Friday, June 17, 2011 - A Welfare State or a Start-Up Nation? - Opinion: A Welfare State or a Start-Up Nation?


Who you vote for in the next election will largely be determined by how you answer the following question: Should we encourage more productive use of resources or more social welfare? Higher taxes to support a larger welfare state means a larger share of national resources pay for a Medicare system that everyone recognizes as expensive and inefficient. More spending reduction, especially for Medicare and Medicaid, allows a more productive use of resources for growth.

Capitalist development and open economies lifted vastly more people out of poverty in a decade than welfare state policies had achieved in 50 years.  The welfare of the citizens—poor, middle-class and wealthy—is best improved by using resources more productively.

After one generation, a one percentage point difference in growth rate becomes a 25% difference in per-capita income. Low growth significantly lowers real wages and living standards for everyone, which in turn lessens tax receipts and resources for redistribution.

Mr. Obama and his followers claim they want a solution that is "fair." Why is it fair to distribute more welfare to today's voters at the expense of their children and grandchildren who will pay for this less productive use of resources? This is the same "fair" approach that Europeans chose decades ago, and which led to chronic low growth and high unemployment.

It isn't fair to tax future generations just because they can't vote. We have a choice between a brighter future for our descendants and more social spending now. The missing words "more productive use of resources" are critical for a rational choice. To realize the promise that the U.S economy has always offered, we must choose less social spending, less intrusive regulation, and more efficient use of resources in both the public and private sectors.




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