The consequences of borrowing to fund welfare states have been getting more obviously destructive. In the European Union, the fates of governments with still a few years to go to pay the piper are tethered to the fates of even more wildly profligate states.
Yet the solution most EU officials propose, aside from more tax hikes, is to lend and borrow even more. Whole governments go on the welfare roll. The countries delivering the loans in turn “borrow” from their own unwilling citizens.
When will it end?
Maybe never, if the precedent being pondered by the innovative government of Portugal is implemented and gains traction.
A court there has ruled that it’s unconstitutional for Portugal to save money by cutting the salaries of government employees. (Perfectly all right to hike taxes, though.) So the government is thinking of end-running the decision by paying workers part of their salaries in treasury bills instead of the usual funny money.
The logic is stunning. Obviously, we can pay everything we owe just by issuing IOUs! Not since Rumpelstiltskin wove straw into more straw has anybody fashioned something this magical.
Nobody need ever go bankrupt again so long as we all keep issuing IOUs to vendors and creditors. All the bad consequences of bad practices will maybe just disappear through this expedient! Incredible!!!
Maybe I’ll call up my credit-card company to explain how this works. Once I figure it out myself, that is.
This is Common Sense. I’m Paul Jacob.