Disturbing parallels between the U.S. and Argentina

I touched on this subject in a post last month, and return to it because creeping socialism (or American Peronism, if you will) is a very slippery slope with disastrous long-term consequences. I know Argentina and its history very well. In fact, I once had to take a high school equivalency exam that included a rigorous test and essay on Argentine history, and my first job as an analyst in 1981 was to prepare an extensive report on the outlook for Argentina. Additionally, I lived there four years in the late 1970s. My wife and I have countless friends and relatives that we have visited dozens of times over the years since. As much as I love the people, the food, and the wine, I detest the Argentine government for the unimaginable economic pain and suffering it has inflicted on its people. I've witnessed first-hand the destruction of Argentine living standards over the past 35 years.

I never thought I would see the day that counting the number of parallels between the U.S. and Argentina would require the fingers of two hands, much less just one. But Richard Rahn does just that in a very well-done article in today's Washington Times. Excerpts:

Argentina has extensive import bans and controls. The Obama administration has been advocating protectionist trade policies and has opposed the ratification of previously negotiated trade agreements.

Argentina has income tax rates roughly equivalent to those in the United States but also has a value-added tax (VAT) and a wealth tax. Officials of the Obama administration and some members of the U.S. Congress are flirting with a VAT.

Argentina has continued to run inflationary monetary policies while at the same time attempting to treat the symptoms through price controls. The U.S. Federal Reserve has greatly increased the money supply, which is likely to produce future inflation. Officials of the Obama administration, at times, have advocated price controls of insurance companies, medical suppliers, financial institutions and even fees for carry-on luggage on airplanes.

Argentina's largest bank is state-owned, as are a number of its other banks. The Obama administration forced a number of large American banks to become partially government-owned. The two largest mortgage institutions in the United States - Fannie Mae and Freddie Mac - are now largely government-owned-and-controlled.

Argentine courts are slow and corrupt. Property rights are not secure, and the government has willfully understated inflation statistics, causing foreign and domestic bondholders to lose much of their investments. The Obama administration unilaterally took away bondholders' rights in the GM and Chrysler cases and, in essence, took their assets and turned them over to the unions that had supported Mr. Obama.

Argentina has extensive labor regulations to favor unions, which greatly increase the cost of hiring. The Obama administration has supported costly labor regulations that the unions favor, which eventually will drive up the cost of hiring workers and result in higher unemployment.

Argentina has a long history of deficit spending, which, in turn, has made government debt burdens so high that the government refuses to pay the debt to the private domestic and international debt holders. Over the next 30 years, economists ... estimate ... that the U.S. public debt will rise to between 200 percent and 500 percent of GDP. (It is now about 60 percent.) Debt levels of 200 percent to 500 percent cannot be supported; hence, the debt holders will face erosion of their capital through either inflation or nonpayment.

We are clearly headed in the wrong direction, and it's now up to the people to demand change for the better come November. I think it can be done. If not, the long-term consequences are very disturbing.