The Death Spiral of the Welfare State

Is death spiral an over-dramatic term? Robert J. Samuelson doesn't think so, and he explains why in this column.

How does the Greek crisis relate to us here in the United States? Well, we have an aging population. It isn't as bad as the situation in Greece or much of Europe, let alone China and Japan, but it's bad enough. One of the factors which has kept our population younger, and thus provided us with a broader base of working-age people to support the welfare state, has been our relatively high immigration rate. And a lot of people want to kill that particular golden goose.

One way to look at it is that we need to encourage lots of young people from other countries to move to the U.S., get jobs, and contribute to Social Security and Medicare, or those programs will go broke.

And at least we have that option.

The Greek Riots and the Markets

Daniel Gross provided a quick reaction to the response of the financial markets to the deadly riots in Greece. What I don't get is the extent to which the markets were apparently surprised by the reaction of the pampered Greek people to the idea that they were going to have to adjust to a new reality. Greece had a system under which people could retire on full pay at age 53, there were lots of cushy government jobs (the technical term is "sinecures"), and tax laws were only loosely enforced. Now the government is cutting jobs and subsidies, promising to enforce the tax laws, moving out retirement ages, and cutting pensions.

Say you're a 45-year-old Greek looking forward to retiring on full pay in only eight years. Now they tell you that you can't retire for several more years, and when you do retire you're not going to take home as much, and the government is going to take more out of your pay in taxes than they have in the past. This is supposed to be make you happy?

Good News or Schadenfreude?

It's another column by Daniel Gross. I really need to start adding more original content. For one thing, I'd like to take off on Agim Zabeli's comment on an earlier post and get into questions about taxes and deficits. But, for the moment, Gross has some good comments about how the Japanese superiority in quality manufacturing, and the European superiority in social solidarity may have been just as illusory as the American economy that could grow forever. I'm not sure this is so much good news for the United States as it is glorying in the misfortunes of others.

The thing is, the EU is doing to the profligate nations in its ambit what the U.S. probably ought to be doing to profligate institutions: cutting them off and forcing them to make hard choices. But the EU has the advantage of national boundaries. For all the work that's been done on unification, they can still force Greece into an austerity program and limit the damage to other countries in the union. If the U.S. gets too tough with California or General Motors, the effects will come around and bite the rest of us in the ass.