What Happens When We Runs Out of Other Peoples' Money ?

By Christopher Chantrill

Egypt Runs Out of Other Peoples' Money

I don't know too much about Islam and the Prophet. But I do know this: governments tend to fall when they run out of other peoples' money.

So it doesn't matter whether the government in Egypt is run by Gamal Abdel Nasser or Hosni Mubarak or Mohamed Morsi or whoever. The government is broke, and that means it can't keep those food and fuel subsidies going. Millions flood into the streets. End of story.

You would think that the wise heads of the world would have decided by now that subsidies on food and fuel are a really bad idea because it is almost impossible to to turn them off without millions in the streets. Talk about settled science!

It doesn't help that greenies in the United States have paid farmers to plant half the corn belt in corn for ethanol and have sent food prices into the stratosphere. Maybe those Islamic extremists should stop talking about the U.S. as the Great Satan and get nasty about the upper-class environmentalists that are starving their children.
Here in the good old USA we are also heading full-speed-ahead for the iceberg. Only our subsidies center on pensions and health care for senior citizens like me. You can take that Medicare out of my cold dead hand.

You would think that when the going gets tough the tough would get going and pull together, like they do after a natural disaster. I suppose that the operative word is "after." In the months and days before the checks stop coming, it's "after you Alphonse" when it comes to taking a haircut on your government benefits or your free food. It's only after the disaster that people are prepared to help their neighbors.

Up to now, we have concentrated on Greece and Argentina as examples of national folly. Both nations have an egregiously corrupt and venal public sector, but there is a difference between the two. The difference is that Argentina can always devalue its currency every decade and thereby present the millions in the streets with a fait accompli.

But Greece is tied to the Euro. For now.

In Egypt the problem is deeper because the problem is not just an overburdened public sector, complete with an education system that churns out graduates that can't find jobs. Heck, every self-respecting nation has that. The problem is that Egypt's government is expected to dole out food and fuel to the people. You can devalue the currency all you want, but people kinda know when they are getting less food, and they will take to the streets to remind the government of that.

Here in the United States we are much smarter. We can trim Social Security payments by queering the pitch of the Consumer Price Index, and we can hide Medicare cuts behind the smokescreen of ObamaCare and the IPAB. At least, that's the plan. And we can keep wages low and competitive by flooding the labor force with low-skilled immigrants.

In the U.S., we are only spending about 38 percent of GDP on government, according to usgovernmentspending.com, not counting the unfunded federal entitlements and the unfunded state and local pensions. What could go wrong?

Every ruling class gets to rule by promising gifts of other peoples' money to its supporters. That applies to every political movement from a robber gang to a ruling class of educated liberals. But since humans take previous gifts for granted, the ruling class always has a problem. It must keep upping the ante to maintain its support.

Thus the wisdom of Margaret Thatcher: "They [socialists] always run out of other people's money."

But really the notion applies to all ruling classes. All ruling classes end up running out of other peoples' money, because there is no limit to the rapacity of the people that support politicians. As long as the ruling class can still print money or sell bonds, then it is worth spending money on the supporters to stay in power.

Egypt has run out of money to pay its supporters, so riot, revolution, and civil war will be required before the Egyptians will be willing to reduce their non-negotiable demands on each other.

Here in the U.S. we watch Egypt only to wonder how things will look when Greece, or Spain, or Portugal runs out of money. Is bloody revolution and civil war in their future?

There's a difference between Egypt and us. Egypt has a "youth bulge." Think the U.S. and Europe in the baby-boomer Sixties. Youth bulges have a way of taking to the streets and telling the geezers to get lost.
But Europe and the U.S. have a youth dearth. So when the checks stop coming, riot and revolution could never happen here.

Thank goodness for that.

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