Friday, December 06, 2013

Three Vertical Levels of American Dependency

Let's recap one of my favorite topics.  Americans' self image as rugged and independent is a delusion.  Our society is in collective denial about its dependency on government handouts, backstops, subsidies, and bailouts.  The three broad layers of American society - the poor, the middle class, and the rich - all eagerly await their next free lunch.

The poor need EBT to make it through the day.  The middle class need social Security because they haven't saved for retirement.  The rich need Wall Street bailouts and thousands of pages of tax exemptions or else they'd fall below the poorest of the poor.  Class warfare is impossible in America only if every class is financially self-reliant.  Take away any of the subsidies and each class will scramble for someone to blame.

The rot isn't just vertical between the classes.  It's horizontal between industry sectors.  The dirty, nasty hydrocarbon sector depends on the oil depletion allowance to justify new drilling to shareholders.  The wonderful green energy sector would collapse without renewable portfolio standards and feed-in tariffs.  Civilization needs energy to do work but Americans would be working a lot harder to pay the true cost of energy without those subsidies.

Americans ignored the warnings of the bipartisan Simpson-Bowles commission.  Curtailing the entitlement culture sooner would have minimized the pain our society would have to feel.  We instead chose to postpone the day of reckoning and keep the subsidy party going.  The party will end when foreign investors stop paying our bills.  The dollar's reserve status was fun while it lasted.  We won't know how much it meant to our living standards until after it's gone.