeper and deeper annual deficits. Since most of Obama’s fellow democrats agree that deficits must be tamed, entitlements require a mushrooming revenue stream gushing into federal coffers.
Under Obamanomics, the funding source is higher taxes on the rich, of course, but the sustainability of that model is not addressed. The continuing ability of those footing the bill to meet the growing demand for their money is simply assumed. These people are supposed to be a perpetual moneymaking machine with a need-to-achieve compulsion that assures ever more federal revenue.
A telling dichotomy underlies this belief. While abiding achievement is assumed in one part of the population, indelible dependence is assumed in the other, much larger, part. Viewed in microevolution terms, this change in a once-unified group marks the beginning of two subspecies: producers and consumers. Under predictable evolutionary progression, producers prosper, even if it means migrating to more accommodating locales, while consumers eventually go extinct.
The analogy could not be clearer. The indispensable core of Obamanomics is also its inevitable demise. Friedrich Heinemann, the Corporate Taxation and Public Finance Department Chair at the Centre for European Economic Research, defines the problem as a forced morality change.
In a study of the long-term impact of social norms on the welfare state, Heinemann concludes that increasing benefits and unemployment fatally destabilize the system. A generous welfare state creates a dependency in those who take from it, undermining the social norms indispensable to its survival. People become so used to feeding at the public trough, they will cheat to keep the benefits coming. Heinemann’s is not a politically correct study, but reality rarely is.
The reaction of the Greeks to their government’s austerity measures is also real and underscores Heinemann’s point. After decades of extravagant social spending, the Greeks have shot through dire straits and are dangling in midair over financial ruin. Keeping them from falling into the abyss is the refusal of European leaders to see their banks and their economies undone by unpaid Greek loans. But, the Eurozone’s rescue imposes “austerity” on the country, if living within its means can fairly be called austere.
And the Greeks don’t like it one bit. They burn. They loot. They riot. They vent their displeasure like spoiled children whose profligate parents are trying to change their ways. And yet, public support is critical to the success of reforms necessary to restore financial health. Whether it is ultimately given is anyone’s guess.
Meanwhile, in a show of resolve, Wisconsin voters rejected the bullying tactics of national unions, refusing to restore Democratic control to their legislature. All the national boys could buy for their thirty-five million dollars in campaign spending was a net gain of two seats. Sounds vaguely like the federal deficit.
Granted, this was not a direct showdown on Obamanomics. But, it does maintain the reforms that were ushered in by the 2010 elections, which were a rejection of Obama’s fiscal policies. And you can bet that, had the unions succeeded, our president would be on the stump today, pushing the result as next year’s victory predictor.
Will the country’s voters follow Wisconsin’s lead and opt for responsible government or will they burn and loot in the footsteps of Greek rioters? Is there really a choice? On October 8, 2008, the national debt stood at $10.1 trillion. Today, less than three years later, it has spiraled past $14.6 trillion, for a 45 percent increase. Other than hand waving and smoke screens, all we have to show for it is an historic downgrade in our credit rating.