Takers Taking Over
In case anyone hasn't noticed it yet, Europe is in crisis. Faced with violent protests and general strikes, European politicians seem unwilling to take the necessary steps of structural reform that would save their economies. With rigid labor laws, bloated government workforces, declining birthrates, and universal welfare schemes, Eurozone economies have experienced subpar performance for decades and are now sliding into recession once again. The model of the European-style welfare state simply does not work.
Unfortunately, when the percentage of those receiving government aid exceeds 50%, it is difficult to cut benefits. The threat of cutbacks in Greece has brought chaos to that country. The sight of thousands of left-wing thugs, marching in close ranks and armed with large batons and Molotov cocktails, is now a common one in central Athens. These blackshirted youths form a paramilitary force of a sort that has appeared in other European nations as well, adding a dangerous element of uncertainty to the future.
Government's response to civil unrest has been to appease the protesters. Greek officials have dragged their feet finalizing proposals for "voluntary" write-downs of 50% on their sovereign debt since those write-downs come with stringent conditions of structural reform. From all appearances, it looks like the Greeks are angling for debt forgiveness with no substantive change in the Greek welfare state. In other words, they are asking investors to continue subsidizing their enormous deficit spending.
If all this sounds a lot like what's happening in the U.S., it is. Like the socialists who govern Greece, Obama's left-wing administration depends on the support of left-wing activists, unionized government workers, radicalized students, and welfare recipients. All of these groups have been pressing for more government spending, and Obama has not disappointed them.
In just three years, discretionary spending has increased by 24% (not counting an additional trillion dollars of stimulus spending plus two rounds of quantitative easing by the Federal Reserve), all of it funded with deficit spending. Obama's 2012 budget, which was rejected by every member of the Senate, called for continued spending at 2011 levels, even as his own budget supercommittee struggled to come up with $1.5 trillion in cuts.
It is clear that Obama's priority is not fiscal responsibility. In fact, the single-minded focus of this administration has been the expansion of government benefit programs designed to foster dependency. From the beginning, Obama's political strategy has centered on the restoration of "welfare as we know it." The clients of welfare are always reliable supporters of the Democratic Party.
If Democrats can expand the percentage of the population dependent on benefits above 50% of the population, they will have achieved a permanent grasp on power. If anyone doubts this, let him look to the European welfare states. In none of these countries have social welfare programs been eliminated once they've gained their footing.
America stands at a crossroads in 2012, for this is the year when the American people will decide irrevocably whether they wish to see their country transformed into a European-style welfare state.
At this crossroads the choice is between two very different futures. The welfare state promises lifetime benefits for the entire population. Every American will be entitled to a safety net of food support, housing, education, medical care, child care, child tax credits, transportation, and a host of other benefits regardless of whether he or she chooses to work. Everyone will enjoy the right to this wide array of government benefits covering the necessities of life, but to pay for it, those who choose to work will be taxed to the point that they too live near the level of welfare recipients.
Eventually, the logic of the welfare state dictates that few will choose to work. Instead of a nation divided into "takers and makers," America will become like Greece: a society composed mostly of takers. And those takers will never willingly relinquish their lifetime benefits.
The dire consequences of this situation are not entirely apparent even in Greece because the Greek economy has been propped up by the stronger northern European states and by international loan agencies largely funded by the American taxpayer. Yet it appears that Greece may be on the brink of default, as large debt payments are due in March 2012. Once Greece is cut loose, it will face a very long and harsh economic depression, and until it institutes fiscal reform, that depression will continue indefinitely.
Economic depression is the endgame not just for Greece, but for the Eurozone as a whole and for America as well if spending is not reined in. In America one can already see the effects of Obama's restoration of welfare: higher rates of long-term unemployment, millions permanently dropping out of the labor force, stagnant wages, stalled growth, a dearth of high-paying jobs, and a shift of innovation and job-creation to nations in the developing world. In just three years, America has lost its triple-A credit rating, slipped from second to tenth in economic freedom ratings, and accumulated more new debt than it did during its first 214 years as a nation.
Ominously, the percentage of takers, those who collect benefits and pay no federal income tax, now sits at 49%. Anything beyond that and the country is lost forever.
Fortunately, there is an alternative future. Under capitalism, workers are not condemned to hand over 70% or 90% of their earnings to the state, and they're not forced to live at the level of welfare recipients. The free market affords ample opportunity for success for individuals and for the nation as a whole, but it demands acceptance of the fact that some will fail.
Socialism is an economic system in which no one is allowed to succeed, or to fail. But by eliminating the motive of competition, socialist economies reduce all workers to the lowest common denominator. Instead of success for the many and failure for a few, the norm under capitalism, socialism invariably produces failure for all.
Paradoxically, the only thing that can prevent failure for all is for society to accept the fact that some will fail. Fewer people will eventually fail if early in life they are convinced that there are serious consequences for doing so. And while inevitably some will fail, society as a whole will be better off for allowing them to do so.
Whether Americans will choose the more demanding path of capitalism over the soft tyranny of socialism remains a question mark. It is not just that there are now almost as many takers as makers; it is that even among those who succeed, there exists a misguided sympathy for those who fail to compete. Many Americans are convinced that there should be no moral hazard for irresponsible behavior: there should be a bailout for underwater homeowners, forgiveness for bankrupts, lifetime unemployment benefits, homes for the homeless, suffrage for felons, and so on. By supporting such behavior, however, they are simply encouraging more of the same.
The choice, in sum, is between prosperity for all but a few and poverty for all. It is hard to imagine that any free people would choose poverty for no better reason than that under capitalism, a few will be left behind. But that is the danger we now face.
And once the takers take over, we will no longer be in a position to choose.
Jeffrey Folks is the author of many books on American culture, including Heartland of the Imagination (2011).