With each passing day there's some new headline in the financial press about an ailing European government facing "austerity", "severe cuts", and maybe default due to a mismatch between incoming revenues and outgoing liabilities. What's not explained is why this is so problematic.
It's not, and it isn't in the least. Though a great deal of commentary up to this point has noted that European countries have created unsustainable welfare states, the simple explanation for the present is that with the private European individuals who prop up the State suffering difficult economic times on the way to less taxable income, so are governments wholly reliant on the taxable economic efforts of private individuals.
Frederic Bastiat long ago observed that the State is the grand fiction through which wealth is redistributed to others, and with the producers hurting, so is the State's wealth redistribution machine. We can lament the growth of European governments, but shouldn't the present point be that since those whose labors support governments are getting by with much less, wouldn't it be correct if supplicant governments similarly shrink in line with the times?
We keep hearing about the "painful sacrifices" governments must make in the present, but aren't those alleged sacrifices something governments should enforce with a smile along the lines of "our benefactors are getting by at the moment with much less, and so will we happily do so in deference to our funders." Governments only exist at the pleasure of those who pay for them, and their supporters are struggling right now.
And what about the individuals whose economic labors produce little to no economic value, but who are reliant on the government funding provided by those who are productive? Can they say with a straight face that their benefits should remain intact while their benefactors earn less, and worse, potentially face job loss?
Not commented on enough is just how obnoxious all the government wailing about a lack of funds is. It's almost childlike in that only a child lacking broader knowledge of the human condition would complain about an allowance reduction in the midst of struggles for the individual bestowing the allowance. In this case it's the limping people of Europe who provide the means for the monstrous European governments, so for those same governments to bemoan their depressed situations amid monumental difficulties for their European providers is the height of immaturity.
So with governments acting in childlike ways it's time to let those same governments experience the pain of allowance cuts in concert with default if they prove unwilling to more than match the austerity presently faced by those they annually fleece. Shouldn't governments that allegedly serve at our pleasure while spending our money experience pain exponentially worse than we do during downturns?
John Tamny is editor of RealClearMarkets and Forbes Opinions, a senior economic adviser to H.C. Wainwright Economics, and a senior economic adviser to Toreador Research and Trading (www.trtadvisors.com). He can be reached at jtamny@realclearmarkets.com.
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