Will our politically created welfare state and unsustainable entitlements sink the USA?
*Financial Times, by Alan Greenspan, January 3, 2012:
''The failure of the 'Super Committee' last year to reach a budget
deal underscored the underlying wedge in US politics.''
''The emerging fight over the future of the welfare state, a paradigm
without serious political challenge in eight decades, is accentuating
the centre's decline. The welfare state has run up against a
brick wall of economic reality and fiscal book-keeping. Congress,
having enacted increases in entitlements without visible means of
funding them, is on the brink of stalemate. As studies by the
International Monetary Fund have demonstrated, trying to solve
significant budget deficits predominantly by raising taxes has tended
to foster decline. Contractions have also occurred where spending
was cut as well, but to a far smaller extent.
The only viable long-term solution appears to be a shift in federal
entitlements programmes to defined contribution status. The
assets of private defined benefit pension plans, confronted with the
same economic forces, have already fallen from 67 per cent of private
pension plans at the end of 1984 to 37 per cent at the end of last
September. But the political problems of such a switch can be
seen in state and local governments' attempt to trim public defined
pension plans. Public sector unions have fought mightily to avoid
having their pensions shrink, as they have in the private sector.
Cutting back on benefits that are 'entitled' is going to be a far
harder political task than curbing federal discretionary
spending. We have created a level of entitlements that will
require a greater share of real resources to fulfill than the economy
seems likely to be able to supply.''
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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