Some people are angry in the US State of Wisconsin. The new Republican governor and legislature want public employees in that State to contribute a modest amount to their own retirement pensions and health care insurance and to restrict the collective bargaining role of public sector unions to wages, as distinct from other conditions of employment. Wisconsin is a small state (5.7 million people) with, like most states, a large debt and budget deficit.
Demonstrations have ensued. I saw one bloke on Fox News say it is embarrassing; they’re acting like a bunch of Europeans. He was no doubt thinking of the demonstrations in Greece, France, and the UK and elsewhere brought on by the prospect of entitlements of one kind or another being cut. Colourfully, to prevent a vote on the legislation, the fourteen Democrat members of the State senate absconded to Illinois leaving the senate one short of a quorum. Apparently being across state lines complicates the job of hauling them back to do their duty.
While the “entitlement” demonstrations are undoubtedly confected in part with professional agitators bussed in to swell the crowds, they have a more sinister import than the usual run of the mill demonstrations.
Banning the bomb, the Vietnam War, anti-globalisation, French farmers against free trade, whatever has drawn the crowds has not threatened the very fabric of Western civil society. Unsustainable debt and spending by societies whose members refuse to accept any personal sacrifice is a different matter. A business can survive a gigantic oil spill in the Gulf of Mexico. A family can survive their house being burnt to the ground in a bush fire. Neither can survive intractable spending continuously outstripping their income.
The growth of unaffordable entitlements sponsored by socialist-leaning politicians and governments should lead to a conservative resurgence to repair the damage. To an extent this is happening; for example, in the United States and the United Kingdom. But the sense is that it is all too hard. Changes are proposed around the edges and all are opposed by the parties on the Left. It says something when Democrat state senators abscond in a grandstanding gesture to establish their sharing and caring credentials. They are intent on remaining part of the problem and will never be part of the solution of cutting entitlements. There will be no grand coalition on this, anywhere.
It will be interesting to see the budget proposals for 2011-12 coming from the Republican Party faced with Obama’s (do nothing to cut popular spending) budget. Materially cutting public sector salaries, pensions, and welfare and health benefits is possibly beyond the resolve and ability of any conservative government in Western democracies. And, to make it worse, the need for material cuts is generally growing with aging populations. Let’s pay each other more than we can afford is a socialist disease that may well be too established and virulent for conservative panaceas.
If that proves to be the case, it will provide, perversely, an opening for the Left whose philosophy created the problem in the first place. Their answer will be onerous and confiscatory taxation on business and the wealthy and, for good measure, less spending on defence. In turn, this will reduce prosperity and make it even harder to afford those growing entitlements. Where it will end is hard to say but nowhere that is particularly desirably economically. Moreover, it will weaken, as it is now weakening, the ability of Western nations to guard the gates against the barbarians.
There isn’t an obvious answer. If there is glimmer of hope it probably rests on the emergence of a new super-charged Reagan in the United States; maybe Chris Christie, the governor of New Jersey? It seems unlikely that Europe will find the leadership required.
Also: “Is Keynes wrong?” Peter Smith on ABC Counterpoint. Listen here…