Wednesday, May 30, 2012
Our nation is rapidly approaching a point from which
there's little chance to avoid a financial collapse. The heart of our problem
can be seen as a tragedy of the commons. That's a set of circumstances when
something is commonly owned and individuals acting rationally in their own
self-interest produce a set of results that's inimical to everyone's long-term
interest. Let's look at an example of the tragedy of the commons phenomenon and
then apply it to our national problem.
Imagine there are 100 cattlemen all having an equal right
to graze their herds on 1,000 acres of commonly owned grassland. The rational
self-interested response of each cattleman is to have the largest herd that he
can afford. Each cattleman pursing similar self-interests will produce results
not in any of the cattlemen's long-term interest -- overgrazing, soil erosion
and destruction of the land's usefulness. Even if they all recognize the
dangers, does it pay for any one cattleman to cut the size of his herd? The
short answer is no because he would bear the cost of having a smaller herd
while the other cattlemen gain at his expense. In the long term, they all lose
because the land will be overgrazed and made useless.
We can think of the federal budget as a commons to which
each of our 535 congressmen and the president have access. Like the cattlemen,
each congressman and the president want to get as much out of the federal
budget as possible for their constituents. Political success depends upon
"bringing home the bacon." Spending is popular, but taxes to finance
the spending are not. The tendency is for spending to rise and its financing to
be concealed through borrowing and inflation.
Does it pay for an individual congressman to say,
"This spending is unconstitutional and ruining our nation, and I'll have
no part of it; I will refuse a $500 million federal grant to my congressional
district"? The answer is no because he would gain little or nothing, plus
the federal budget wouldn't be reduced by $500 million. Other congressmen would
benefit by having $500 million more for their districts.
What about the constituents of a principled congressman?
If their congressman refuses unconstitutional spending, it doesn't mean that
they pay lower federal income taxes. All that it means is constituents of some
other congressmen get the money while the nation spirals toward financial ruin,
and they wouldn't be spared from that ruin because their congressman refused to
participate in unconstitutional spending.
What we're witnessing in Greece, Italy, Ireland, Portugal
and other parts of Europe is a direct result of their massive spending to
accommodate the welfare state. A greater number of people are living off
government welfare programs than are paying taxes. Government debt in Greece is
160 percent of gross domestic product. The other percentages of GDP are 120 in
Italy, 104 in Ireland and 106 in Portugal. As a result of this debt and the
improbability of their ever paying it, their credit ratings either have reached
or are close to reaching junk bond status.
Here's the question for us: Is the U.S. moving in a
direction toward or away from the troubled EU nations? It turns out that our
national debt, which was 35 percent of GDP during the 1970s, is now 106 percent
of GDP, a level not seen since World War II's 122 percent. That debt, plus our
more than $100 trillion in unfunded liabilities, has led Standard & Poor's
to downgrade our credit rating from AAA to AA+, and the agency is keeping the
outlook at "negative" as a result of its having little confidence
that Congress will take on the politically sensitive job of tackling the same
type of entitlement that has turned Europe into a basket case.
I am all too afraid that Benjamin Franklin correctly saw
our nation's destiny when he said, "When the people find that they can
vote themselves money, that will herald the end of the republic."
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