A Fling with the Welfare State
From the best of intentions to bankruptcy and recriminations
Jul 25, 2011, Vol. 16, No. 42 • By NOEMIE EMERY
From that day on, the world and the country would be given a series of lessons in the dangers inherent in treating a good as a right. The European Union extended a bailout to Greece in exchange for a series of deep cuts. The country was to reduce its deficit from 13.6 percent of its gross national product to less than 1 percent in 2015, by way of “reduced wage costs in the public sector . . . and lower defense and health care spending.” Other countries in Europe began preemptive measures to deal with their own budget problems. In Britain, David Cameron planned cuts of $130 billion over a five-year period, cutting welfare and causing riots by raising fees in universities. In France, Nicolas Sarkozy raised the retirement age from 60 to 62, and limited pensions. In Spain, Socialist José Luis Zapatero did much the same thing. “An elaborate cocoon of benefits faces disassembly,” the Washington Post reported on May 15, 2010. “We can’t finance our social model any more,” the European Council president said. “Workers have been forced to accept salary freezes, decreased hours, postponed retirements and health care reductions,” Edward Cody wrote in the Post on April 25, 2011. “From blanket health insurance to long vacations and early retirement, the cozy social benefits that have been a way of life [in Europe] appear be luxuries the continent can no longer afford.”
In the United States, the states patterned most on the Old Europe model—those with high taxes, high spending, and strong public unions—suffered the same plight as Europe, while those with free-market models did not. “The eight states with no state income tax grew 18 percent in the past decade,” Michael Barone tells us. “The other states grew just 8 percent.” The 22 states with right-to-work laws grew 15 percent in the past decade, the 28 others grew 6 percent. The 16 states that don’t require collective bargaining with state employees grew 15 percent, the others grew 7 percent. The most rapid growth—21 percent—was in the Rocky Mountain states and Texas, which have low taxes, weak unions, and light regulation.
Among the states with high taxes, strong unions, and heavy public employee pension burdens are those in the Rust Belt around the Great Lakes. As Matt Continetti writes in the Washington Post, “Five of the eight states that border the Great Lakes now have Republican governors working to limit union power,” while one Democrat, New York’s Andrew Cuomo, son of a much revered liberal icon, has been praised by New Jersey’s Chris Christie as his cost-cutting twin. And to everyone’s shock, the Democratic legislature in Massachusetts has voted to rein in unions, too.
“For decades, the Great Lakes states have subscribed to a high-tax, high-spend, closed-shop political model,” explains Continetti. “That hasn’t worked out.” That didn’t work out in Europe (whose welfare states the American left has always looked up to); that didn’t work out in American states such as California and Michigan; that didn’t work out in Detroit, which is becoming a wasteland in spite of massive infusions of government money, and that didn’t work out for General Motors, which turned in time into a retirement plan with a car company attached to it, which priced itself out of the general market while foreign car companies built factories in right-to-work states in the South, employed hundreds of thousands of people, and took its share of the market away. It probably won’t work out in Illinois, either, where the Democratic governor passed a massive tax increase, and the Republican governors of neighboring states invited Illinois businessmen to relocate there.
Was it wrong for the liberals to try to create an entitlement paradise when World War II ended? No, the war’s end seemed a good time to start over; the link between the rights that they fought for and the “right” to a middle-class standard of living seemed rather more plausible then, and they had no way of knowing it might one day prove too expensive. When Roosevelt signed Social Security into law, it was meant to start coverage at age 65 at a time when 58 was the average life span of male Americans. (Roosevelt himself died at 63 ten years later.) When President Johnson signed Medicare, life spans were still well below today’s standards, and most major medical breakthroughs were still in the future. (Johnson also would die in his 60s.) Neither imagined a world in which people routinely lived into their 80s and 90s, with knee replacements and heart transplants and home dialysis machines. Roosevelt opposed public employee unions, whose pension demands and early retirements are now driving some of our states and cities into bankruptcy. It’s easier to think of goods as rights when the costs are low, and they therefore take little from others. It’s when the costs rise—as in medical treatments—that the political trade-offs rise, too.