Spare the Rod, Spoil the Country

Scott Redler penned an article on Forbes.com that discusses how all the bailouts and rescue plans are setting the global economy up for a terrible fall.

Well, I’ve got news for you: Spoiled children always grow up dysfunctional.  Rewarding nations for overspending and under-delivering sets a dangerous precedent. “Le Tarp” gives money to countries that have disregarded basic economic principles. It rewards bad behavior.

Similar to the warnings many were issuing for the bailouts the U.S. government has been handing out, Scott hammers home the point that rescuing the irresponsible simply rewards the wrong groups.

The ones that played by the rules will find loans more expensive, capital for growth harder to come by, and taxes higher. Greece’s long-term borrowing costs plunged to 6.5% from 12.4% and Germany, which provided the bulk of the bailout funding, saw its rates rise.

If we look inward, we can see where we will soon be faced with similar choices to Germany.

California, the eighth-largest economy in the world, faces a grave budget crisis that will likely need to be addressed by the federal government sooner or later.

Not only will this likely be handled with Federal assistance, it will be done without forcing California to make any cuts whatsoever.  At least the German assistance came to Greece at a price.

People in Greece are upset that they now have to give up their Christmas, Easter and summer holiday bonuses, also known as 13th and 14th salaries.

Just last week, California’s Governor Schwarzeneggar proposed serious cuts in State entitlement programs because California was simply broke.  The protests and popular uproar was huge.  If the California legislators are forced to make those severe cuts, why would we expect to see anything but riots similar to those in Greece?

If we are to get things right in our own house, it will take serious cuts in government programs – health care reform, Social Security, Medicare, Medicaid, and defense.  It may require a restructuring of our tax code so that everyone puts something into the kitty and perhaps a bit more than most already do.  It will certainly cost many politicians their seats, but that is the most pleasant of what must come.