Collapse of welfare state
By Dr. Grace Vuoto
April 5, 2011
America is going bankrupt. The nation currently has a staggering national debt of over $14.2 trillion, or the equivalent of approximately $46,000 per individual. In addition, our annual budget deficit is $1.4 trillion.
The Obama administration is currently locked in a budget battle, seeking to reach a compromise with Republicans who are calling for billions in spending cuts. The president hopes to prevent a government shutdown by the end of the week. In addition, Treasury Secretary Tim Geithner said recently that America will hit the debt ceiling of $14.3 trillion by May 16. He is calling on Congress to lift the legal limit on the debt or risk that the government will default on its obligations. In other words, President Barack Obama’s reckless stimulus spending has done little to revive the economy but has brought the nation to the precipice of a financial meltdown.
The root cause of this unsustainable structure is the nation’s abandonment of the core principles that made us an economic powerhouse. Since the 1930s, as President Franklin D. Roosevelt began to erect a welfare state, we have systematically destroyed the values that undergird a thriving capitalist economy. Rather than orienting the national ethos toward the accumulation of capital and wealth creation, as our predominantly Christian forefathers did, American leaders have focused mostly on the redistribution of wealth. Even the more free-market loving presidents have been unable to reverse this trend. This stagnant economic model invariably leads to debt accumulation rather than capital accumulation. The result is a gradual erosion of both our prosperity and freedom.
We are now at a crossroads: give up the welfare state and enact radical reforms or go broke. The welfare model, whether tied to a democratic or totalitarian government, leads to a financial crisis that compels either dissolution or reform. The Soviet Union eventually crumbled under the weight of its insolvency. Cuba and China have been forced to adopt free-market reforms in order to survive. History has taught other nations a lesson we have yet to fully grasp: A collectivist economy is inevitably a failing economy.
For a brief moment the Democratic Party understood this. President Bill Clinton, who won election in 1992 “as a new kind of Democrat,” suffered amnesia during the first two years of his presidency and then saw the light after the 1994 midterm election drubbing. He declared “the era of big government is over,” reformed welfare, balanced the budget and won reelection in 1996. The Democratic Leadership Council, founded in1989 and whose philosophy Mr. Clinton espoused, sought to make the Democratic Party more centrist. Yet, following the end of Mr. Clinton’s tenure in office, each successive Democratic presidential candidate—Al Gore, John Kerry and Mr. Obama—has campaigned to the left of Mr. Clinton, dragging the party down a collectivist path. By 2011, the DLC is now a spent force, and the Democratic Party has embraced the old and tired tax-and-spend mantra whole hog.
In the meantime, the GOP provided only tepid opposition to the welfare state until the Tea Party revolt of 2009 compelled more draconian attention to America’s fiscal woes. Now, the GOP leadership is under pressure from the grassroots to return to a strident free-market approach to the economy. The first major onslaught against the welfare state comes from House Budget Committee Chairman Paul Ryan, Wisconsin Republican, whose blueprint “Path to Prosperity” suggests how to eliminate $6.2 trillion in spending over the next ten years.
Mr. Ryan does so by reforming the tax code (capping personal and property taxes at 25 percent), bringing spending down to 2008 levels, scrapping ObamaCare and transforming the food stamp program. He also presents a means of reforming Medicaid by allowing each state to control block grants and transforming Medicare by allowing for greater private competition. In a nutshell, this “Path to Prosperity” is tantamount to a piecemeal dismantling of the welfare state.
And this is the only way forward—or, we might say, backwards to the values of our forefathers. A sound economy, like a sound personal budget, has to be based on the following values: individual responsibility not collective responsibility; thrift not deficit spending; capital accumulation not debt accumulation. Wealth, both individual and national, comes from the patient, diligent investment in durable goods rather than the reckless funding of consumer appetites—whether these are appetites for cars and homes or insatiable appetites for social welfare.
One of the core principles we must return to is a suspicion of debt. Debt is not a solution but only another problem added to disordered spending. For centuries, Christians viewed debt as disgraceful—as in itself a sign of personal failure. In addition, during the Middle Ages, usury, or the collection of interest on debt was illegal and viewed as profoundly immoral. The argument against usury was that the lender was selling time—and time cannot be sold as it belongs exclusively to God. Moreover, the lender invariably claims a larger and larger share of the borrower’s life.
This is the opposite of charity, which is simply to help one in need, without laying claim to the despondent person’s future labor and without rendering him in some kind of servitude. In short, charity is to give money without wanting anything in return and usury is to give money on the condition of a large return. Christians defined the latter as evil, pure and simple.
We may snicker now at such Christian principles. Yet, when we borrow against time, we are essentially asserting some claim to the future—a future we cannot know and cannot predict. As we act like gods, we suffer instead the fate of fools who do not know their proper limits.
-Dr. Grace Vuoto is the Executive Director of the Edmund Burke Institute for American Renewal.