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Five Lessons from the Shutdown

October 21, 2013 in Economics

By Daniel J. Mitchell

Daniel J. Mitchell

Greece is now suffering through a very deep recession, with record unemployment and unimaginably harsh economic conditions. To make matters worse, there’s not much light at the end of the tunnel.

The debt burden is larger today than when the crisis started, notwithstanding years of austerity. Or, since politicians have imposed enormous tax hikes, perhaps it would be more accurate to say that the crisis has deepened in part because of the wrong kind of austerity. Regardless, what matters now is that Greece is on life support by international aid and with little hope for the future.

Now ask yourself a rhetorical question. Wouldn’t it have been preferable if there was some sort of mechanism, say, fifteen years ago that would have enabled some lawmakers to throw sand in the gears so that the government couldn’t issue any more debt?

The small-government advocates need to sit down over the next month or so and agree on a common strategy.”

With our keen powers of hindsight, don’t we wish that there was something akin to a Greek Tea Party that might have forced a reevaluation of entitlement programs and imposed some sort of cap on spending?

Yes, there would have been some budgetary turmoil at the time, but it would have been trivial compared to the misery the Greek people currently are enduring. The IMF and European Commission doubtlessly would have been aghast at the “hard-hearted” and “draconian” approach of the budget cutters, but nothing could be more hard-hearted and draconian than Greece’s current recession.

That, in a nutshell, explains why some reformers in Washington launched an uphill battle in hopes of at least temporarily delaying or defunding Obamacare.

Budget wonks know that America faces a very grim fiscal future because of poorly designed entitlement programs combined with unfavorable demographic changes. Unfortunately, recent presidents have worsened this problem. President George W. Bush saddled the nation with a new prescription-drug entitlement and President Obama imposed the so-called Affordable Care Act.

But the Tea Party-oriented lawmakers who wanted to block Obamacare before people began to get hooked on subsidies were unable to prevail: we have a deal and the wailing and hysteria in Washington is over. The politicians now have the authority to borrow more money and the bureaucrats are all back at work (rested and refreshed after their paid vacation, so they’ll probably tax, spend and regulate with extra fervor).

So what can …read more

Source: OP-EDS

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