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Greek Bailout Delays the Inevitable

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The European Union’s bailout of Greece will only delay the inevitable because it doesn’t get to the root of the problem — Greece’s welfare state, along with the fierce refusal of the Greek citizenry to abandon the welfare-state way of life.

It’s amusing to watch Greek citizens protest so vehemently against Germany, whose taxpayers have just been plundered to bail out the beleaguered Greek government. It’s also amusing to watch those same Greek citizens protest any reductions in welfare in Greece.

Here’s the problem in a nutshell:

The Greek people want the government to take care of them with free welfare benefits. Where do the Greek people expect the government to get the money to pay for those free welfare benefits? They don’t care. They just know that it’s the government’s job to take care of people by providing them with free welfare benefits. How the government gets its money is no concern of the Greek citizenry. That’s the government’s problem.

For a while, the government taxes the rich and uses the money to make the welfare payments. More and more people sign up for the free welfare payments and, in fact, start demanding higher free welfare benefits. At some point the demand for benefits gets so high that the government begins taxing the middle class. Ultimately, as recipients of the welfare dole increase, along with the amount of the dole, the government begins taxing everyone.

Ultimately, the amount of the tax revenues cannot keep up with the amount being paid in free welfare payments. So, the government starts borrowing the difference by issuing bonds. Purchasers of the bonds figure that their investment is safe because the Greek government has the power to tax people in order to repay the bonds. As the welfare sector continues to increase, the government’s debt continues to soar.

Finally, things get to a point where the government’s tax receipts are insufficient to make the welfare payments, the debt payments, and pay the expenses of government. The government is broke, busted. It’s a deadbeat. To make its payments, it would have to tax and destroy the private sector, and even that would not be sufficient.

You would think that this would be an opportune time for people to challenge the fundamental premises of the welfare-state paradigm. Alas, not so. By this time, people have become too dependent on the dole, just like someone on heroin. They cannot imagine life without the dole.

What happens if a heroin supplier runs out of heroin? The addict looks for another supplier, which is what the Greek people and the Greek government have done. They just looked to Germany and other EU countries to tax their citizens and send the loot to the Greek government, which it is using to make debt payments and welfare payments.

But it’s only a temporary fix because the Greek people are unequivocally committed to the welfare-state way of life. They will continue to demand their dole and at ever-increasing levels. They won’t care where the Greek government gets the money. All they care about is that their dole be maintained. The government will continue taxing and borrowing and looking to foreign regimes to subsidize the free Greek welfare payments.

Ultimately, however, foreign taxpayers will finally say “No more” and refuse to be looted for the sake of the Greek welfare recipients, and investors will refuse to buy Greek bonds, and the gig will be up. Of course, the statists will blame free enterprise, greed, the banksters, the speculators, and maybe the illegal aliens rather than confront the root of the problem — the welfare-state paradigm itself, a failed, destructive, and immoral paradigm if there ever was one.

Americans should take heed because they are, in principle, in no different position than the Greek citizenry. Ever since the advent of the modern-day welfare state under the Franklin Roosevelt administration, the number of people on the dole — and the amount of the dole itself—has continued to soar, decade after decade. Moreover, American dole recipients are just as fiercely resistant as the Greek citizens about losing any portion of their dole. Like their Greek counterparts, Americans have become hopelessly addicted to the dole, unable to imagine life without it. Just propose the immediate abolition of Social Security, Medicare, Medicaid, education grants, farm subsidies, or corporate bailouts, and you’ll see what I mean. The recipients of those free welfare benefits, along with the supporters of statism, will scream like banshees and claim that they’ll die without them.

American statists say, “Don’t worry. We’re not like Greece. We’re rich. We have lots more people to tax here than they do in Greece.” That’s true but we also have something else that Greece doesn’t have: a vast military empire that sucks off the private sector as much as the welfare-state sector does. Bases all over the world, occupations of two countries, assassination programs, torture facilities, secret prisons, suppliers, contractors and sub-contractors, and fancy jets and golf courses for the generals and admirals. And most important, a fierce determination on the part of the warfare-state dole recipients to oppose any reduction of their dole, much less a total dismantling of the empire. We’re told that “national security” is at stake. Without this vast military empire, the nation will supposedly fall to the communists, or the terrorists, or the drug dealers, or the illegal aliens.

Like Greece, the U.S. government’s tax revenues have not kept up with the welfare-state and warfare-state payments. So, like Greece, the U.S. government has borrowed the difference, and continues to do so. The government’s debt continues to soar out of control, while the dole recipients in both the welfare-state sector and the warfare-state sector fiercely resist even small reductions in their dole.

When the day of reckoning comes for the United States, unlike Greece there will be no foreign taxpayers lining up to bail out the U.S. government. There’s too much anger and resentment against the United States for that to happen. Instead, count on the Federal Reserve to do what it has done for decades — plunder and loot people through the debasement of their money. The Fed will print and inject into the system vast new quantities of fiat money, in order to continue making payments to its welfare-state recipients, its warfare-state recipients, and its ever-growing list of creditors.

None of this can end well. But with crisis comes opportunity. The crisis facing our country provides us with the opportunity to lead our nation and the world out of the statist morass. Let us seize it before it’s too late. The best place to start is by challenging the premises of the welfare-state and warfare-state way of life and by restoring a free-market, limited-government republic to our land.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.