Tuesday, March 1, 2011

It is the Entitlements, Stupid!

Unsustainable public entitlements seem to be the most talked about secret in the nation.  There does not appear to be a pundit out there who has not addressed the necessity for cuts in or fixes of the entitlement system.  Europe has started facing down this monster while US states (who have to balance their budgets) have begun the reform process.  Yet, strangely the federal government has done little to address the nation's budgetary mess.

In today's Wall Street Journal, Charles Koch wrote a poignant editorial about the need to fix America's fiscal situation.  He called on the government to tackle the overwhelming burden of the nation's entitlement system.
In spite of looming bankruptcy, President Obama and many in Congress have tiptoed around the issue of overspending by suggesting relatively minor cuts in mostly discretionary items. There have been few serious proposals for necessary cuts in military and entitlement programs, even though these account for about three-fourths of all federal spending.
His criticism is not solely reserved for the Democrats.  The GOP is equally culpable in the mismanagement of the national finances.  Koch attacks the concept of crony capitalism, which is seemingly endemic on both sides of the aisle.  Democrats and Republicans alike operate under a system that has utterly failed to face reality.  Koch argues that,
Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.

The purpose of business is to efficiently convert resources into products and services that make people's lives better. Businesses that fail to do so should be allowed to go bankrupt rather than be bailed out.
Our elected officials would do well to remember that the most prosperous countries are those that allow consumers—not governments—to direct the use of resources. Allowing the government to pick winners and losers hurts almost everyone, especially our poorest citizens.
Politicians, on both sides of the aisle, should heed these warnings.  Koch makes a powerful - and true - argument.  If American politicians, for fear of electoral retribution, fail to force tough choices on America, everyone will pay the price.  The federal government needs a serious dose of reform.  It needs to be smaller, more efficient, and supportive of free competitive markets.  Time to get started before it is too late.

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