Monday, May 24, 2010

European Socialism, the Darling of the Obama White House, Bankrupting the Euro


With the near collapse of the Greek economy and subsequent bailout from the EU partners, the IMF (International Monetary Fund) and the US Federal Reserve for a trillion dollars, the nations of Europe might get to catch their collective breath.

If ever there was a need for a clear symbol on what would happen if the Obama redistribution of wealth program got adopted, this is it. Greece goes bankrupt from the deficit burden of the socialist promise of cradle to grave care from the state. Now we find out most of the members of the European Union have far exceeded their allowed deficit and must institute emergency budget cuts.

These are some of the key features of the European style Obamacare being sought by the White House and Democrat controlled Congress.

National Health Insurance
Nationalization of certain insurance, banking and auto industry elements
Nationalization of the housing and commercial mortgage market with Fannie Mae and Freddie Mac already siphoning off over a trillion dollars in taxpayer money
New restrictions on energy industry and increased global warming and environmental pressure
Creation of a futures trading market with Goldman Sachs for industrial carbon credits

There are a lot of other things they want as well but you get the general idea. Obama has often cited the socialized programs of Britain, Germany, Canada, Denmark Norway, Switzerland, Finland and the Netherlands as examples of successful socialized social programs.

For decades demographers and economists warned Europe that social welfare was doomed because of the aging of Europe's baby boomers. With most countries now achieving zero population growth, there are not sufficient youth to pay the cost of benefits to the baby boomers as they retire. Still the social welfare states kept adding to the excessive benefits over the years falling deeper and deeper in debt.

Now the nations of Europe face deep cuts and the first round of cuts came by reducing public payrolls and benefits, the least objectionable. They are not nearly enough to achieve the cuts necessary however so cuts to the social welfare programs are next and they will be painful.

Germany is the financial foundation for Europe and it is facing a $3.75 billion budget cut from it's budget. The only way to achieve it is with cuts to the nation's unemployment program, which just went through difficult cuts 5 years ago. Unemployed people under 50 years of age will get 60% of their last salary before taxes, and the benefit lasts up to a year.

Britain's new government is facing $8.6 billion in cuts mostly to government payrolls. Retirement ages to qualify for state pensions are being raised from 60 to 65 for women, and from 65 to 66 for men. The current system that allows people to remain unemployed indefinitely when not looking for work will change to require people to seek employment.

Funding for Britain's nationalized health program is safe for the time but is scheduled to increase each year until 2015. The current $360 payment to families for every newborn, intended to encourage a higher birth rate but largely unsuccessful throughout Europe will be eliminated and child tax credits reduced.

In France people can now retire at age 60 with 50% of their annual salary. The French intend to raise the retirement age like Britain and are bracing for massive union opposition like occurred in Greece.

Spain is cutting billions of dollars in state salaries next month and the socialist government has frozen increases in pensions for cost of living increases for the next two years. Assistance payments for disabled people is being cut by $375 million, the new baby bonus of $3,124.35 per baby is eliminated and the retirement age for men is being raised from 65 to 67.

Denmark and other Nordic countries have the world's highest taxes and most generous cradle to grave benefits and have moved fastest to address long term needs. As a result they also have the lowest unemployment rates and most generous benefits. Norway, whose benefits are fully funded with oil revenues, has the lowest jobless rate in Europe at 3%.

Southern European countries have the most trouble. In Greece civil servants earning over $3,750 per month will lose two extra months of salary now being paid, one at Christmas and another between Easter and summer vacation. They now have to contribute to pensions for 40 years instead of 37 and early retirement cannot be taken before age 60.

To make their cuts Portugal is raising income, corporate and sales taxes, unemployment benefits will be cut and out-of-work must accept any job that pays 10% more than they earn on unemployment.

German public education, which was free until 2005, now allows tuition fees of up to $1,250 per year. All German students pay no more than that to attend state funded universities, including the most elite schools.

The most expensive and elite universities in Britain like Cambridge, charge $4,720 per year which is far less than the elite USA schools like Harvard that charge $35,000 per year.

These are just some of the problems being faced by the social welfare states of Europe and by the way, yes, through the Federal Reserve we are helping to bail out these countries for their excessive socialist spending. Does Obama really think after we underwrite the bailout of the European socialist nations and their failures in redistributing wealth, will we really have any wealth left to redistribute?


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