Out of control government spending is no longer purely a fiscal burden. Now, the unrestrained growth of sovereign debt is proving to be a burden on the English language. Terms that have been universally understood by economists for decades have been prostituted by leftist politicians and commentators in an attempt to confuse – and comfort – the general public. The Sophists would surely have approved of their spin.
First, thanks to Britain’s Gordon Brown and America’s Barack Obama, entitlement spending became an “investment”. By taxing and borrowing to pay for welfare programs, the government was apparently investing in the future. Not surprisingly, these “investments” have yielded no tangible returns.
New French President, Francoise Hollande, has taken this sophistry one step further. He has defined the current economic malaise in Europe as a choice between austerity and growth, by which he really means spending cuts or more borrowing and spending.
But it gets worse. Austrian socialist Hannes Swoboda, writing in the Wall Street Journal (21 May), goes so far as to argue that, “investment in growth and employment … should not be integrated in calculations of structural deficits” because it generates income and taxes. So if we don’t count the money that the government borrows, we can pretend we are not borrowing it at all.
Of course, the laws of economics cannot be manipulated like the terms. Whether or not we wish to measure key economic indicators, the consequences of our actions will still occur. It is just like driving a car. Mr. Swodoba is advocating doing so with eyes closed because he doesn’t like what he sees.
Pretending that economic terms can be relabeled to avert a crisis is akin to rearranging the deck chairs on the Titanic. The futility of the exercise reveals a level of political desperation that runs well beyond naivety.
Ballooning entitlement spending is creating a government-driven financial meltdown in Europe and the United States. Hollande’s call for growth is little more than the trick of an illusionist. The rhetorical appeal of “growth” is that it requires no sacrifice and no hard choices. It means we spend because we can and while we can.
So governments have a spending problem and their solution is to borrow and spend more, only to call it “growth” and not to account for the cost. Then what?
It is perhaps apt that the inevitable social fragmentation caused by ‘spending gone wild’ is on display in Greece, the most indebted European nation and the birthplace of sophism. Since Greece will be first to arrive at the tipping point, it will show the way.
And while economic growth (in its traditional definition) could indeed provide countries with much needed relief from the impact of high levels of sovereign debt, the rising tide of revenue would not fix the underlying spending problem. Economic growth, even if it returns to 1980s levels, cannot be counted on always to outpace entitlement spending.
‘Debt-mageddon’ could yet reveal the limits of prosperity in a democracy – a stark symbol of our inability to suppress the urge of entitlements over collective thrift.