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hundreds of. during the ninety's. to see is organized crime is right. well my colleague bill dog will be here in half an hour's time but for the meanwhile with western powers overspending and crippled by debt people of elena's guests and crossed the welfare system is here to stay or just to fade away thanks for watching. if you can. follow him welcome to cross talk i'm peter lavelle the welfare state is dead long live the welfare state the idea of western style the welfare state has few supporters during these hard times but few are willing to demand less and pay more for government services the system is broken and bankrupt with almost no one taking

responsibility. to. discuss the prospects of the welfare state i'm joined by peter taylor goopy in canterbury he's professor at the university of kent in dusseldorf we go to god for steingart he's an international bestselling author and the editor in chief of handel's blog and in boston we go to lawrence call to love he's professor at boston university and another member of our crosstalk team on the hunger all right gentlemen cross talk rules in effect means you can jump in anytime you want well i've done many cross talk programs gentlemen but i've never come across a topic of it is so last loved in the world especially in the western world and that is the welfare state so gentlemen the welfare state once the pride and glory of western democracies has it become a curse peter in canterbury could i go to you first no i wouldn't say that the

welfare state is i think trade me properly or in the u.k. the problem is that the government doesn't believe that we can afford it well peter can you afford it. i don't see why not it's simply a decision about how you spread in public while very if people are prepared to pay for public services there's no problem about providing not be a bit just recently heard the government the current government in britain is going to cut one hundred thirty five billion dollars to shrink government by almost twenty percent that's not very popular is it. but i don't think that's a popular program the other thing is that it's a program that's unique in europe and did the developed world many countries are facing spending cuts and. crisis but nowhere is cutting welfare spread abruptly as you try it's a very big. ok if i can go to do so how about you i mean can we afford the welfare

state i suppose that's the question right now because because we can't really afford it and i'm looking at the united states and what's going on in the u.k. all across the eurozone with cutting and we can't afford to keep going on the way we are. i would. put the question like this whether we can afford it or not the welfare state especially in germany bursting all over europe maybe except great britain the welfare state there's not another pay t.v. programme which we can switch on and off it's part of our social contract it's part of our constitution it's organized as an insurance as you already know and this insurance is build on public money and to build also on trust people trust in this system for in germany now for one hundred forty years and so the welfare state is under attack yes but we should rebuild it ok if i use this stay with you is there enough trust and is there enough money is there an equation there is

a or is it just ask right now and you have to work towards equilibrium again. the welfare state is not attacked by the financial crisis our biggest problem is the the aging society when i was born we had one point one million babies in germany one point one million and in our days we have five hundred to six hundred solve those per year so we have a problem with our shrinking and aging society and that makes it hard to finance the welfare state in the old way ok i'm going to you lawrence now in boston or your name is mentioned quite often because of the deficits and i'm sorry budget . debts the government debts that the u.s. has us to meet it had to be two hundred trillion dollars eight hundred forty percent of current g.d.p. that's

a remarkable number and it tells me tells me that i mean you don't have to be very you just have to have just cursory knowledge of economics you know you're not going to be able to pay that kind of money back it's just simply impossible. yeah it isn't possible what what's we have to realize that if you help one set of people in society or one generation you're going to hurt somebody else it's basically a zero sum game across generations so we talk about the welfare state were helpings making some people better off or include proving proving their welfare but we've got the same time and welfare state for those people are paying we're we're redistributing and what we've been doing here for decades in the u.s. and in western europe and in japan and increasingly in china is to take from young people and give to old people and tell the young people don't worry you're going to get yours plus a whole lot more when you retire you get your chance to expropriate the next set of young people and we're coming to the end of this ponzi scheme because this was just

mention the demographics and there are a slowdown in growth there's only so much you can extract from the next generation to pay the old people and in the u.s. we have these an absolutely absolutely enormous bills coming due to pay the baby boom generation as well as existing old people and that's where you come up with this two hundred trillion dollar fiscal gap that the present value the value in the present of all the spending projected into the future of the federal government versus all the taxes well the difference is two hundred two trillion dollars that's the real debt of the u.s. we have an official debt of nine trillion it's trivial that's the mole hill the mountain is the two hundred trillion dollar problem and we're not going to fix that by raising taxes we're going to have to cut spending and that's why i think you have this new congress the public senses that the government and it's not just this is a ministration for six decades of of margin time tape type school policy has put us into this very deep hole you know peter if i go back to you in

canterbury i'm glad lawrence brought up to be boomers because i think that's really you know we've heard from dusseldorf about you know the origins of the welfare state but really when we think about the. well for a fair state today it's about entitlement and the baby boomers is that sustainable will any other generation live so well and have so many benefits from the state that it would one time was relatively cheap but now it's become enormously expensive it's a paradigm shift for the welfare state at this point yes but that doesn't mean that we have to abandon the welfare state told to. be quite a complex movement across most european countries during the last twenty years to adjust pension benefits just the contributions that younger people. are going to be sold to. it's a problem of how you would just the pie it's not a reason for abolishing to do for abolishing. it's welfare states are issues that

could be. very strong. lawrence i want to jump in there go right ahead. you know i just want to agree with that statement i'm not for. forcing people to save and for and making sure that everybody has a health insurance policy we need to have social insurance but we don't need to have one generation be forced to pay for the social insurance of another generation which is what's been going on in the u.s. and i agree that in europe they're making they have made and in the u.k. case now they're making some major adjustments that are going to help the problem whether they're large enough is another question but in the u.s. we're done nothing and we're just making the situation worse but absolutely we need government intervention in these areas but we don't need the government to do good but also do a ton of bad by expropriating the young we've got more if i can go to you and to

sort of i know you're not an american but i'm sure you're aware of the american situation we just came through an election and it is really anti-government cut government spending cut programs but you know there's no political will there i mean it's easy to say government should cut spending but when it comes to your programs and i'd like to point out to big defense spending in the united states was not mentioned at all it's hands off you can't touch that right now especially from these tea partiers and republicans i mean i'm still trying to get how do we square the circle gentlemen because i cannot see how we'll have another baby boomer generation live so well i don't see where the wealth is where it's being generated and who's going to do the work of what do you think about that. first of all everybody is the is watching the process in the. electorate in the us and after this election night we are all surprised and bought the tea party and the big success and how all the history will go on with that because you mentioned

they are against government against big government but nobody is allowed to touch to touch the military expenditures so we have to discuss this subject which kind of government and the social contract yes i agree with that with peter we have to adjust it and we try to do it and germany is a lot of reforms are on the way for example we don't collect all the money from young people we collected now on the gas station a significant part of our of the prize we pay at the gas station is not for our pension system even of people don't realize they are putting some gas into their cars they are funding the pension system so the government is looking for some smart ways of adjusting and make it big not that hard for the younger generation to finance the older on the other side let's part of this contract that the younger people find of the old and the healthy people finance the ill people that's that's

the contract of every insurance warrants i wasn't sure if you were agreeing or disagreeing but i'll go ahead peter if you marry go right ahead go ahead but what right spirit belt this debate is you have two very different approaches to the whole system of welfare in the us you have a very liberal individualist approach the welfare state is an extra maybe you can afford it very bukhari in european countries like germany it's seen as something that's much more integral to society that's nice said part of people's lives as a social contract what's interesting now is that the u.k. used to be close to the job. perspective but my feeling is where now leaving your very rapidly in this card to perception moving much closer to the liberal market us more well peter aren't you a little worried about what's going on in the united states because i don't think that's a model really to emulate regulate you could finish there peter we'll go to

a break go ahead. yes something the florist me a lot but there are issues that lie behind base how do you achieve growth in capitalist economies is the bottom line and show countries the euro pig and the us have faced a situation of long term decline in their economic positions their old feelings a new economic model that will give on why you see everybody else once a jumping or at first we're going to have to go to a break after a short break we'll continue our discussion on the welfare state today stay with r.t. . if you. are

you. are comfortable. will teach you to display. just a few hours. urgency and scary cars. are included. with the. wealthy british. time to. market why not. find. what's really happening to the global

economy is a report on our t.v. . welcome back to rostock i'm peter looked around to remind you we're talking about the trials of the welfare state. but before let's see what russians think about this issue in a welfare state the government plays a key role in ensuring for the wellbeing of its citizens the concept became widespread after the second world war as a way of providing full veterans and their families but today's so-called wealthier states are facing decline as economists and budgets contract from the sovereign debt crisis and recently by the sound of poll asked russians what they expect from

the state this in housing ranked first and income protection second but that was not all a good education high close to food savings protection and even then good call were listed despite the crisis it seems russians expectations of their state remain high . right gentlemen before going to the break we're talking about how to pay for all this and debts are huge in the eurozone and as lawrence just pointed out a lot higher in the united states and a lot of people are probably aware of is it a good idea to go into debt to get out of debt if i go to you lawrence because stimulus packages this is been one route to do it a lot of people are very worried that this is compound in the problem but if you don't do that then what do we do just live tight or poor i mean is that the future if we want to have a welfare state living within our means because we obviously haven't been doing that for decades in the west go ahead lawrence. well the country is psyched out you

know psychologically nervous and spending more money is made them more nervous so you need to get the private sector to get reenergized and have a very simple game plan for how you're going to fix the fiscal problems fix the financial system and move the country ahead and just spending more money or cutting taxes is just making people nuts and that's the problem now the germans have made significant strides in pension reform in the health care reform they give us an example of and the brits now are doing some major things they show us that this is possible to get your house in order it's very late in the day in the us and we have we're going to take a lot of pain and we have to take a lot of pain we have to do it quickly but we can do it intelligently so we don't just throw out the baby with the bathwater we need to have social insurance we just don't need to expropriate the young to do it so we need to get control of health

care spending right away and add again when we so also have to have to make sure that everybody has a basic health plan and we need to do that intelligently and what's what we've done so for hasn't been it defense spending which was raised here we could certainly cut defense spending by a lot because the u.s. is spending as much as the next fifteen countries combined on defense but you have to realize if we got rid of all of our offense spending forever we would still have probably one hundred ninety trillion dollar fiscal gap we'd still have an enormous problem we'd still be bankrupt as a country so we we have to get control of more than just defense spending and and that's really not the the real answer to the problem we have to get control of health care spending in it so it's really the growth in this and the benefit levels that is so dangerous because every year those benefits grow faster than per capita g.d.p. grows you're giving higher benefit levels to everybody coming. the future and there

is seventy eight million baby boomers who get a bonus with this back to their future health care benefits i'm talking about the medicare program member to care or which provides health benefits to old people and us given if i can go to you i mean in your sense in europe do you think it's still a social good social idea for having a sense of equality in society is that still sustained through this financial crisis that the state is responsible to some extent for the lives of its citizens. i think there's one misunderstanding you see the smaller government a smaller welfare state in the u.s. but the much bigger deficit let's. you have. to say it in percentage it's one hundred percent more u.s. twelve to fourteen percent of the g.d.p. is the public debt we have heart of it in germany with a much bigger welfare state so so why because a welfare state is not financed by taxes it's not. the federal government which is

which is spending all these monies we have created one hundred years ago those independent insurances they are hot public half private insurance as you can step in step out but you have the shield of these big big insurance is for insurance this fall on employment for health for. the care of older people and for unemployment and these for insurance is run by own organization and they are collecting their money we call it in german by to get it kind of tax and people and that's the difference to the u.s. people people love these insurances and they are willing to pay we don't have a discussion even if when as an economist i have to say this kind of texas a very high and we we're close to have a much lower level of financing this welfare state it's hard for the businesses to

to afford it but people love it and people pay this kind of sort of taxes and nobody is doubting this kind of system that's the different thing in the u.s. you have a lot of trouble people who want to have medicare and medicaid and all this kind of government aids but they don't want to pay for it so it's a difference maybe if i go to you peter do you think now with this these this budget cut going on budget cuts going on in the u.k. is there we're going to get a new generation of people that won't. also when title because there are just won't be as much to go around that you're not going to be relying upon as much the government you won't be looking towards the state in the classical sense that we have i think the collective generation that were of us here on the program is that going to change social attitudes are going to change when you cut back and learn to live a different way that's a possibility but i think it's much more likely they'll be much direct. some

people will be eyeball to afford private provision and private had private schooling health care and so on but i don't think the mass of the population well what. happened during the last twenty or thirty years is that western societies have growed much more cool you have to collate the u.s. the u.k. but also. tensions between different social groups. to get much worse lawrence if i go to you i think that really isn't a very important point because in the united states has it been reported recently the division in wealth is really incredible in it's growing here and we you know let's look i mean over the last two years and with this new congress coming in there is no political will on the republican side will see with the tea party side to get the kind of financial reforms that the current president has really been pushing for they're just going to wait him out in waiting two more years in the united states could be catastrophic what do you think about that. well i'm not so

pessimistic be a poll ryan is a very good congressman who is now the head of the house budget committee he certainly has some very good and straightforward ways of fixing things that this democratic administration hasn't considered and i don't you know but basically he's not for eliminating our what we call our welfare state i think our welfare state is pretty significant even compared to the german intervention and of course it might be organize some of it might be more of it might be called private versus public but that's basically a matter of language the real difference i think in in europe is that the growth of this stuff in the future is getting under control that i think there's a lot more that has to be done but in the u.s. we're not as you said we're not facing up to this reality that we're expropriating our kids and they weren't and we're getting higher and higher benefits for older people and as a result the country is consuming

a lot more because the consumption of the elderly is just going up dramatically the national saving rate last year for the country was negative two percent the last time it was negative was in one nine hundred thirty four in one thousand nine hundred five it was fourteen percent of national income it's now negative two percent and because we're not saving we're not investing and therefore the chinese and other people are investing in our country and now we're getting angry at them for doing that which is crazy so we have to get this. we have to maintain social insurance but very efficiently and make sure that our kids can survive through this we can't keep taking from them and giving to us that's been the basics of the last six decades of u.s. fiscal policy republican and democrat it's the old people the democrats or republicans are having this food fight with each other and that's a disguise for what's really going on which is deception which is really taking from the young to pay to the old ok good point if i can ask you do you think that and i'm not just thinking about germany but the concept of the welfare state in. in

the post world war two era is it should we start because of this financial crisis started expecting less from the state i mean should you so everybody you know they'll be something there but we're not the first resort that you have to look towards like has been the case for many decades particularly in western europe and in different ways the united states. i think people are realizing that without growth it's not possible to practice solidarity so the younger generation i think that makes itself ready for a life. not embedded in a lot of entitle mance but we will say we will take our system. towards the future but we have to cut it back and we have a discussion in and france and in germany too to work longer normally people stop working in germany and in france in the age of fifty six fifty eight sixty maybe and now we are discussing in germany sixty eight is the first entry level into the

pension system and maybe we have to to set this level little bit higher two to seventy maybe later on to seventy two and to make it. more difficult to get all this money for the older people called the older people in our age are are old but they are they are still healthy so that's that could be one part of the reform too to close up the pension system for people which are too young and too young to stop working well let me go ahead once you get the last word go ahead but let me just. ok you know we've we've talked about the fact that there's a lot of inequality in the u.s. and i think that has to be addressed to we can't just let but but there's also growth how do we get to grow the economy to grow the reason economy is growing is we're not really investing as much as we need to last year's investment rate was one point eight percent it was in the fourteen fifteen percent value around nine

hundred sixty five it's because we're not saving so we can invest and we were not saving because we're taking from me and say we're hearing things like a vicious circle here i'm going to have to leave it there gentlemen many thanks to my guests today in boston dusseldorf and in canterbury and thanks to our viewers for watching as we see you next time and remember last time. he. was. great for the. we've got. the biggest issues get the human voice ceased to face with the news makers.