Killing the Goose that Lays the Golden Eggs

Show me someone who is strongly in favor of ObamaCare and strongly prochoice and I will show you a strong liberal. Big government solutions on economic policy and a strong preference for personal freedom on matters of sexuality define the American left more reliably than anything else.

Unfortunately for the left, the latter has been relentlessly undermining the former. This is the (unstated) implication of Meagan McArdle's brilliant piece on the European fiscal crisis in the Atlantic.

A fiscal crisis isn't hard to understand. For decades, the European governments have been doing what the U.S. is now doing: spending far beyond their means. Deficits occur when government expenditures exceed revenues. The deficit must be covered by borrowing, thus adding to the public debt. Lenders charge interest. As the debt grows, so also grows the portion of the budget going to interest payments. At some point the interest payments begin to put a squeeze on other spending and begin to grow so fast that a government cannot hope to slow that growth down, let alone pay down its debt. That is called insolvency.

McArdle notes that Italy is facing such a situation. That is a bigger deal than Greece or even Spain, as Italy has a much larger economy.

Consider Italy. It is no exaggeration to say that the fate of Italy is the fate of the euro zone: if Italy can keep its debt under control and its banking system solvent, the euro zone will probably make it; if Italy defaults, the resulting panic will probably force Portugal, Ireland, Greece, and Spain to follow suit.

This linchpin is under a great deal of strain. Italy's public debt stands at $2.3 trillion, roughly 20 percent larger than the country's GDP. If not for that debt, Italy would have run a slight budget surplus in 2011. But interest payments alone soaked up nearly 5 percent of the GDP, creating a deficit of about 3.6 percent of national income and increasing the debt even more.

There are only two ways to restore fiscal stability. One is to reduce expenditures. This is called "austerity" in the coin of the times. It hurts. Sometimes it reduces economic growth thus further reducing revenues. The other way is to increase revenues by means of genuine economic growth. Therein lays the problem.

Economies grow when workforce output grows. That can happen when workers become more productive or when you get more workers. In actual fact, it is usually the latter. Italy and Europe are going in the opposite direction.

Everyone agrees that rapid growth would be much nicer than higher taxes and slashed pension payments. The hitch is that over the past five years, growth in the Italian economy hasn't averaged even 1 percent a year. Soaring growth will be tough to achieve, because more and more Italians are getting too old to work—and fewer and fewer Italians have been having the babies needed to replace them.

Italy's fertility rate has actually been inching up from its 1995 low of 1.19 children for every woman, but it is still only about 1.4—well below the number needed to replenish its population (2.1). As a result, even with some immigration, Italy's population growth has been very slow. It will soon stall, and eventually go into reverse. And then, one by one, the rest of Europe's nations will follow. Not one country on the Continent has a fertility rate high enough to replace its current population. Heavy debt and a shrinking population are a very bad combination.

Why did Europeans stop producing Europeans?

Since the invention of birth control and antibiotics, country after country has gone through a fairly standard shift. First, the mortality rate drops, especially among the young and the aging, and that quickly translates into a bigger workforce. Then, birthrates drop, as families realize that they no longer need to birth a basketball team to ensure that a couple members will survive to adulthood. A falling birthrate means that parents can invest more in each child; with fewer mouths to feed, more and better food can nourish each of them, and children can spend more years in school, causing worker productivity to rise from one generation to the next. As the burden of bearing and rearing children lightens, mothers can do more work outside the home, boosting both household resources and the national economy.

As medicine makes it possible for people to live longer, they focus more on their golden years than on the next generation. The result is that we kill and cook the goose that lays the golden eggs.

For more than a half century the left has relentlessly encouraged policies and celebrated lifestyles that result in population decline. This now undermines their desire for the growth of government spending. Europe is now facing the reckoning. We are only a little bit behind.

Comments

[Kody K]

Nice. Reading this really makes me crave the "good ol' days." Let us just have every country file for bankruptcy and start over. Yeah, that sounds completely reasonable.

[larry kurtz]

Pink slime no longer breeding, Ken? Go get yer vasectomy reversed and get to it, Cracker.

[larry kurtz]

http://consortiumnews.com/2012/03/31/if-the-supreme-court-goes-rogue/

[duggersd]

LK, I thought you were leaving? There went the neighborhood.
We already know, according to one blogger here that deficits do not matter. I disagree. But there are other problems associated with a shrinking population. Social Security is a Ponzi scheme that is also waiting to topple. While technically the money in SS is not part of the budget, in reality it is, especially when one considers all of the money from the untrustworthy fund the government has taken to fund its deficit that does not matter and cannot pay back short of printing money that will be worth less than what was given in the first place. With a declining number of workers funding each retired worker, the outlook is bleak. If the US does not get its financial situation in order, PIIGS will look like chicken feed. BTW, the guy who helps me with my investments says he believes the countries will default and the rest of the world is just trying to have it happen in an orderly manner.

[Donald Pay]

This constant doom and gloom is a symptom of conservative mental illness, not anything wrong with modern societies.

Only someone with a personality disorder would look at societal prosperity and good medical care and a social safety net that reduces childhood mortality and leads to longer more fulfilling lives and reduced birth rates as something to fear. So these mental defectives (conservatives) prescribe their remedy to the modern society which gives us all this prosperity: recreate the era of high childhood death, bad medical care and social degradation for the 99 percent and immense wealth for the elite.

Uh,no thanks. We don't need the Ryan budget and the wealthy one percenters to tell us there's something wrong with us because we prefer that we and our children live a long and prosperous life with good medical care.

[duggersd]

Donald, the problem with what you are talking about is you want someone else to Pay for it. We have a mandate in Obamacare. What happens if one refuses to purchase the insurance according to the mandate. Will the government force that individual to purchase it? If the individual still refuses to purchase the insurance, will the government jail the person? And if and when that person gets ill, will the hospital be able to refuse to treat that person?

[Bill Fleming]

DuggerSD, they will pay a fine. Call it a tax if you want to. Like Medicare.

[Mark Anderson]

There you have it women, no longer can you go to college, marry, or not, have one or two children. You've got to stay home and have a basketball team. It used to work for Agar and Onida, why not our country.

[Donald Pay]

"As medicine makes it possible for people to live longer, they focus more on their golden years than on the next generation. The result is that we kill and cook the goose that lays the golden eggs."

What do you mean by this?

[A.I.]

There is so much wrong with this reasoning KB, it's hard to know where to start...unless its with the fact that somehow despite this supposed shortage of births over recent decades, the unemployment rate among young people is very high both here and in Europe. It would seem if the young were in such short supply, they would have no problem finding work. And in the spirit of unfair generalizations being unfair, show me someone who is strongly in favor of letting our health care system continue to run amok and who would sacrifice a woman's life for the sake of a blastocyst, and I'll show you a strong conservative.

You might also note that while those economic morons in Europe generally spend from 11 to 12 percent of GNP on health insurance for nearly all, we spend over 17% while leaving millions uncovered. At least they'll go broke healthy.

[duggersd]

But Bill, what happens if they refuse to pay the fine? Jail? Execution? Not giving a service? And if they refuse to pay the fine and wind up with some sort of disease needing intervention in order to save the life? Just let them die? If not, how is that different from what we have today?

[Stan Gibilisco]

"For more than a half century the left has relentlessly encouraged policies and celebrated lifestyles that result in population decline. This now undermines their desire for the growth of government spending. Europe is now facing the reckoning. We are only a little bit behind."

Well, population decline in and of itself would not be such a bad thing. The world population continues to explode, leading the human race inexorably to a global crisis that will make economic meltdowns seem like thundershowers in comparison to a hurricane.

Maybe the solution to our socioeconomic woes is to keep the population-decline part of the liberal philosophy while also keeping government spending in check. That is to say, social liberalism and fiscal conservatism. I believe that combination pretty much defines what the Libertarian Party is all about.

[Bill Fleming]

I don't know, DuggerSD. I don't think anybody does. What happens if you don't pay into Medicare or SS? A assume it would be something similar.

[larry kurtz]

http://northernbeacon.blogspot.com/2012/04/who-was-that-nazi-i-saw-you-with-last.html

[duggersd]

OK, at least propose what should happen, Bill. BTW, I cannot fail to pay my SS or Medicare as that is taken out before I even see my check. Now, if I am self employed, that is a different thing. Then we have the IRS coming after me. If I do not have the money or refuse to pay it, they can probably jail me. Are you prepared to jail someone who refuses to purchase medical insurance?

[larry kurtz]

Join a union, Barnes.

[Bill Fleming]

Everyone who practices civil disobedience should be prepared to go to jail, Barnes.

It's part of the gig. Haven't you read your Thoreau?

http://thoreau.eserver.org/civil.html

[duggersd]

Actually, I did read his Walden book. Mostly he was full of himself and lived off his parents. And BORING! But that is beside the point. I am asking what the government would do to such a person. I can hardly wait to see the first person jailed for not purchasing health insurance! The question is probably moot as it will probably be struck down.

[Ken Blanchard]

A.I.: good argument! I note only that it confuses two things: the supply of jobs with the distribution of jobs. Population decline depresses economic growth. That is the point of McArdle's piece and it is uncontroversial. A growing or at least sustaining population requires a lot of services and produces a lot of output. Do you really think that declining populations in Europe are not a problem?

At the same time, European nations have done everything in their power to make sure that the older populations have job security. If you are an emigrant from North Africa living in France, good luck. You get to clean the toilets, if that.

Like Donald, you wish to ignore the glaringly obvious. It must be comforting.

[Ken Blanchard]

Donald: yes. Everyone who is concerned about the future is mentally ill. Go back to sleep. I don't wonder that you hate the Ryan budget. It actually tries to address the fiscal problems the nation faces. It actually tries to reduce spending to levels that are the historical norm. That's horrible!

Meanwhile the President's budget was voted down in the House without a single Democrat supporting it. The Democratic majority in the Senate refuses to actually submit a budget. By your standards, the Democrats are very healthy mentally. They refuse to take any responsibility for the future at all. Well done.

[Donald Pay]

KB,

You aren't concerned about the future of the vast majority of people, certainly not middle class elderly, families and children. Anytime you are asked to present any solution to any of the hallucinatory nightmares you broadcast you have no answers except to increase the misery of the vast majority of people in order to enrich the 1 percent. You applaud the conservative dystopia that Ryan and the Republicans would usher in, and have no empathy for the deaths that would result. This is mental illness. The problem for you, KB, is people, not just me, are wide awake. Your constant answer to anyone who tries to address your mental problems is for them to go back to sleep. That's pretty telling, KB.

[Bill Fleming]

Never did hear what that "Golden Egg" think was all about.

[Ken Blanchard]

The golden egg is prosperity, I think, in all versions of the metaphor.