We should all be paying close attention to the sad narrative of Greece. But it is not even just Greece. It is Rome, Germany, the USSR, and China. It is a classic story that has played out through human history and we seem incapable of retaining the lesson. You can see why God never intended for sin and death to enter into his design, because it leaves subsequent generations relearning the same lessons over and over again.
I do not need to cite a single economic statistic to tell you the tale of Greece. The story is well known at this moment. An ever expanding government took more and more of the economy for itself. In doing so, it made government officials more and more important, thus contributing to them, currying favor with them, and bribing them became viable risks to take because the rewards were so great. So you introduced what economists call “friction” into the economy. I simply call it greed.
But more than that, as the government expanded, it displaced the private sector in the economy. As the government takes on more services, there is less room for individuals to start businesses providing those services. But the government is not using those revenue streams to grow or expand, the way a business would, they are just trying to cover costs. So you need increasing amounts of job creation from the remaining private sector purview to cover for lost opportunities to government.
As we have seen in this country, it does not even have to be a direct providing of services. It can be just through overregulation of the financial sector, insurance, telecomm, and the airlines, everywhere that government has stuck their hands in and dictated how industries may or may not grow. Eventually, government starts to choke out the private sector, there is not enough oxygen left in the economy for both. Jobs get scarce because job creators get scarce (sound familiar?).
Let’s use Obamacare as a mini-case study. Right now, if you want to become a doctor, you are only limited by whether or not you can get into medical school, your ability to graduate, and your ability to land a job after medical school. You can work for any number of public, private, or religious hospitals or healthcare practices. As Baby Boomers age, there is growing demand for healthcare, which means this sector is growing rapidly to meet the demand. New jobs are being created all the time.
But, the Federal government is in the process of taking over the health care industry, 1/7th of the U.S. economy, under the guise of controlling costs. So guess what? They are going to have to cap the amount of doctors, they are going to have to cap what doctors make. You cannot centrally plan something like health care if you do not know how many doctors you will have in 2013 versus 2012. Since your mandate is to control costs, if you only had 112,000 doctors in 2012, then you will only want to have 112,000 doctors in 2013. Which means, regardless of how many would-be doctors graduate from medical school, central planning will dictate how many can actually work in that field. The government is going to achieve cost savings by artificially suppressing demand for health care, rationing it, and leaving unmet needs the private sector would have met. Those that would have been able to find work as doctors, in a true free market, will now have to crowd into other sectors.
What happens when we have several hundred politicians and bureaucrats in Washington, D.C. trying to plan a vast array of industries they know nothing about? Well, there historically have been two different roads. In Germany, when the government controlled 51% of the economy, it was the tipping point. You cannot run an economy by committee, and the people went looking for a central authority figure, an economic czar if you will, to run everything. They found a Fuhrer.
The Greeks have gone a different path and this is the one we are on in this country. It keeps the masses in the dark longer about what is going on. The Greeks chose to borrow money to prop-up their economy. They essentially got onto an economic treadmill from which there was no escape.
A government less efficient at creating jobs kept expanding, crowding out the private sector. To provide social services and investment to bridge the gap, the government borrowed. But every time the government borrowed, it expanded, which exacerbated the gap. So you get to a point where the rate of decline is accelerated. This is where the United States has been the past few years.
(I should note that this is not Cloughard-Piven, this is not same vast conspiracy that got us here, nothing that fancy (unless you can prove that Richard Nixon and Barack Obama were ever in a room together). It is just plain old lack of faith in God. A portion of this country made government their new religion and we are all paying for their worship of this golden cow.)
The Greeks, much like the USSR before them, have gotten to a point where they can no longer borrow enough or deliver enough government investment to offset the gap. The treadmill has broken. The EU is now forcing Greece to live within its means, almost overnight. As the government pulls back, there is no private sector infrastructure to pick up the slack. There is essentially a gaping hole in the Greek economy. The result is sky high unemployment and incredible social instability. People lost track of how dependent they were, even indirectly, on the government.
Inevitably, when there is scarcity of resources, the economic solution demanded is rationing. Rationing requires a strong central authority. I predict the civil unrest will be the impetus for some sort of authoritarian government to emerge in Greece. Rather than pushing capital out as broadly as possible, scattering seeds far and wide to see what grows, this new government will likely employ a knee-jerk reaction. They will ration resources, trying centrally to pick winners and losers in their bets. This will only ensure Greece remains paralyzed for generations to come.
So what about the U.S.? Must this to be our fate? The answer is no. We have a small, but closing window to avoid this. If we quickly reach consensus that our government is too large, we can still orchestrate an orderly reduction of the size, scope, and budget of government at all levels. If we do so, we can then offer a corresponding reduction of tax rates and regulation.
We still have enough of a private sector and enough entrepreneurial bones in our nation that in short order (though not instantaneously and not painlessly) the private sector can take up much of the slack and be growing our economy in a sustainable way. It would probably usher in the kind of growth not seen since WWII, perhaps even bigger than the Reagan Era.
But the challenge is real. We have built our economy around the government, not families. While the economic slack of government cuts can be absorbed by existing infrastructure, are families ready to pick up the slack as those services go away? Are we ready to give enough to feed and clothe our neighbor as the social safety net is reduced? Are we ready to take more responsibility for feeding our own families, for working, for educating your children, for disciplining them? Are we willing to pay the price for freedom? I don’t know.
What I do know for certain, is our politicians will not decide this for us. It would be political suicide for either party to take this on without a clear mandate from the American people and we have made power much too comfortable for them to risk it. We have to send a clear signal in THIS election.
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