Monday, October 7, 2013

The West In Decline

Said a banker of world reputation:
"It's an Age of Reduced Expectation. 
For workers, the answer
Is less social transfer;
The rich face diminished taxation."

HSBC Chief Economist Stephen King, in a New York Times op-ed piece entitled When Wealth Disappears, argues that "We are reaching end times for Western affluence."  While the Post-War generation seemed to live in a world in which rising prosperity and markets guaranteed a comfortable future, now "the numbers no longer add up. Even before the Great Recession, rich countries were seeing their tax revenues weaken, social expenditures rise, government debts accumulate and creditors fret thanks to lower economic growth rates."

What's interesting about this quote, and many others like it, is the degree to which economic forces that the writer wishes to portray as unstoppable waves actually resulted from government policy choices that he himself likely supported, and for which his industry energetically lobbied. 

Over the last generation, US tax revenues have weakened largely because tax rates have fallen. The most important reason that our social expenditures have risen is the cost of healthcare. Years ago, some Republican think tanks, alarmed at runaway medical spending as well as the prospect of a single-payer system to fix it, proposed a "social market" alternative, which was actually successfully implemented in Massachusetts. Why don't any of them acknowledge that now that a similar system is being implemented federally?

I do not mean to denigrate Mr. King's economic forecasting ability or the depth of his social concern. But one has to be skeptical when one hears the representatives of the 1% arguing that the 99% must accept diminished expectations as their destiny.  

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