Sunday, June 27, 2010

From The Dept. Of Easier Said Than Done

I suppose it's a good sign that the leaders of the G20 have agreed they need to reduce their governments' debt loads - almost every G20 economy is running dangerously high deficits, especially considering the oncoming demographic crunch facing many of them. The problem is that politicians saying they need to reduce the amount of government spending is like you or I saying we need to exercise more, eat fewer potato chips, or quit smoking - no matter how obvious it is that it needs to be done, and no matter how loudly it's proclaimed that it will be done, there remains a smart gambler's chance that it won't happen. In a welfare state democracy, politicians get votes by passing out goodies (expensive goodies) to the constituencies that vote for them, and they lose votes by depriving said constituencies of the goodies they've come to expect. Politicians may dance around the issue, telling voters that government largesse can be paid for by higher taxes on someone else - the rich, corporations, etc. - or that spending can be lowered by eliminating "waste, fraud, and abuse", but when it comes down to it, running a large modern welfare state costs a lot, more than voters in most countries are evidently willing to pay in taxes. The answer to this point to the conundrum of how to buy votes without violating voters' price thresholds has been to buy them on credit, but as anyone who's ever maxed out a credit card can tell you, deficit spending has its limits. I really do hope that the governments of the industrialized world get their acts together and reduce their spending in the near future, when it will be less painful to do so - but were I the aforementioned smart gambler, I'd bet against it happening until every single one of those governments was in the situation Greece is in now.

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