Unsustainable public debt closer to home Aug 3, 2015, Vol. 20, No. 44 • By IRWIN M. STELZER
Is America, or Illinois, or Chicago the next Greece? The answers are “Yes, if . . . ,” “No, but . . . ,” and “Perhaps.” Greece joined what was then the European Economic Community even though it had no business applying for admission, and the existing members had no business allowing it entry, as the community’s finance ministers concluded, only to be overruled by France and Germany, whose leaders were hoping to construct an institution that would make another continental conflagration impossible: Full speed ahead, economics be damned. Greeks did not speak any of the languages common in the larger EEC countries, or English, the language of international commerce. Their country’s stage of economic development was described delicately by the Hellenic Republic Ministry of Foreign Affairs in its official narrative as “diverging from the average ‘community’ development level,” meaning the country was more developing than developed, and that law-abiding, German-style taxpayers were thin on the ground. Politics was, er, primitive, with Communist and fascist elements unreconstructed.
Once admitted to “Europe,” and then to euroland, the Greeks proceeded to party, with the help of creditors who seemed to believe that lending to Greece was the same as lending to Germany and charged low interest rates reflecting that misapprehension. The Greeks reacted as they had when receiving the first post-independence loan in 1824. John Dizard, writing in the Financial Times, notes that J. Emerson Tennent, Count Pecchio, and W. H. Humphreys wrote in their book A Picture of Greece in 1825, published in London in 1826, “The majority of [them] do not rightly comprehend the meaning of a ‘loan,’ but very simply conclude that it is some European method of making a present.” Presents need not be repaid, so instead of putting them to use developing the country, Greeks past and present spent them. Greeks have had enough loans lavished on them by lenders to support early retirement, generous payments for not working, construction of a rules-ridden corrupt economy, with no need to collect those annoying taxes other countries struggle with.
In short, Greece partied. And creditors, in ignorance of or ignoring John Taylor’s admonition, “Don’t lend to a country with an unsustainable public debt,” continued on a course that would eventually force them, in essence, to pick up the bills. So lenders continued to lend. Until they wouldn’t. More precisely, until they took a pause to impress on the Greeks that they are broke—as in, you have no money and your ATMs are almost running on empty—and that when I lend thee not, Chaos is come. The pause also gave German chancellor Angela Merkel time to concoct terms for a third bailout so severe that her critics at home, who for some reason resent working until age 65 while Greeks retire at 50, became merely sulky, rather than mutinous. As this is written, the Europeans are prepared to do the can-kicking for which they have become famous, and fork over another 86 billion euros ($96 billion) in return for renewed promises to reform and privatize sections of the Greek economy. Presumably, the Greeks will throw themselves into the reform process and create an economy sufficiently robust to permit them to repay the 86 billion euros in new debt taken on by a country unable, even if it were willing and thought it right and proper, to repay the debts it has already incurred.
On to America, and to the recently often-asked question, “Could America become the next Greece?” Romina Boccia, research manager at the Heritage Foundation, concludes—with some quite sensible caveats—that indeed we could: “Greece and other struggling European countries offer Americans a window to the future.” Unlike President Obama, who finds the view from that window to the future quite agreeable—an America more like Europe—most observers would prefer not to become Grecian when it comes to fiscal matters.
Fortunately, to become the next Greece we would have to take several steps, including continuing the expansion of the entitlement state, as Democrats would have us do; refusing to fund the inevitable cost of our aging demographic and a larger defense establishment, as the watch-our-lips, no-new-taxes Republicans would have us do; and refusing to make the obvious reforms and investments that would transform an economy that will likely be growing at around 3 percent by year-end into one that can grow at 4-5 percent. That sort of fiscal vandalism would require a significant increase in our reliance on borrowing—fly now, pay later.
The European Union is bailing itself out, not the GreeksJul 20, 2015, Vol. 20, No. 42 • By CHRISTOPHER CALDWELL
A mass outbreak of syphilis, the radical economist and member of parliament Costas Lapavitsas told an interviewer, is about the only thing the European political establishment did not threaten Greece’s voters with before the country’s early-July referendum.
5:08 PM, Jul 1, 2015 • By GEOFFREY NORMAN
One reads of the crisis in Greece. And the one much closer to home in Puerto Rico. The crisis, that is, that inevitably comes after spending too much and taking on more debt than it is possible even to service, much less pay down. One thinks of how unfortunate it is for the people who will now redeem with pain, the promises made by the politicians of previous generations.
4:28 PM, Jun 17, 2015 • By GEOFFREY NORMAN
The subject of debt – how much and how tolerable – slipped into the shadows for a time. But yesterday, it reappeared. As Rebecca Shabad of the Hill reports:
5:30 PM, May 15, 2015 • By DANIEL HALPER
President Obama has reported less than $1,001 in his savings account. The disclosure comes as part of the president's annual Executive Branch Personnel Public Financial Disclosure Report.
The only savings account listed by the president is a "JP Morgan Chase Private Client Asset Mgmt Savings Account," according to the disclosure reports.
9:09 PM, Feb 2, 2015 • By DANIEL HALPER
President Obama's budget is not likely to be passed by Congress. But if it did, the U.S. would be about $26.3 trillion in debt.
The numbers come from Obama's budget, and were sent around by the Republican National Committee to highlight the heavy spending in the president's proposed budget:
9:00 PM, Feb 2, 2015 • By DANIEL HALPER
Senator Jeff Sessions, the former ranking member of the Senate Budget Committee, says President Obama's proposed budget "raises taxes by $2.1 trillion."
"The President has sent another tax-and-spend budget to Congress," Sessions says in a statement responding to Obama's proposed budget.
A collision between national sovereignty and the European Union in the birthplace of democracyFeb 9, 2015, Vol. 20, No. 21 • By CHRISTOPHER CALDWELL
In Athens in mid-January, two weeks before the election that would make 40-year-old engineer Alexis Tsipras Greece’s new prime minister, a bunch of cleaning ladies explained to me why they planned to vote for his party, the Coalition of the Radical Left (Syriza, for its Greek acronym). We met where they had lived, at least part of the time, for the past 16 months: among tents on the sidewalk in front of the economics ministry in downtown Athens.
3:23 PM, Jan 29, 2015 • By IKE BRANNON
New York governor Andrew Cuomo, not content with President Obama’s proposal to make junior colleges free, recently introduced his own plan for New York to essentially waive the first two years of student debt payments for college graduates living in the state.
9:10 AM, Jan 20, 2015 • By DANIEL HALPER
Under President Obama, $7.5 trillion has been added to the national debt. The number is being highlighted by the Republican National Committee ahead of President Obama's State of the Union address, which will be delivered tonight from Washington.
1:47 PM, Jul 30, 2014 • By MARK HEMINGWAY
As I've made pretty clear, I am not a fan of the "explanatory journalism" trend that purports to take an empirical approach to explaining complex issues. Its chief practitioners are a bunch of young, terribly biased journalists who tend to treat politics and policy as some sort of game, even as they broadcast their ignorance. Anyway, if you want a concise example of why explanatory journalism is bad—so pure and crystalline it could have been produced by Walter White—let me direct you to this Vox.com piece on Medicare.
8:41 AM, May 19, 2014 • By GEOFFREY NORMAN
More signs that the dynamism that once characterized the American economy is waning:
7:35 AM, May 12, 2014 • By DANIEL HALPER
Timothy Geithner, the former secretary of the Treasury Department, says the White House wanted him to lie in scheduled appearances on the Sunday TV talk shows. As Geithner writes in his new memoir: