Rather than get bogged down in statistics from the Republicans or emotional and deceptive rhetoric from Barack Obama, let’s look at a real-life and current example of where this nation is headed: Spain.
In 1999 and 2000, when Spain adopted the euro as its currency, interest rates fell to historic lows as the European Central Bank (similar to the U.S. Federal Reserve) made money easily available. So Spain’s banks, its property developers, and the everyday home-buyers (with prodding from the government) embarked on a frenzy of commercial and residential building and buying. From 1996 to 2007, Spanish property values tripled.
Spain has a massive social safety net which accounts for a vast a majority of its government spending — spending that absorbs nearly 46% of the country’s annual economic output or GDP. Further, the nation’s unfunded long-term social commitments account for more than 15 times its yearly GDP. Despite this, the Spanish government embarked on one of the most ambitious green energy programs in Europe, pouring untold billions of euros into solar and wind energy.
In the meantime, because of rigid labor laws, union influence, and government regulations which prevent wage reductions and mandate ever-increasing benefits, the Spanish unit labor cost has risen by 40% (as compared to Germany), making Spanish industry uncompetitive. Many have, by necessity, moved their operations overseas. Nonetheless, large-scale immigration, much of it illegal, continued unabated through 2008, further exacerbating the cost of government.
Does all this sound familiar?