If you understand economics, you can pretty easily predict the future. For example, history has shown with amazing clarity that socialism leads to societal disaster. Always. The more socialism, the quicker the disaster. In 2000 Zimbabwe seized the farms of 4000 white farmers. At that point simple economic principles forecast years of economic crisis, which unfortunately played out exactly as expected (hyperinflation in Zimbabwe doubles prices every 1.3 days, the unemployment rate is 80%). Everybody who understands economics saw the pending collapse immediately.
The path to disaster is playing out more slowly in Europe, but Europeans will find they simply can not beat the financial math. Greece is ground zero – the government borrowed heavily to shovel money to its citizens (its voters), and now can not pay back that money. That is a problem for the European banks that lent Greece all the money. If Greece goes down, those banks go down, which will likely torpedo the countries in which those banks are located. So the countries of the European Union have decided to ship tax-payer cash to Greece so that Greece can keep paying back the banks. But to get that cash for Greece, the other European countries (particularly France and Germany) must raise taxes. To the German taxpayer is certainly looks like he is paying more so that Greece can live beyond its means.
If the problem was just Greece, it would probably be manageable. But the socialist-leaning attitude of the Greeks permeates all of Europe, and there is the high likelihood that if Greece defaults on its debts, other countries such as Portugal, Ireland, and perhaps Spain might also default on their debts. The taxpayers of Germany and France are not going to bail them out, the sovereign bonds of many countries are going to default (Greece first and soon), many banks will fail, economic growth will slow, and the Euro itself will dissolve. There’s an old saying that Socialism stops when other people’s money runs out.
Which brings us to the US. The states of California, Illinois, Michigan and New York are teetering on collapse precisely because they have been infected with high levels of socialism – promise everybody everything, with no way to pay for it. These states (and Massachusetts isn’t too far behind) are losing people to ‘right to work’ pro-growth states as their governments attempt to impose ever-higher taxes. Illinois in particular needs to find a way to repudiate its crushing debt burden. When it defaults on its municipal bonds, the interest rates on all municipal bonds will increase to incorporate this new risk of default. Which is a good thing. These states would not have the enormous debt problems if investors had not given them more debt than the states could handle. The introduction of some ‘moral hazard’ in muni bonds would be a positive, but would make subsequent defaults by other states more likely (because they would have to roll over debt at higher interest rates).
On the federal level, the infecting socialism can be seen in the Medicare debate. Medicare is on its way to insolvency, the Republicans (Paul Ryan in particular) are proposing difficult solutions to a difficult problem, and the Democrats are simply standing around shouting “they are trying to kill grandma!” The Democrats have not proposed an alternate solution, and the status quo is not an option. Economic reality will come crashing down hard very shortly, and the Democrat’s strategy of ignoring the problem will just make the pain worse.
In fact, the entire federal budget debate is a debate about the level of government social programs that can be afforded. The Republicans are trying to balance the books, the Democrats are ignoring the problem, not even proposing a 2012 budget. Much easier to criticize the Republican budget, better sound bites.
The Republicans and the Tea Party are trying to shake voters of their stupor, grab them by the lapels and get them to understand that economic realities are leading our country to a bad future. It was predictable in Zimbabwe, it was predictable in Europe, and it is entirely predictable here. The 2012 election is about fiscal responsibility, and probably our last, best chance to alter the math before the walls come tumbling down.
