Has The Welfare State Peaked?

As Economist Herb Stein used to say, “If something cannot go on forever, it will stop.”

The welfare state which basically picks from one pocket and gives it to another is an unsustainable program. It works for as long as there are enough pockets to pick on to give to others.

Yet could we be seeing the peak of the welfare state?

This from the New York Times, (all bold highlights mine)

For years, Denmark was held out as a model to countries with high unemployment and as a progressive touchstone to liberals in the United States. The Danes, despite their lavish social welfare state, managed to keep joblessness remarkably low.

But now Denmark, which allows employers to hire and fire at will while relying on an elaborate system of training, subsidies for those between jobs and aggressive measures to press the unemployed into available openings, is facing its own strains. As a result, it is beginning to tighten up.

Struggling to keep its budget under control after the financial crisis, the government in June cut into its benefits system, the world’s most generous, by limiting unemployment payments to two years instead of four. Having found that recipients either get work right away or take any job as their checks run out, officials are also redoubling longstanding efforts to move Danes more quickly out of the safety net.

The New York Times, being a liberal in the conventional sense, ends up defending the welfare programs. However, the lesson seems quite clear.

As former chancellor of West Germany Ludwig Wilhelm Erhard wrote to remind us, (bold emphasis mine)

Just as a people cannot consume more than it has first produced, so the individual cannot gain more real security than we, the whole people, have gained as a result of our efforts. This basic truth cannot be concealed by attempts to veil it with collective schemes. It is for just these well-intentioned ventures that a high price has to be paid. Efforts to free the individual from too much state influence and too much dependence on the state are thus brought to naught; the tie with collectivism becomes stronger. The apparent security, granted to the individual by the state or by any other group, has to be bought dearly. Whoever wants protection of this kind must first pay in cash.

At the end of the day, the basic laws of economics prevails.