The State Of The Welfare State

And by Welfare State I’m not talking about food stamps for the poor. What I’m talking about is the focus of where President Obama and his circle of advisers want to take this country. Which is to a place where European countries are. This is a place where the government takes on the responsibility of caring for their citizens by way of their health care and retirement plans. The latter of which is called Social Security in the United States.

Right now, and before Obama became president, Social Security and Medicare are poised to bankrupt the country, if you will allow the use of the term bankrupt as an adjective. Those two programs total $42.9 trillion in unfunded mandates. Due to the demographics of our population, there will soon be people owed benefits with no money in the bank to pay for it. This isn’t a right-wing talking point. This is an economic fact.

Starting his second term, Bush opened up the debate to head off this catastrophe, but there was no support for it, and, he was derided by the media. It was labeled as the third rail, something not to be touched. Well, except to tax it. It involved ‘privatizing’ 1-1/2 percent of it and letting the person actually own his share of contribution. We all know how that ended up.

Fixing social security is still not on the President’s radar. But health care is. The solution proposed by President Obama is to essentially, increase the coverage of Medicare to include the entire country. It will also include the demise of the private health insurance industry for their inability to cover more people regardless of medical pre-conditions on the modest 3-4% profit margin they earn. This is keeping in step with the European model that Democrats in Washington seem to champion.

So what’s wrong with that?

First of all, to compare the United States with any European country is like comparing apples and oranges. Or watermelons and grapes. The economic stability of the European countries are quite shaky right now. But something deeper and more fundamental is at work which the global credit crisis has merely helped to expose. Most European countries today operate under economic and labor policies crafted during the height of the post-war baby boom, featuring middle-class entitlements like generous pension systems that allow early retirement, liberal disability programs that exempt many laborers from work, and extended unemployment systems that make going on the dole and staying there easier than in the U.S.. Europeans designed these policies in an era when there were, in many European minds, too many people competing for jobs and a bulging work population to support those who were retired or on disability.

Now, this house of cards is falling down. The demographics are nothing today like they were 60 or 70 years ago. Now, not only are there less people working, but there are more people on the government dole collecting retirement pensions. Europe has baby boomers too.  Governments, like Greece, Spain, Italy and Portugal, have no money to sustain this welfare state and they and other countries face riots in the streets at the very thought of trying to reform (take away) the unsustainable benefits they have put in place.

Back to the watermelons v. grapes comparison. Many of these countries are smaller than  most states in the United States. And they’re going bust. It takes more than the audacity of hope and hubris to suppose that a country the size of the United States, already heading to default, can pull itself out by expanding a health insurance entitlement program to include the combined populations of France, Italy, Germany, United Kingdom, Spain, and Greece. Not only that, but President Obama is still claiming that it will lower the premium costs and increase the quality and availability of care. Oh, and that’s after cutting $500 Billion from Medicare first. I think we should run that proposition by the people in Canada and Europe who travel to the United States for medical treatment and see if they think that modeling a health care system after what they have would be a good idea.

The European countries are suffering from a demographic shift that is compounding their economic situation.  In addition to their workforce shrinking, and their retired populations growing, their birth rates are falling below what is considered to be a replacement rate. Clearly, they need to change course. The old paradigm of the Welfare State is not sustainable.

Although we are demographically robust compared to Europe (our working age population will increase by a projected 17 percent over the next 40 years) and we work longer, our own baby boom was so large that we will still need substantial changes in Medicare and Social Security to meet our future obligations. Meanwhile, our states face a tough road because many of them have granted European-like retirement benefits to government workers that are exacerbating state budget problems. It doesn’t take a rocket scientist to see a trend here. But it is a trend that seems to escape Democrats in Washington.

Why is it that, despite the history and conditions in Europe, the Obama administration insists that creating our own Welfare State here is the way to go? Obama and his advisers are of the wrong century. Still high from their heyday of the 60’s, only now they are in control of our government and espousing something called ‘social justice.’ Essentially, they are heading the country southbound in the northbound lane. And instead of advising him to turn around, they’re telling him to speed up. And before too long, this great country will be in the same shape as Greece, Great Britain, Spain, Italy, and the rest of them.

What's your two cents?