Increased dependence on government
Sunday, November 29, 2009 at 10:32AM http://www.nytimes.com/2009/11/29/us/29foodstamps.html?pagewanted=4&_r=1&partner=rss&emc=rss
Many will read the above article and feel good that the government safety net is expanding, and that the stigma is being removed. Food stamp usage is exploding and now covering the middle class. One in four children receive food stamps. The bureaucrats are ecstatic -- their business is booming.
We are moving so far along the road of regularizing welfare that it's no longer seen as an embarrassing situation from which to extricate yourself as soon as possible, or to try very hard to avoid in the first place, or to leave to private charity. The government safety net now covers society from Goldman Sachs to the Appalachian Mountains.
As government spends more and more on welfare, and taxes people more and more to pay for the welfare, the very situation which requires welfare is created by government intervention. By reducing productive activity and thwarting competition through government intervention and spending, regulations and tax burdens, unemployment has climbed to double digits and will rise higher in the next year. If healthcare reform passes, taxes will go higher, unemployment will rise and welfare rolls will swell, requiring new taxes, creating more unemployment and greater welfare needs, which will require higher taxes, causing more unemployment and increasing welfare rolls, requir...
We may be entering an economic reality where 15% unemployment is normal, even during economic growth. The jobs at the bottom level of pay are no longer worth the effort to pursue. A person can make as much money on welfare and doing side jobs in their area. These people will be hidden in the accounting, but they will be supported by tax payers. The workforce is becoming more technologically challenging, and the public school systems are failing to produce the skills required to make decent money in this new work reality.
Technology will create productivity gains which require smaller and smaller workforces, plus many jobs will be contracted over-seas -- poor, illegal immigrants will do the grunt work, adding to the burden of our social welfare system -- low paying jobs will not be enough, so our tax dollars will have to subsidize the immigrant workers for certain critical services where they won't be turned away, or that they use just by being here.
The heavier tax burdens on small businesses will prevent them from hiring and training -- the cost of training ill-prepared high school graduates will be too burdensome due to the higher taxes and meddlesome regulations. Small businesses will either go out of business or stay small -- expansion will be almost impossible.
Can 85% of the productive force in this country support 15% of the people? It will be more than that when you take children and the disabled into account? I suppose it's possible, but economic activity would have to be brisk and relatively free of government intervention. If it's just a matter of raising taxes on productive activity, and not creating regulations which strangle innovation and expansion, then I suppose it's possible - I don't propose this, although it's likely possible -- but will the producers be satisfied with paying that much to support almost a quarter of the population? Or, will society demand better education, more skilled workers and less government welfare?
Can we compete globally with this type of welfare burden placed on businesses, on top of military expenditures, foreign aid, support for the UN, World Bank and IMF? Can we keep prices down through efficiency and productivity in order to compete with cheap labor in China and India?
If we're forced to choose between competing with the arsenal of efficiency, productivity and innovation versus cheap labor, I choose the former, and I think we can compete without ill-conceived protectionist measures, but our government will have to realize that if they want the 75-85% who are productive to pay the bill for everyone else, then they will have to honor capitalist principles. If we drift further toward a progressive/socialist/statist form of central planning and social engineering and partial-nationalization of industry, we'll spiral downward and fall much faster and land harder than Rome or the Brits fell. And, it won't be just us who fall.
capitalism, productivity, public education, welfare 
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