Freedom Line Blog

Military historian Victor Davis Hanson trots out an underappreciated statistic that should give European opponents of Germany’s austerity measures a reason to reflect:

There is one general rule about the history of the modern state of Germany since its inception in 1871: Anytime Germany has been both unified and isolated, armed conflict has followed.

The Greeks can’t form a government to implement Germany’s austerity measures, and are rioting rather than reforming.  Spain is teetering on the edge of a shredded social contract where more than 40% of young adults can’t find work.  France just elected a Socialist president who claims that “My real enemy is the world of finance.”

And there sits Germany with the most money on the Continent, vilified for insisting on the same frugality from its debtors.

While it’s almost impossible to think that Germany would resort to military force to press its claims, it is within the realm of possibility to see it pulling back from the European Union in a way that cuts its losses and leaves the big spending countries to defaults and devaluations.

If that happens, expect to hear at least a few Europeans wishing Germany had just annexed their country.  At least then they would be a part of a more stable economy.

Recently, I wrote about the Social Security Trust Fund being a piggy bank for other federal spending programs.  In return, federal spenders put worthless IOUs back in piggy with an implied promise to pay back the debt with higher taxes in future years.

Now, there is word that Social Security Disability Insurance – yet another expense drawn from the empty retirement Trust Fund – will go bankrupt by 2017.  The reason for the rapid insolvency of disability insurance is simple: eligibility for disability can begin before reaching retirement age.  Per the Associated Press:

Applications are up nearly 50 percent over a decade ago as people with disabilities lose their jobs and can’t find new ones in an economy that has shed nearly 7 million jobs.

The more President Obama’s Washington dithers on enacting policies to spur economic growth, the more unemployed people will be forced to find money wherever they can.  The vast majority of Americans want to work, but Obama’s job-killing policies just aren’t giving them the chance.

It would be an unnecessary irony if a liberal like Obama presided over an austerity government that not only raised taxes, but also cut services like Social Security that liberals love.  Yet that is the path we’re on as a recessed economy lurches from market plunges to debt downgrades to a contracting job market.

We need an “opportunity president,” and this one surely isn’t it.

A sobering bit of news for college administrators about to go on spring break:

“The current prolonged recession means that we can no longer expect new revenue to pay for increasing attainment in higher education,” said Jane V. Wellman, Executive Director of the Delta Cost Project, which does a study every year on the cost of higher education. “In the next decade, we are going to be lucky to hold onto the resources we have. That means that all institutions – from the Ivies to the community colleges –are going to have to develop investment strategies that support goals for attainment. That will require new habits: looking at spending, and promoting the values of efficiency and cost effectiveness as co-partners to the never-ending search for new revenues.”

At first, one might be tempted to think that higher education needs to take a financial haircut just like the rest of the economy.  While that is undoubtedly true, the consequences will be enormous.

Federal higher education loans like Stafford and Grad Plus (and their state counterparts) are used like entitlements, though you’d never hear a recipient saying so.  Though only 1 in 4 Americans eventually graduate with a college degree, nearly everyone qualifies for the loans to finance one.

Because the cost of attendance continues to grow at several times the rate of inflation, grads and non-grads are piling up huge debt loads; prompting some to call the looming student loan crisis our next financial disaster.

The coming cuts in state and federal budgets for higher education financing will significantly decrease the subsidies available to students.  That means fewer students going to college, leaving enrollments peopled with those able to count on private financing.

Since passage of the 1944 GI Bill an essential part of the American dream has been having the opportunity to go to college by removing cost as a consideration.  The same bill did the same thing to spur home ownership via the VA-backed mortgage.  We all know how slippery that slope turned out to be.

Austerity is coming to America.  Hopefully, we can adjust to reduced expectations.

Today’s New York Times draws out an helpful distinction between British and French notions of liberty.  The context is each country’s reaction to the growing public sector spending crisis.

“France’s problem is that, for too long, the economy has been run as a kind of job club for French workers,” said an editorial in The Spectator, a conservative British magazine. “Britain and France believe in liberty, but have different definitions of it.”

While the British believe in “liberty from government,” the editorial said, the French “still like the big state and squeal at the prospect of being removed from its teat.”

The French also pay higher club dues and expect commensurate rewards. French pensions can reach three-quarters of a working wage, compared with just over two-fifths in Britain. So, if French workers and teenagers strike over their pensions, there’s plenty to protest about.

One of the consequences of France’s keener devotion to socialism is a reduced sense of class conflict.  Not so in Britain.

If Britain falls prey to protest, there will be sharper overtones of class struggle than solidarity. Britain is a more divided society than France. Wealth is more ostentatious, poverty more visible. People in Britain have learned to have sharper elbows in pursuit of individual gain, while France prides itself on a broader concordat.

“Social confrontation is part of our democracy,” said Prime Minister François Fillon, “but social consensus is, as well.”

How each country’s government handles the coming backlash to ‘austerity’ in public spending will do much to define the future of freedom for their respective citizens.  Hopefully, they can make a credible argument that limited government and greater individual opportunity go hand-in-hand instead of coming to blows.

I wonder if new British Prime Minister David Cameron offered any words of fiscal wisdom to President Barack Obama during the two leaders’ first meet-and-greet since assuming power.  If he did, Cameron should have pointed out that adopting an “austerity” budget program need not be code for lack of creativity.

Under a recently announced plan to decentralize much of the National Health Service (NHS), Cameron’s Coalition Government of Conservative and Liberal Democrats plans to “shift control of England’s $160 billion annual health care budget from a centralized bureaucracy to doctors at the local level,” reports the New York Times.  “Under the plan, $100 billion to $125 billion a year would be meted out to general practitioners, who would use the money to buy services from hospitals and other health care providers.”

Already one of the chief criticisms is that eliminating several layers of bureaucracy will cause several layers of bureaucrats to lose their jobs.

To which the Coalition responds, “And…?”   Britons realize that it’s time to make government spending fit within government budgets.  If the NHS is about health care for all – and not bureaucratic full employment – then it’s time to give patients and taxpayers the most value (and discretion) for their money.

If President Obama really wants to impose a stateside version of the NHS on Americans the least he could do is give the soon-to-be nationalized doctors the ultimate say in how they treat their patients.  Doing that would not only give doctors an incentive to stay in the profession, it would also drive up demand for entrepreneurs to fill in their business knowledge gaps with services to manage their new workload.

That sounds like a job-creating business opportunity to me; even if it is born more from government regulations rather than a purely free market need.  In the current political climate, though, it would be an improvement.