Entitlements Gone Amuck!

Our country's political process has been broken for a long time, but I'm not talking about the partisanship that seems to be tearing us apart right now. I'm talking about the decades-long loss of political will to to say "no" to unaffordable spending. We are now on the verge of a massive upheaval that will be required to get us out of the giant hole we have put ourselves in.

Governments at all levels are swimming in debt, saddled by huge unfunded pension and medical liabilities, and trapped by gold-plated labor contracts that seem ironclad. There is no easy way for many of these public entities to escape bankruptcy, and that's why I predict a massive upheaval over the next few years. It's going to be interesting.

Under-taxing and over-spending got us into this mess, and correcting the problem will require over-taxing and under-spending for quite a while. In addition, the fix may also require the "managed bankruptcy" of many governments. This unavoidable medicine will certainly cause a massive upheaval in our society as we rebalance our governments.

It's almost funny that addressing the entitlements problem has taken so long, since it's been as obvious as the noses on our faces for a long time. In the private sector, we saw GM slowly die as its untenable labor contracts killed off its competitiveness - and then we paid to fund its bankruptcy and backstop the outrageous deals it had made with its workers. But who can save all these bankrupt governments? Only us, by forcing change that will be hard for all of us to take. Or, will the politicians demogogue this issue until our country collapses under the weight of its incredible debts and unfunded entitlements?

The stock market is currently jumping up and down in reaction to the problems Greece's insolvency is causing the EU. Greece is a tiny player, but its unraveling finances are creating great uncertainty. What would the world's reaction be when its largest economy can no longer pay its bills? Massive upheaval, that's what, and perhaps of the worst kind that one cannot even speculate about without praying hard. That's why we need to engineer our own mini-massive upheaval, starting this year. A stitch in time saves nine, as they say.