Europe’s economic tremors offer useful lesson for Kentucky
Americans paying even cursory attention to what’s happening on the other side of the Atlantic are about to get a stark reminder of an economic principle that too often gets pushed to the side – especially during troubling times: No government has ever taxed, spent or borrowed its way to prosperity.
Even leaders of European nations and the International Monetary Fund – not exactly known for being right-wing thinkers – recognize that fixing a nation’s problems cannot just be about more cash. That’s why their massive loans in recent years, pulling France and Greece back from the edge of total economic collapse, were accompanied by demands that those nations’ collective belts be tightened.
They knew that without these “austerity measures” the funds designed to buy nations time to return to some sense of financial stability would disappear into the monstrous black hole of government entitlements and bloated public payrolls.
But now that the French have elected Socialists on a promise to rebel against such terms, America has the opportunity to learn some valuable lessons that could lessen the Richter-scale level of our own economic earthquake.
Among the most important of lessons: You cannot return down the same path that led you into the hole in the first place and expect different results.
France’s election results had hardly been announced when its new Socialist president-elect Francois Hollande revealed what he really meant by “change now” – the campaign slogan he used to win the election.
He “says governments should increase spending now, while economies are so weak.”
It’s reminiscent of leftwing economists who thought America’s $800 billion stimulus spending plan of 2009 wasn’t enough. New York Times columnist Paul Krugman said it should have been $800 billion more.
But how many times have we shaken our heads at a victim of abuse who, despite the pain, convinces herself that when she returns to her abuser it will be different this time?
Somehow, too many politicians have convinced their constituents that the wise mantra that says “ when you find yourself in a hole, stop digging” does not apply to government.
In fact, the citizenry has been too easily duped into believing it’s just the opposite: By digging faster, our government somehow will cause us to rise out of “the hole.”
This is not just a problem with politicians in Washington or France. It’s a problem in Frankfort, too.
During this year’s Kentucky General Assembly session, an attempt was made by Sen. Joe Bowen, R-Owensboro and Rep. Mike Harmon, R-Danville, to cap at 6 percent the amount of General Fund revenues that could be spent on servicing debt in each budget.
Bowen got the support of 34 of the 38 senators. But the effort was buried in the graveyard of House Committee inaction – a familiar ending for many responsible policies in the statehouse.
Instead, we now have a budget that spends more each year with a debt ratio of 6.5 percent.
The governor – one of those who believe that somehow because it’s government, it can dig better and faster than the rest of us – originally proposed a debt ration of a whopping 7.1 percent.
And we don’t even have to wait until he’s out of office to figure out that this is the wrong approach. Each Kentuckian personally carries $1,685 of the commonwealth’s debt load – compared to $318 for each Tennessean, $492 for each Hoosier and $933 for each Buckeye.
We’ve talked about Kentucky’s debt problem before. But I think it needs repeating: Our neighbors have figured out that there’s no magic in government shovels. The only thing that happens when government digs is what happens when everyone else digs - the hole gets deeper.
One wonders: When will France – and Frankfort – figure that out?