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Deficit funding can’t last forever

August 14, 2012
The Daily Mining Gazette

To the editor:

I have witnessed the birth, growth, flourishing, decay, and threatened destruction of the Welfare State.

In 1932, there were 24 million people unemployed, but no unemployment insurance, no provisions for old age and no health insurance - only soup kitchens and bread lines.

Then came the New Deal, which with it, the Social Security Act and a host of other acts, created the Welfare State. The Welfare State brought not only relief to the poor but prosperity to all Americans. Between 1945 and 1975, the economy grew at 2.2 percent a year, faster than it ever has before or since. And the wealth was more equally shared than ever before or after.

All that ended between 1980 and 2008, when Presidents Reagan and Bush presided over years of low taxes and the impoverishment of the Welfare State. This meant not only neglect of the poor but economic stagnation. The economy no longer grew by 2.2 percent a year but barely over 0.0 percent a year. Meanwhile, 1 percent of the population amassed more than 20 percent of the nation's income.

Though the Welfare State was impoverished, it was not abolished. Americans loved it too much. It was kept going by deficit financing. Both Reagan and Bush ran up monstrous deficits.

But deficit financing cannot last forever, as Greece, Italy, and Spain have discovered. Today, they are bankrupt. But it is not the Welfare State that has bankrupted them, only financing it by borrowing. Sweden, Norway, and Finland have robust Welfare States, but they are not bankrupt, for they paid for their Wellfare State by adequate taxes.

Today, the Republicans face a dilemma. Their opposition to deficit financing is so great they cannot finance a Welfare State by deficit financing, yet they are adamantly opposed to higher taxes. What to do? Paul Ryan, their spokesman in Congress, proposes to slash Social Security and Medicare-in short to destroy the Welfare State.

But Americans love the Welfare State, even the Tea Party. Of the Tea Party in South Dakota, 83 percent wish Social Security to remain intact, or increased, 78 percent oppose any cuts in Medicare. They do not wish to see either of them privatized. 58 percent believe that taxes should be increased for those making over a million a year.

These are policies that President Barack Obama, not Mitt Romney favors. Therefore, those who wish to preserve the Welfare State should vote for Obama, not Romney.





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