By: Douglas J Utberg

There is an old proverb that states you should be careful what we ask for, because you just might get it.  The wisdom of this insight lies in the fact that most things we want are accompanied by undesirable consequences.  Children and adolescents frequently desire things that carry unwanted consequences with them, but generally lack the foresight to see the future impact.  Part of the responsibility implicit in becoming an adult is to anticipate when ‘getting what we asked for’ will result in something very unpleasant.

Unfortunately, this principal seems to be very difficult to communicate when it comes to electoral politics.  Evidence of this assertion is found in the general trend amongst free electoral systems for the populace to overwhelmingly support political candidates that promise to give ‘free’ services from the government.  However, very few people stop to consider where the resources for these government services will come from.

For example, the United States has a very large entitlement liability from Social Security and Medicare that is likely to result in tremendous demands for payment in future years.  (The current ‘bailout’ initiatives feed this phenomenon as well)  The options for raising the money necessary to meet these obligations all involve undesirable effects.  The ‘best’ alternative is for the economy to grow tremendously over the coming decades, creating a large increase in the tax base.  This alternative requires that the government maintain pro-growth policies for an extended period of time, while holding spending in check . . . all of this in spite of pressure to further increase entitlements.  The next alternative is for the government to either drastically increase taxes or issue new debt for the unfunded liabilities.  Unfortunately, this option constricts the economic activity that is necessary for generating future tax revenues.

The final alternative is to simply ‘print money’ or devalue the currency by increasing the amount of money in circulation by simply issuing new treasury certificates into the open market.  This is far and away the most likely scenario, because is the least visible and doesn’t require a direct vote by the legislature.  The unfortunate end result is that the increase in currency will cause large amounts of inflation that devalue savings, home equity, and entitlement payments.  Thus, the very same people who have demanded entitlements for many decades may see that the actions needed to finance their entitlements will ultimately erode the value down to where they would be better off if no entitlements had been created in the first place.