"The Entitlement Time-Bomb"

For those that follow the situation in Europe, it could be a preview of what the future will look like here in the USA. Last year it was riots in Greece when the government ran out of money and after two bailouts from the European Union, could not borrow any more. So deficits had to be reduced; "entitlements" were cut and citizens rioted by attacking police, destroying property, and even burning down a bank (killing two people that were inside). Many experts believe Greece is still going to need more financial bailouts.


Now it is happening in Spain. The country's banks need a $130 billion dollar bailout and as part of that payment the European Union requires that they make major cuts in their spending to reduce future deficits. So yesterday the Prime Minister announced major cuts in entitlements and tax increases. Here are just a few of the austerity measures:

- The Value Added Tax (VAT) has been increased to 21% (in simple terms; buy a $30,000 car and the sales tax is $6300).

- Government worker's annual salaries will be cut 7%. BUT, here is how absurd the "entitlement" mentality can get. Until now government employees in Spain received 14 monthly paychecks per year - 12 regular paychecks plus an extra monthly paycheck at Christmas and one at vacation time. So they received two "free" monthly paychecks per year.  The 7% "cut" is the Christmas "free check" being eliminated - they will still get the free check at vacation time.

- Now if unemployed in Spain you will only get 60% of your salary for the first 6 months, then it will drop to 50%. I don't know how long you can receive unemployment in Spain, but from my many travels in Europe it can be years.


And so they are rioting in Spain.


If you give a child, or even the family dog, "treats" on a regular basis, once they are used to it, it is almost impossible to walk it back. Grownups are the same. Throughout the world for years politicians have been promising their constituents "treats" just to get votes, without any regard for how the free stuff will be paid for.

This is a world-wide problem from top to bottom:

- USA:  $16 trillion in debt and deficit rising at the rate of $1 trillion per year; 8.2% unemployment and payments increased from 26 to 99 weeks; 42 million on food stamps and the government advertising for more people to apply; in June 85,000 workers left the workforce to collect disability (more than jobs created), and in three years, regardless of age they will all qualify for Medicare. 
- Greece, Spain, Portugal, Ireland, Italy and probably France all nearing insolvency.   
- California, a $16 billion deficit this year, almost twice the forecast, and at least 10 other states with similar financial problems.
- Stockton, San Bernardino, Scranton, filing bankruptcy recently and some experts predict upwards of 100 cities in the USA close to insolvency. 

Like Greece, sooner or later there will not be any money to pay these entitlements and no one will lend any more money or buy bonds from these countries, states, or cities.

The fuse on the entitlement time-bomb has been lit. In the words of that great philosopher Reverend Jeremiah Wright: "The chickens have come home to roost".