From Robert Samuelson:
In theory, expanding public welfare could offset eroding private welfare. President Obama’s health-care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt will double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.
Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today’s welfare — present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.
The U.S. welfare state is weakening; insecurity is rising. The sensible thing would be to decide which forms of public welfare are needed to protect the vulnerable and to begin paring others. Our inaction poses another dreary parallel with GM. It was obvious a quarter-century ago that GM the auto company could not support GM the welfare state. But the union wouldn’t surrender benefits, and the company acquiesced. Inertia prevailed, and the reckoning came.
The same cycle, repeated on a national scale with sums many multiples higher, would be correspondingly more fearsome.
A lot of Friedrich Hayek’s work is really about whether or not a society consumes or misallocates or squanders its capital and suffers a consequent loss of general welfare, or whether a society instead invests and innovates and coordinates it capital utilizing relative prices, sound money, and a competitive system and thereby enjoys the consequent bounty of an ever expanding general welfare.
Hayek fought the Keynesians, the socialists, and the unions because each of these groups represented in effect a conspiracy against the expansion and coordination of capital production — both though a complex of false scientific ideas, and through their massive influence on legislation and the administrative state. The Keynesians were the enemy of sound thinking about increasing output through the lengthening of capital production, and also the enemies of sound thinking about the effect of monetary expansion on the capital structure across time. The socialist were the enemy of sound thinking about the role of relative prices in the coordination of production and the role of competition in the advance of innovation and productivity and consumer satisfaction. The unions were the enemy of sound thinking about the rule of law and the effects of price controls and government mandates on income, output, productivity and personal choice , and they used their muscle to legally priviledge themselves in the political process and in the economy, to the detriment of everyone else — most especially the next generation.
Hayek warned about all this and more — and now Obama and the American government seem dead set on putting the pedal to the metal as America goes blasting off headed straight for a brick wall.