Spending and Demographics

House Speaker John Boehner criticized President Obama’s “failed policies and hostility toward job creators.” The current administration established a “new normal” for Americans: fewer jobs, higher unemployment, more spending, higher prices, and bigger deficits. The White House official blog calls this status quo the “Great Recession.”

To say that the economy is anemic is an understatement – GDP is 1.9 percent, only 69,000 jobs were “created” in the month of May and unemployment is at 8.2 percent. Unemployment figures are constantly revised, massaged, and misrepresented. No wonder, citizens no longer trust their government, they fear it.

Congress, who controls the purse strings, has done little to curtail the out of control government spending and waste on bankrupted “green energy” that electrifies nothing except campaign sound bites and the die-hard environmentalist left. 

Last week President Obama signed the reauthorization of the Export-Import Bank, raising its lending authority by 40 percent to $140 billion. The Export-Import Bank guarantees loans from U.S. banks to foreign businesses that buy U.S. made products.  Conservatives in Congress criticized the move and “assailed it for meddling in the free market.”

Legislators did not raise the most obvious question before approving the $140 billion giveaway. Why do we give loans to foreign corporations to buy American products? Do we have money to subsidize corporations, foreign or domestic? Why has Obama the Senator called the Import-Export Bank “little more than a fund for corporate welfare” during the 2008 campaign and promised to eliminate it, yet has reauthorized 40 percent more taxpayer dollars?

For the past three and a half years, the manipulated and constantly revised (a week or month later) unemployment rate has been above 8 percent. The real number is far worse, in the 11-14 percent range. Although the left maligned President George Bush on a daily basis, under his presidency full employment was always in the 4.5-5 percent unemployment range.

A sustained doubling of the unemployment rate is devastating to those who have lost jobs and for our economy. However, if you ask Spain, Greece, Italy, France, or Portugal, they would gladly trade places with us. Their full employment is an unemployment rate of ten percent and higher. This happens because their national priorities are stacked in favor of outrageous social programs and unionized labor, while the population becomes more slothful and happy to live on government handouts.

United States spends 14.8 percent of GDP on welfare programs and has not reached the welfare expenditures level of European socialist countries. France spends 28.5 percent of Gross Domestic Product (GDP) on welfare, Spain 21 percent, Greece 24.3 percent, Italy 24.4 percent, and Portugal 21.1 percent. There are European nations that spend more on welfare, such as Denmark (29.2 percent), Sweden (28.9 percent), Germany (27.4), and Belgium (27.2) but the economic situation in these countries is substantially different. (Statistical data source: NationMaster.com as quoted in Forbes)

German Chancellor Angela Merkel is vilified for her efforts to impose austerity measures on countries whose economies necessitate bailouts from the European Central Bank and the International Monetary Fund. Greece rejected the idea through vigorous and violent demonstrations, while 47 Greek parliamentarians walked out of meetings upon hearing about the type of austerity measures they would have to approve. France rejected austerity by electing a socialist president who promised more socialism, more spending, and more bureaucratic job creation. President Francois Hollande reneged on the austerity agreements his predecessor, Sarkozy, had cobbled with German Chancellor Angela Merkel.

Critics point out that Germany’s five percent unemployment rate makes it unfair and socially unjust for Angela Merkel to impose drastic welfare and pension benefits cuts in Greece, Spain, Italy, France, and Portugal when their respective unemployment rates are so much higher. In Spain, the overall unemployment has reached 25 percent, while 50 percent of young people, including recent college graduates, cannot find jobs and must leave Spain to seek employment.

Joel Kotkin describes them most vividly. “In Madrid you see them on the streets, jobless, aimless, often bearing college degrees but working as cabbies, baristas, street performers, or – most often – not at all. Call them the screwed generation, the victims of expansive welfare states and the massive structural debt charged by their parents.” (The Daily Beast, June 4, 2012)

A young man with a psychology degree, who is working in the grocery store where I shop, was complaining one day that he could not find a job. A quintessential liberal with the agenda of environmental sustainability, social justice and equity, the mantra of the left, it has not occurred to him that the “hope and change” he voted for, his overt distaste for capitalism, love for communism and the murderous Che Guevara whose t-shirt he is wearing under his uniform, is what is dooming his prospects of finding a decent job. He bought his college advisor’s empty promise of a six-figure salary upon graduation, his professors’ socialist/Marxist indoctrination, and is now facing Realville.

European demonstrators argue vociferously and increasingly violent that austerity and budget cuts are the primary reasons for their national economic crises. They believe that the largesse of the government welfare system spending has nothing to do with the government running out of money. As former Prime Minister Margaret Thatcher had said, “the problem with socialism is that eventually you run out of other people’s money.”

Taxing the rich in France at the proposed 75 percent rate will not solve their financial difficulties for long; it will simply prolong the inevitable. Even confiscating everyone’s wealth will only pay the debt and cover the deficit for a few months at best.

Lavish spending is unsustainable when the economy grows too slowly and the population is not having enough babies. There are insufficient wage earners who pay taxes to support retirees who derive benefits and pensions from those taxes.

Demographically speaking, the population replacement value in the U.S. is still within normal range of 2.1 newborns per woman if we count the illegal aliens’ newborns. Without illegal alien births, the U.S. population replacement value is 1.9. Many European Union nations have even lower population replacement values, below 1.4 newborns per female.

According to Joel Kotkin, wealthier countries in the north such as Germany, Denmark, and Sweden, “have offset very low fertility rates and domestic demand by attracting migrants from other countries, notably from eastern and southern Europe, and building highly productive export oriented economies.” (Forbes, May 31, 2012)

Unemployment among young people in Greece and Spain has reached the fifty percent mark. Many have left Spain for employment opportunities elsewhere. Young people have postponed having babies, preferring instead to buy homes, vacations, and luxury goods. The birth rate in Spain dropped to the lowest level of 1.4 from the previous four children per woman fifty years ago.

Joel Kotkin argues that a Nordic welfare state is sustainable because “companies and the labor force are productive and highly skilled,” while Spain, Greece, Italy, and Portugal derives most income and revenue from tourism. By 2021, every working person in Spain will support six students and retirees. (Source: National Institute for Statistics as quoted in Forbes)

Implementing national policies that promote affordable housing for families, reduced taxation for married couples, and higher birth rates instead of abortions, should be a priority for countries with a penchant for lavish spending.

Since Roe V. Wade, millions of babies in the U.S. have been aborted. It is a human tragedy with economic ramifications that will affect our labor force and the future of our country. We can afford right now to import cheap labor from Central America or outsource it to China. Would that be enough in the future to support the ever-burgeoning welfare class in this country? What will happen when we reach the tipping point of no return of the European style demographic decline?