The Welfare State is Doomed

BALTIMORE – No whining and kvetching about the Deep State today.

Instead, we sit at its feet, admire the cut of its jaw, and sing its praises.

We are grateful to it… and not just as a source of amusement. In short, we delight in its incompetence.

Preposterous Initiative

What brings this to mind is a small item in the news, which, like a pool ball careening across a felted table, knocked two or three others in their pockets before coming to rest.

We had to go pluck each one out of its hole and examine it. And what a marvelous fraud each one is! Democracy! Central banking! Welfare statism!

We think of the Swiss as prudent, careful people. They have their feet on the ground and their heads screwed on straight.

But they have undertaken a pathetic and preposterous initiative, one so hopelessly ill-conceived, it is worthy of American economists… or French intellectuals.

Specifically, next week the Swiss will vote on a proposal to give a “basic income” to all Swiss residents, whether they work or not: a guaranteed annual income of $30,000.

You may have the same reaction we did: This is crazy!

If you can earn $30,000 a year without working, it will be hard for anyone earning less than $60,000 (about the same as $30,000 after taxes in many places) to get up in the morning and put on his overalls.

Why bother?

The waiters will abandon us at our tables, our glasses unfilled and our dirty dishes still in front of us. The valet parkers will drive off in their own new cars. The burger flippers will leave their hot patties in midair as they head home. All the low-paying jobs, and more than a few middle-income posts, too, will be vacated.

New War on Poverty

But this proposal taps into several faddish worries and is finding many supporters…

First, there are the zombies.

Ever eager to get something for nothing, they see more something here to get. ‘Nuff said.

Second, the “good government conservatives” imagine that government can function more rationally and more efficiently.

They see the feds flailing around with their welfare programs. They figure this will be a simpler, more effective way to deliver something for nothing to the undeserving multitudes.

If you’re going to spend trillions fighting a war on poverty, they believe, you might as well win it.

Third, the elites of all faiths and persuasions are eager for any pretext to give money to the zombies in exchange for their votes. It’s a way for them to manipulate the masses, gain control of the police power of the state, and use it for their own aims.

Fourth, those whose hearts bleed over “inequality” imagine that they can get the feds to staunch the wound.

But they’ve missed the point. The insiders who control the Deep State don’t want to eliminate inequality; they want to add to it. They use government to get more money, power, and status. And they can only get these things by taking them away from their rightful owners.

(This is a key reason why the welfare state is doomed to failure… about which, more tomorrow.)

Fifth, there are those who are concerned about robots!

What?

Yes, there is growing concern that robots will take over the world’s work.

For example, there are 3.5 million truck drivers in the U.S. Many or most of those jobs may soon be history, thanks to self-driving trucks (which are already operational).

So, too, will millions of other jobs now held by human beings. Lawyers, accountants, actuaries, architects, physical trainers – any career that involves routine procedures is vulnerable to disruption by the new generation of smart “bots.”

Robots are getting better and cheaper; by comparison, humans are becoming dumber and more expensive. Some people believe robots will gradually replace all but the most creative, most entrepreneurial, and best educated workers.

Here Come the Robots!

We’ve reported that the wages of 9 out of 10 U.S. workers are no higher today than they were 40 years ago after you adjust for inflation.

It could get a lot worse: 9 out of 10 workers could be permanently out of work. Here’s journalist James Neilson writing in the Buenos Aires Herald:

The idle poor. There are already many millions of them. Soon, they could be numbered in the billions.

With alarming speed, technological progress is leaving them behind. “Artificial intelligence” – robots, computerized systems, and whatever else the folk in Silicon Valley come up with – will take over large swathes of the economy.

By doing so, it will deprive all but a tiny minority of their jobs.

What then? How will most people support themselves when most people have no jobs?

That’s what Swiss politicians think they have figured out.

The idea of a guaranteed income is hardly new. And hardly far out. The Romans had their panem et circenses(bread and circuses).

The slaves gradually took over all the menial work – especially on the large latifundia (landed estates) – leaving a large, idle, and restless population in Rome. In order to keep them docile, the Romans handed out wheat and staged gladiator combats in the Colosseum. (Today, we have welfare payments and presidential debates.)

More recently, American economist Milton Friedman proposed a negative income tax (NIT). He was trying to make the welfare system more efficient.

The Nixon and Carter administrations proposed a guaranteed income program in the 1960s and 1970s, with the aim of making the system fairer, as well as more effective.

And the Green Party included a NIT proposal in its 2010 platform, for God knows what reason.

What’s wrong with these proposals? What’s wrong with the state the Welfare State is in?

Stay tuned…

Regards,

Bill Bonner
for Bonner and Partners

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