Pajamas Media | by Victor Davis Hanson | Feb. 17, 2010
Imagine a politician announcing: we are going to raise the Social Security age to 66. We are going to freeze and cut spending until we balance the budget within three years, and then with surpluses pay down the debt within 6 years. We are going to build 100 new nuclear power plants and open up the country and its shores to oil and gas production. We are going to cut back all federal entitlements and subsidies by 20% immediately. We are going to ensure enough water for agriculture. We are …
The Greek Lesson
No, I don’t mean the classical Greeks, but their present-day counterparts.
Economists have given us all the usual diagnoses of what went wrong in a now bankrupt Greece — high taxes, tax cheating, too generous retirements, unsustainable entitlements, government corruption, and anemic demography.
Add to such socialism the natural foreign policy and collective expressions that always follow statism in the modern Western world — increased pacifism, utopian pretension, moral equivalence, cheap anti-Americanism — and we have the foreign policy expression of Greece (and much of the EU) of the last 30 years. (A citizen who believes by birthright that he is to be taken care of by the state always hates the state that can never do enough, in the fashion that the country who is taken care of militarily always hates its protector.)
In other words, Greece is the canary in the mine of the impending crack-up of the modern welfare state. It is a great gift to us all, this example. A year ago, the socialists, even as they were juggling and falsifying their books, were bragging that the Wall Street meltdown was a referendum — and capitalism was doomed. Now, the entire socialist dream is exposed and even the most ardent statist knows that there is no longer enough “others” to pay the tab.
The poor EU learned that the Greek siesta, the 10PM Athenian dinners, the state power company vans at the beaches in the workday afternoons, the kafenions full of 50-year-old men at 11AM, the angry students perpetually in the streets at each hinted reform, and the moonlighting telephone employees all came at the expense of far harder-working Scandinavian and German socialists, who apparently now realize a nice two weeks each year on Santorini or Crete aren’t worth billions of their own Euros in rescue bailouts.
We Are All Greeks Now?
Here in California we see the symptoms of the same Greek malady as we go from one budget shortfall to the next — dream-like borrowing, raising taxes, and furloughing, in lieu of the tough medicine of cutting government payrolls, changing pension payouts, and freezing the pay of state-workers until their compensation mirror images those in the private sector.
Postmodern Western society will soon witness a real showdown, analogous to the teenager who rebels and either accepts that he is still dependent on his parents and therefore subject to the rules of the house, or runs away and implodes in a sea of drugs and street-life.
In short, how will an entitled society react when the money runs out and it learns that it must change or wither away — and all the whining rhetoric about “social justice” and “a green future” and “spread the wealth” and “redistributive change” won’t bring another barrel of oil or bushel of wheat or Douglas fir 2” x 4”?
Two Forks in the Road Ahead — California as Greece
On the one hand, the money is vanishing. Income, state and federal, as well as payroll, taxes here in California may soon top 60% on top incomes (10% state, 15% plus payroll on most of one’s self-employed income, 39% federal). Add in property and sales taxes and we’ve reached the point where the lemon can no longer be squeezed without either more than the current 3,500 a week leaving the state, or going the Greek route of endemic cheating.
(Indeed, as I wrote not long ago: I go to Greece every other summer, and lived in the country for over two years. I come away with one overriding observation: almost every Greek I met in some way either cheated on his tax obligation or conned a way to get some state subsidy — or both, while furiously damning “them.” [“Them” if one were poorer, meant the rich; and if richer, the state; and for both, also meant the United States.])
Bottom line: I don’t see how the state or federal government can up taxes much more and still find wealth-producing, law-abiding, motivated job creators.
On the other hand, as the money runs out, will state workers, pensioners, and entitlement recipients accept that there are too few wealth-creators to fund their pay-outs, or, as in Greece, hit the streets in protest, teenager style, each time some adjustments are necessary?
So if we can’t raise taxes and we can’t cut expenditures what is left? There is no Germany to bail us out? Cut defense? Keep borrowing from the Chinese and Japanese?
Where did all the wealth go? Modern Western society is in some sense becoming drone-like, its entitled sensitive citizens assuming ceremonial roles and attitudes about the very landscape they inherited from their industrious predecessors.
Here in California we idle farmland, though we have the water, expertise, and soil to produce far more food than we do. We put vast swaths of both land and sea off limits to gas and oil production, though we could produce far more petroleum and natural gas than we do. We snub nuclear power, though our population steadily increases and its desire for electronic appurtenance grows, not shrinks. We like “wilderness areas” (who doesn’t?) where we build no roads, harvest no timber, and build no dams. We strangle Silicon Valley with all sorts of labor and business regulations until it fabricates and outsources abroad. In other words, we are creating no real new sources of concrete wealth as we nuance the shrinking capital we inherited.
We Are Still Humans For a Bit Longer
Hollywood is great. Tourism keeps San Francisco alive. Napa Valley produces great wines. We have strong finance, insurance and plenty of regulators. But ultimately our generation lost sight of the fact that we must eat and therefore grow food; we must clothe ourselves and therefore need fibers; we must move from place to place and therefore need fuel; and we must have shelter and therefore have wood, cement and glass.
Yes, we can import all this from the Chinese or the Canadians or the South Americans, but at some point one needs the real capital created by real wealth to pay for it all — not nuancing and adjusting and tinkering with money. Money is simply a representation of stored capital that comes from real production of some sort. Talking about “millions of green jobs” and “a wind and solar future” and “high-tech sector” is well and good. But ultimately Western man has not yet (as we learn from his consumptive habits) evolved to some sort of ethereal existence. Even Harvard Review grandees need real fuel to power Air Force One to get to Copenhagen.
So for a while longer, we need the miner, the oil pumper, the farmer, the fabricator, the carpenter, the road-builder, the railroad guy, the cement layer, the chemist, the computer engineer — and the system that allows them all to create wealth unimpeded by government and in an environment in which the citizen who benefits from their labor appreciates their industry.
The 11th Hour
Yes, before we have the actor, the writer, the professor, the insurer, the investor, the regulator, and the politicians, we need the elemental among us to find or create material wealth. We, the sloganeering class, forgot that, and so subsidize our high living either on borrowed money or the prior productive investment of those now in the grave yards.
And the tab is coming due faster than we ever dreamed. All the soaring, teleprompted rhetoric, the Ivy-League credentials, and the social justice boilerplate will no more create wealth than ceremonial fifth-century AD consuls and robed bishops could fabricate the glory of Rome.
PS. Why am I not too optimistic right now? Our President, who submitted the largest deficits in recent memory, and who is on track to nearly double the national debt in record time, continues to blame Bush — not just for Bush’s lamentable deficits, but for Obama’s own new unsustainable ones. I think his weird logic is: “Bush’s bad deficits made me trump them by a factor of four.” When the Commander-in-Chief expects the populace to believe that, or drops real unemployment figures and talks instead of theoretical jobs saved, or flip-flops on everything from evil Wall Street bankers now suddenly good, or bad nuclear power now vital, then we have about as much hope as we would have under Jimmy Carter.
Remember January 2009? In the era of Democratic supermajorities in Congress, a new JFK in the White House, and a media proclaiming Obama “a god,” we were all grass-roots saints, who threw out the Bush bums and had at last a great workable Congress and White House — and were a daring electorate eager for hope and change from a non-traditional president. Yes, life was good and we, in the pre-tea-party age, were the salt of the earth that earned an Obama.
Now? Suddenly in our media and politics the people are stupid, full of ingratitude, often racist, the system broken, the Congress bankrupt, all of us undeserving of our one chance in a lifetime state agenda. Yes, the petulant liberal attitude in 12 months went from “We, the People” to “You stupid idiots” — and all because some Democratic congresspeople discovered that the more they went out on the limb on Obama stimulus, health care, cap and trade, higher taxes, bigger government, bailouts and endless deficits, the more they were going to get sawed off in November by the ungrateful people. So naturally instead blame the filibuster, the people, the clingers — anything other than the self-preservation instincts of the political class of your own party.