By Dennis Brady
Socialism is like a dream. Sooner or later you wake up to reality.
-Winston Churchill
A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw
I am sure that you had this same experience as I have: you are in a deep sleep dreaming that you are rich , famous, or spending time with a beautiful woman. While you are dreaming you think this is reality but suddenly your alarm clock rings and you realize that was just a dream and now have to get up out of your slumber and face your normal life with all its everyday challenges. I would suggest that a big part of the European Union is now going through the same experience.
Ever since the second world war most European countries have elected governments that have promised to take care of their constituencies from cradle to grave. They gave generous pension & health plans while taxing their most prosperous and hard working citizens at an exorbitant rates. During the prosperous 1960,s, 80& 90’s tax rates went up even though in the distance storm clouds started to gather as their tax base slowly declined and more promises were made for more benefits.
Sure there were attempts to curb this spending in past economic downturns. This occured in the late 70’s and early 80’s in Britain for example under the “Iron Lady” Margaret Thatcher , but in general the path was headed in a pursuit of the socialist utopia. Free market and tax reforms were only made at the fringes and in reality no European government never attempted to eliminate these programs and solve long term problems such as a falling birth rate, a high base unemployment rate, and ever increasing demands of ever more powerful unions.
The Crisis in Greece is a long overdue wake up call, unfortunately it might be too late for the EU in the long term. Germany and France are risking their AAA bond rating to back up weaker members of the EU contributing to a 750 billion-euro ($955 billion) stabilization fund. Why are they risking their financial security? Because if Greece defaults, Portugal & Spain are next in line as the sale of their government bonds sank before the bailout plan was announced. If the debt crisis continues it will put the Euro at risk of collapse.
So what has this to do with the US other than the fact we the taxpayers are footing part of Greece’s bailout indirectly through our contribution to the International Monetary Fund? We are now on the same road as the Europeans. And to be fair to the current Administration this started a long time ago under previous administrations and congresses of both parties, but President Obama and the Democratic Congressional Leadership have accelerated the process exponentially. The US has its own Greece , its called California, rumors abound that the Feds might consider bailing out the state if their finances worsen.
As I wrote in a previous posting to this Blog states like New Jersey have a huge under-funded pension liability issues that are getting worse by the day. These Pensions are mostly to state & municipal workers such as police officers, teachers, Etc . The Unions that represent these workers such as the SEIU (Service employees International Union), and the NEA (National Education Association) have huge influenceover the administration. an for example the former Head of the SEIU Andy Stern is being considered for an appointment to a bi-partisan panel considering how to handle the Federal budget deficit, talk about putting the fox guarding the hen house!these unions are big contributors to the Democratic Party, Enormous pressure would be put on the Federal government not to let States like California default and modify their generous union pension benefits.
But the US is not like Greece or even the EU right? Well we aren’t that far behind, consider this-Moody’s Investors Service has issued a warning that the US might be headed toward a downgrade in its AAA rating if Congressional Budget Office (CBO) projections hold. The key indicator is the ratio between debt as a percentage of tax revenue. The Ratio of over 18-20% would force Moody’s to revaluate its AAA rating. Under President Obama’s own budget figures , interest payments on the debt will move above 18% of revenue in 2018 and 20% in 2020 according to the CBO.
the CBO also ran other scenarios which include much higher interest rates that the federal Reserve is considered doing, in that case Moody’s projects that debt service could hit 22.4% of revenue by 2013. In order to come to grips with the worldwide Debt Crisis politicians in the major European Capitals must wake up and realize they must put their financial house in order, this will mean that their constituencies must accept sacrifices and accept simple facts that you cannot have fully paid retirement when you are in your fifties, free colleague education and health for all and other cradle to grave social programs. The Obama Administration must also realize that America is not like Europe and must not make the same mistakes as these socialist states have made.
We must listen to our alarm clock and wake up before our false dream becomes a national nightmare.
Just my Opinion-D.B.