Monday, August 13, 2012

The Problem of Political Economy We Face

That the government is in dire fiscal shape is general knowledge. My lecture I presented at the most recent Center for Vision and Values as well as the one I gave in July for the Institute for Principle Studies, explained the economic consequences of government spending and our outrageous government debt. The only solution that will be good for long term economic performance is to drastically cut government spending.

Ah, as Hamlet would say, there's the rub. We have gone so far down the welfare state road that to rollback government spending in a way that significantly improves our fiscal condition, people will have to vote against their short-term pecuniary interest. The Weekly Standard reports that now over 100 million people in the U.S. receive some form of government welfare. And that does not even include those on Social Security and Medicare.

As early as 2007, before the Great Recession set in, economist Gary Shilling found that over 50 per cent of Americans received significant income from government programs. This means that to turn this fiscal ship around, a majority of people will have to vote contrary to their narrow self-interest just because it is the right thing to do. I am not sure if our people have that sort of character.

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