When We Choose Security Over Freedom — 19 November 2012

In the end, more than freedom, they wanted security. They wanted a comfortable life, and they lost it all – security, comfort, and freedom. When the Athenians finally wanted not to give to society but for society to give to them, when the freedom they wished for most was freedom from responsibility, then Athens ceased to be free and was never free again.

I came across this quotation recently, and was struck by how appropriate it is to our times.  It was written by Edward Gibbon, author of The Decline and Fall of the Roman Empire, about 200 years ago.  And it rings true today.  I greatly fear that it describes our culture in the early 21st century.

We are rapidly approaching the point at which more people receive payments from the government than pay into it.  And President Obama, by expanding the rolls of food stamp beneficiaries, Medicaid recipients, and all the rest, has accelerated the trend.  To use Mitt Romney’s artless phrase, when the takers outnumber the makers, majority rule becomes a tyranny.  In the far more eloquent words of Thomas Jefferson:

The Democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

Certainly not all those who are on the receiving end of Washington’s largesse are unwilling to work.  Many have paid in their share, into Social Security, Medicare, and all the rest.  But the fact remains that, as voters, they are going to vote to continue the flow.  Why wouldn’t they?

George Bernard Shaw:

The government that robs Peter to pay Paul can always depend on the support of Paul.

There are few votes for politicians who promise to take away the party tray.  Paul Ryan, one of the most articulate voices for spending restraint and the reasons for it, was lambasted by Democrats with images of him throwing Grandma from her wheelchair off the cliff.  They loudly proclaimed they would not countenance balancing the budget “on the backs of the poor.”

To hear them tell it, every dime of the spending avalanche that President Obama has launched is vital to the well-being of America and her citizens.  To even think about cutting back – or even slowing the rate of growth – is sure to result in Grandma picking through the garbage for her dinner.

The fight we are about to witness in Washington over averting the Fiscal Cliff is, for all its  ferocity, rather small beans when you look at the big picture.  We are $16 trillion in debt – and that’s just the money we have borrowed to spend already; it doesn’t count the many trillions in promises we have made but cannot afford to keep, for Social Security, Medicare, Medicaid, and now Obamacare.  Every day we are borrowing another $4 billion to pay for more government spending than our tax revenue can support, so that debt rises by a trillion a year.

We won’t begin to pay down that debt until we reach surplus on our regular budget – and we are miles from that point.  The whole Fiscal Cliff wrestling match is about how to reduce that deficit modestly.  If President Obama gets his wish, and taxes go up for the “wealthy,” it will raise only about $85 billion a year – less than a tenth of the annual deficit, and probably a lot less given how those tax increases will slow the economy and depress other tax revenue.

And watch for this: Democrats will push for tax increases now that they can bank, in exchange for spending restraint in years to come, spending restraint that of course will never happen.  So any thought of balancing the budget, and actually reducing the debt is a distant mirage at best.

Just the interest rate risk we run is scary enough.  Right now the debt is expensive but manageable because rates are at historic lows.  Normal levels are 2-4% higher than they are right now.  But every percent rise with our debt at current levels will add over $150 billion dollars to the annual deficit – that’s nearly twice the extra revenue Obama wants by taxing the “rich.”

(Attributed to de Toqueville):

A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.

Not only did we return Obama to the White House, but at the state level as well, citizens voted to support those who are responsible for financial debacle.  In my own Illinois, which has the worst credit rating, the worst business climate, and one of the most dire public finance situations in the country, the Democrats have run things for twenty years.  They own this calamity, and this year voters increased their majority in Springfield.

Similarly in California, which has similarly catastrophic public debt, and where a supermajority is required to raise taxes, voters returned the Democrats to Sacramento with precisely the supermajority they need.  And the promises and payments and the deficits will continue until one day the bond market says “no mas.”

Governments can only continue on the reckless fiscal path as long as someone will buy their bonds, that is to say, continue lending them money.  The reason Greece is in such dire straits is because there are no buyers for their debt these days, and the rescuing institutions, such as the European Union, the European Central Bank, and the IMF, will only provide money if Athens squeezes into a straitjacket of spending cutbacks.  The result: Greece’s economy has declined by 20% over the last few years.  That’s the kind of depression that will bring revolutionaries into the streets.

Now, we are unlikely to go the way of Greece, for two reasons.  First, since the dollar is the world’s reserve currency, many people continue to buy our bonds even though they are probably a terrible investment: they have cash that needs to go somewhere.  Secondly, there are no international institutions holding our feet to the fire: our own Federal Reserve can – and does – buy our government’s bonds with money it prints out of thin air.  But that doesn’t mean we can indefinitely suspend the laws of economics.

The world will not fund our deficits forever.  Nor can the Fed.  When they decide there is a better home for their money than US Treasuries, the piper will demand payment with a vengeance.  When that day comes, history will look back at this period as the one where our citizens opted for security and comfort over freedom and responsibility, and set our collective feet on the path to ruin.

I really hope I’m wrong.

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One Response to When We Choose Security Over Freedom — 19 November 2012

  1. John McHugh says:

    You’re not wrong and I think it’s worse than you fear. I feel terrible every time I consider what has happened and all the gross stupidity that is sure to ensue: energy, healthcare, etc.

    Have a safe and happy holiday, Fred.

    John McHugh.

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