Our course is charted…

To start off I’d like to say I’m in love with http://www.thefreemanonline.org.

 I just discovered it today randomly and I’m so very glad to find a mouthpiece that so far.. says exactly what I believe but more articulately!
 What follows is a gem of an article explaining finely where we are going with current policies in place.

http://www.thefreemanonline.org/featured/the-paradox-of-the-welfare-state/

The Paradox of the Welfare State

October 2010 • Volume: 60 • Issue: 8

Welfare states face an inescapable paradox: The level of production needed to sustain a welfare state cannot be sustained by
a welfare state.
This paradox is created by policies that encourage the
redistribution and consumption of wealth while discouraging its
creation. In the face of such perverse incentives, living standards
must fall even though, for a time, they may be maintained through
borrowing. The paradox is not unique to Greece or California, nor is it
a function of who is in charge. It is, rather, inherent in the internal
contradictions of the welfare state itself.

The term “welfare state” is defined here as a polity that assumes
primary responsibility for the care of a good number of its citizens,
providing such benefits as public housing, health care, education,
minimum wage rates, unemployment insurance, and financial support for
the poor, elderly, disabled, and politically favored institutions,
businesses, and industries.

The material well-being of any society’s people rests on the
quantity and quality of goods and services they produce. All goods and
services consumed by the unproductive members of society must be taken
from, or paid for by, the productive. Welfare state policies ensure
that the ranks of the unproductive will grow and those of the
productive population will shrink,
and that the productivity of the
dwindling number of producers will fall. As a result, the quantity and
quality of goods and services available will drop and poverty will
rise. The mechanics of this decline are both straightforward and
predictable.

Welfare state policies discourage saving. When government helps pay
for its citizens’ big-ticket items, citizens have little need to save
for the future. Banks will therefore have less money to lend, leading
to lower capital investment and lower economic growth. The taxes needed
to pay for public benefits reduce the ability of, and incentives for,
businesses to maintain and expand production facilities. To the extent
that taxes are paid by consumers, or passed on to them through higher
prices, they will have less money to save, further reducing private
capital.

Loss of Productivity

Minimum wage laws, unemployment insurance, employer mandates, and
regulations that make it difficult to fire workers all drive up the
cost of employment, resulting in less of it.
High corporate taxes will
drive some businesses out of the country and others into bankruptcy,
further adding to unemployment rolls. Demands for protectionist
legislation will become more insistent as jobless rates rise. If these
demands are met, even more jobs will be lost as foreign commerce
collapses amid escalating trade wars.

As benefits and benefit recipients multiply, and as the number of
taxpayers declines, the latter will be less and less able to bear the
ever-growing burden. Many of the most productive and adaptable will
move to countries that allow them to keep more of their earnings.

While productivity increases can help offset falling production due
to a declining workforce, any such increase requires either capital
investments or innovative process improvements. As previously
explained, however, welfare states discourage capital formation by
discouraging savings. Innovation is similarly discouraged by taxes that
reduce or eliminate any profits that such innovation might generate.

Depleting the Ranks

As the population of unproductive citizens grows, either through job
loss or through aging, government bureaucracies will also grow to meet
this rising need. In addition, as more taxes are levied to pay for the
bureaucracies and the programs they administer, government tax
collection agencies must expand as well. This further depletes the
ranks of the productive, channeling them away from producing wealth to
merely redistributing it. Civil servants are typically paid more than
their private-sector counterparts and are generally able to retire
earlier and on more generous pensions than employees in the private
sector, further adding to the burdens of productive workers. Moreover,
the growing ranks of public employees form a powerful voting bloc
strongly favoring increased government spending and more government
control over the economy.

Institutions will grow up around the welfare state, increasing the
number of people with a stake in its continuation and growth (and
further decreasing the number of productive workers). For example,
advocacy groups and law firms will form to help people obtain
government benefits and to demand more of such benefits. Service
providers, such as tax accountants, will spring up to help people deal
with increasing bureaucratic complexity.

Special interest groups like AARP will funnel campaign funds and
votes to pliable politicians. These private institutions will combine
with government agencies in symbiotic, mutually reinforcing alliances.
Elected officials can garner votes by acting as advocates for
constituents forced to deal with unresponsive public agencies.
Government departments, wishing to expand their “customer base,” will
work to make government support easier to obtain and available to more
people.

Job loss, unpleasant in a free-market economy, is softened by
government-provided unemployment insurance in a welfare state. Some
will find paid unemployment agreeable and will delay their return to
work, perhaps indefinitely. As more parents become wards of the State,
more and more children will come to see this as normal, and generations
of families living on welfare will become commonplace.

Advocacy groups and government agencies charged with providing
benefits will work to reduce the stigma associated with receiving
public aid and to justify taking from those who work to give to those
who do not. Poverty must, therefore, be portrayed not as a consequence
of self-defeating actions or poor choices—and certainly not of
government action—but as the result of bad luck or oppression.

Conversely, wealth must come to be seen not as the outcome of hard work
and perseverance, but good luck or greed and exploitation. The very
concept of virtue must be questioned and stood on its head as the Tenth
Commandment morphs from “Thou shalt not covet thy neighbor’s goods” to
“Thou shalt not have goods thy neighbors covet.”

Feedback Loops

Imagine how dangerous the world would be for a person without the
ability to feel pain (as happens with certain forms of leprosy). Such a
person could hurt himself terribly by continuing to walk on a badly
sprained ankle or putting his hand on a hot stove without knowing it.
Government largess can create a sort of moral leprosy by weakening or
even destroying feedback loops linking cause and effect. As the
consequences of self-destructive actions (such as dropping out of
school, having children out of wedlock, or drug and alcohol abuse)
are
increasingly borne by others, the incidence of such behavior will rise.

At the same time, as the benefits of hard work, perseverance, and
integrity fall, such virtues can be expected to fade.

The philosophy underlying the welfare state, “From each according to
his ability, to each according to his need,” leads people to display
minimum ability and maximum need.
To the extent this philosophy is
actually followed—more often, wealth flows from the politically weak to
the politically strong—people will band together along ethnic, gender,
religious, and other lines to compete to be seen as the most needy
and
therefore the most worthy of a larger share of an ever-shrinking pie.
This downward spiral of competitive self-destruction may well create a
permanent underclass that carefully avoids success and embraces
failure—that is, which acts sensibly in the face of perverse
incentives.
This competition for tax dollars may create deep,
irreparable fissures between recipient groups and between recipients
and taxpayers.

As government grows it will increasingly be seen as the answer to
any and all difficulties, and people will demand government solutions
to increasingly minor inconveniences. Legislatures will respond by
enacting ever-more-stringent regulations on individuals and industry,
further reducing adaptability, independent and entrepreneurial thought,
risk-taking, and productivity.
Centralized, bureaucratic rule will
erode people’s self-reliance, initiative, and sense of local community.

When government begins providing people with goods and services they
can provide for themselves, it launches a self-reinforcing trend that
will eventually become unsustainable. Once the practice of taking from
one citizen to give to another becomes established, politicians will be
unable to resist the urge to bribe voters with their own tax dollars.<<HST anyone??>>

As legislators’ rewards for spending other people’s money grow,
spending will grow.

The time it will take a country to spend itself into bankruptcy
depends on its initial economic strength and the strength of its
culture. But whether it takes one generation or ten, unless the trends
reverse, bankruptcy must come.
Time can be gained by borrowing or
printing money, but other countries will eventually stop accepting the
nation’s debt—whether it is in the form of government bonds or in the
form of fiat currency.

In the case of the United States, the country is not yet bankrupt,
but bankruptcy will soon be in sight if current policies are not
changed. Social Security will go into the red this year and Medicare
will shortly follow with even larger deficits. Current estimates of
U.S. debt are on the order of $13–14 trillion, an amount equal to the
country’s entire gross domestic product. As monumental as that number
is, it pales in comparison to the present value of the unfunded
liabilities of Social Security and Medicare, which total $107 trillion.

Of all the changes wrought by the welfare state, a degraded,
dependent culture will have the deadliest impact and will be the
hardest to reverse.
Yet the culture must be changed. This can occur
only if government-created incentives that encourage people to live at
the expense of others are replaced by market-created incentives
encouraging the production of goods and services that people want.

Creative marketplace competition to produce more and better products
must supplant political competition for an ever-dwindling pool of tax
dollars extracted from an ever-dwindling pool of productive workers.

   Thank you Freeman Online.

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About yolandalenin

I talk a lot. ______________________________________________________________________ I write even more.
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