May 10, 2010
Calling all 'conomists
Robert Samuelson describes The Welfare State's Death Spiral:
The welfare state's death spiral is this: Almost anything governments might do with their budgets threatens to make matters worse by slowing the economy or triggering a recession. By allowing deficits to balloon, they risk a financial crisis as investors one day -- no one knows when -- doubt governments' ability to service their debts and, as with Greece, refuse to lend except at exorbitant rates. Cutting welfare benefits or raising taxes all would, at least temporarily, weaken the economy. Perversely, that would make paying the remaining benefits harder.
OK, sez I, then cut welfare benefits enough that paying them becomes easier. That's not so difficult to imagine, is it? The "draconian" austerity measures the Greeks have been forced to impose (in order to get the IMF bailout) are an 11% cut in pension benefits and 14% cut in government wages. Please! The Greek government retirement age is fifty-two! Cut their pensions by 50 percent and make them "work" another 13 years. They'll be no worse off than their private sector neighbors.
And to hell with this talk of a "right" to an overseas holiday.Economics and Markets Posted by JohnGalt at May 10, 2010 3:26 PM