The Price of the Cradle-to-Grave Welfare State...

Quote of the Day:
“Will someone please explain why the Bush White House and the Republican Congress are not trumpeting this economic boom on a daily basis? Their polls are sagging, but the economy is soaring. This simply shouldn’t be.

“If former President Clinton had overseen this economy, he’d have held daily Rose Garden news conferences to mark the occasion. In fact, former President Reagan did just that in the booming 1980’s - he gave speech after speech touting the success of his supply-side tax cuts. Yet President Bush seldom goes into the current economic story, and when he does it’s just a mention.”
--Larry Kudlow, November 30, 2005


We’re paying too much for the past and not spending enough on our future,” says the new German finance minister, Peter Steinbrück. The past, of course, is the five-decade reckoning for the welfare and entitlement state, peppered with a burden of unhealthy demographic developments.

You could have knocked me over with a feather: I believe this marks the first time in history that a liberal - in this case a Social Democrat - has called the price tag of cradle-to-grave welfare “too high.”

(Let’s hope Senator Ted Kennedy and DNC Chairman Howard Dean were doing what they always do when there’s news from Europe contradicting time-honored liberal mantras: turning up the volume on a Joan Baez ditty on the stereo so they won’t have to hear it!)

Steinbrück also warned that if the Stability Pact’s new debt restriction targets are not observed by 2007, the euro will face a “currency crisis.”

Considering that 2005 marks the end of Germany’s official grace period of three below-par years in a row, and that 2006 looks just as unpleasant as the past three years, one might be tempted to ask “why 2007?”

After all, when the rate-hike premium for the euro was called in today, the single currency dropped down to US$1.1689 - very close to its 52-week low and almost 14% below where it was at the beginning of the year. That is a rather precipitous drop for a major currency, if you ask me. Big enough, anyway, for someone to write a headline asking: “Demise of the Euro?”
Don’t hold your breath. Only expatriate Americans really pay heed to the euro, and after undergoing a lengthy process of ideological assimilation, expatriate Americans tend to be dollar pessimists.

Larry Kudlow wrote yesterday: “Perhaps one of the biggest economic surprises is the U.S. greenback, which has regained its strength in the currency markets. This isn’t simply because American interest rates have risen with the economic cycle. It’s mainly because the U.S. economy is throwing off high investment returns that attract foreign capital from around the globe (where free-market capitalism, by the way, continues to spread at a breathtaking pace).”

With record corporate profits and cash flow, US businesses are perhaps the strongest argument in favor of a stronger dollar. They’re paying out record dividends. Dozens of companies are in the progress of aggressive of share buybacks, and are investing in new equipment and technology.

Kudlow comments: “This good news hits home. At lower tax rates on dividends and capital gains, 57 million equity-owning families will have the option of reinvesting their new cash or spending it. The economy benefits either way.”

And healthy economic growth in the States will probably continue to prop up the anemic performance of unrepentant underachievers such as the European Union.