greece burning

[driveby]

another take

 

Mona Charen

 

In Athens or in Washington, it’s the size of government that matters.

 

 

"The President of Greece warned last night that his country stood on the brink of the abyss after three people were killed when an anti-government mob set fire to the Athens bank where they worked." — The Times Online

 

That “anti-government mob,” it must be understood, consisted of civil servants, tens of thousands of whom took to the streets to protest austerity measures. Greece is in the midst of a general strike. Airports are closed. Trains are not running. Classrooms are empty. Trash is piling up. The Wall Street Journal reports that “angry youths rampaged through the center of Athens, torching several businesses and vehicles and smashing shop windows. Protesters and police clashed in front of parliament and fought running street battles around the city.” The Greek crisis, like a fraying rope on a footbridge, is also sending shudders throughout the Eurozone.

 

This is more than a financial crisis. This is a national meltdown. And while facile comparisons to the U.S. must be avoided, there are nonetheless lessons for us — particularly in light of the direction the Democratic party wants to travel.

 

First, the differences. Greece is a small nation of 11.3 million people. Its GDP is estimated to be in the range of $333 billion (though with recent revelations of government dishonesty about deficit numbers, all figures must be viewed skeptically). Greece partakes zestily in the Mediterranean tradition of tax avoidance, and corruption is endemic. Many ordinary transactions are greased with fakelaki (“little envelopes”) or rousfeti (“political favors”). Daniel Kaufmann, a senior fellow at the Brookings Institution, compared 40 industrialized countries and concluded, “If Greece had better control of corruption — not to Swedish standards, but even at Spain’s level — it would have had a smaller budget deficit by 4 percent of gross domestic product.”

 

So Greece has cultural problems that contributed to its economic implosion. But there are similarities to the U.S. as well — and because we have elected Democrats, they are growing. By the end of 2011, Greece’s debt will be 150 percent of its GDP. According to a March report by the Congressional Budget Office, President Obama’s 2011 budget will generate nearly $10 trillion in cumulative budget deficits over the next ten years — $1.2 trillion more than the administration projected — which will increase our debt-to-GDP ratio to 90 percent by 2020.

 

One in three Greeks works for the government. Government employees enjoy higher wages, more munificent benefits, and earlier retirements than private-sector employees. Civil servants can retire after 35 years of service at 80 percent of their highest salary and enjoy lavish health plans, vacations, and other perks. Because they are so numerous, and because Greece is highly centralized, public-sector unions hardly have to negotiate. They simply vote in their preferred bosses. Some civil servants receive bonuses for using computers, others for arriving at work on time. Forestry workers get a bonus for outdoor work. All civil servants receive 14 yearly checks for twelve months’ work. And it’s almost impossible to fire them — even for the grossest incompetence.

 

Public-sector unions are growing in the U.S. More than 50 percent of all union members are now public employees, and their unions have negotiated sweet deals with local, state, and federal governments. As economic historian John Steele Gordon points out, “Federal workers now earn, in wages and benefits, about twice what their private-sector equivalents get paid. State workers often have Cadillac health plans and retirement benefits far above the private sector average: 80 percent of public-sector workers have pension benefits, only 50 percent in the private sector. Many can retire at age 50.” While private employers were shedding jobs during the recession, state and local governments hired 110,000 new workers.

 

President Obama’s new spending will result in a 14.5 percent increase in the number of federal employees in just two years. And he has looked after union interests with particular zeal — at General Motors and Chrysler, by funneling one-third of stimulus spending to state and local governments, and by repealing the rule that required unions to disclose their spending, to name three examples.

 

And in a corrupt feedback loop that may not be so very different from the Greek practice after all, public-employee unions give generously to Democratic candidates, both in cash contributions and by manning phone banks, getting out the vote, and so on.

 

It’s no coincidence that the states with the most powerful public-sector unions — New Jersey, California, and New York — are facing the most severe budget crises.

 

Greece is in flames, but if you look around, you can smell the smoke here as well.

 

Wake up hope and changers, you're getting bent over like the rest of us.

[Perchoutofwater]

Yeah - tho in fairness, the war(s) Bush plunged us into didn't exactly do the economy a world of good either. Course that doesn't mean Obama is exactly justified in continuing it either.

 

I guess all I'm really saying is: I have a dream! Just once, can we not digress into another "it's all the other side's fault" pile of kiddie spittle?

 

No doubt! But Bush's wars which had bipartisan support (unlike anything this congress and administration have done) are temporary costs, not permanent entitlements.

[bpwallace49]

No doubt! But Bush's wars which had bipartisan support (unlike anything this congress and administration have done) are temporary costs, not permanent entitlements.

 

Medicare D

[dmarc117]

change is acoming. get used to living with less. spend wisely. be frugal. times will be tough for awhile.

[Perchoutofwater]

Medicare D

 

I know you like to try to play gotcha, but try to keep up. My response was to the someones post regarding "Bush's Wars". Since you bring it up, I'm sure you know I'm on the record for being against that, and noting it as one if not the biggest failures of the Bush presidency.

[bushwacked]

But Bush's wars which had bipartisan support

 

 

On Afghanistan, yea. For Iraq, Congress authorized the Joint Resolution,which had bipartisan support, based on the premise vigorously pushed from the executive branch that Iraq had the means of attacking the Eastern Seaboard of the U.S. with biological or chemical weapons. It authorized the president to use force, it wasn't, in anyway, bipartisan support for a long term invasion and occupation of Iraq, or the "Bush War." I can never tell if you are ill-informed or sincerely dedicated to being the tailgate resident right wing talking point spin boy.

Edited May 7, 2010 by bushwacked

[borge007]

Congress authorized the Joint Resolution,which had bipartisan support, based on the vigorous premise pushed from the executive branch that Iraq had the means of attacking the Eastern Seaboard of the U.S. with biological or chemical weapons. It authorized the president to use force, it wasn't, in anyway, bipartisan support for a long term invasion and occupation of Iraq, or the "Bush War." I can never tell if you are ill-informed or sincerely dedicated to being the tailgate resident right wing talking point spin boy.

 

We all know the answer to your last point!!

[Azazello1313]

On Afghanistan, yea. For Iraq, Congress authorized the Joint Resolution,which had bipartisan support, based on the premise vigorously pushed from the executive branch that Iraq had the means of attacking the Eastern Seaboard of the U.S. with biological or chemical weapons. It authorized the president to use force, it wasn't, in anyway, bipartisan support for a long term invasion and occupation of Iraq, or the "Bush War." I can never tell if you are ill-informed or sincerely dedicated to being the tailgate resident right wing talking point spin boy.

 

 

!

[Savage Beatings]

!

 

Youtube lied.

[bpwallace49]

aaaaand we are off track!!

[bushwacked]

!

 

I fail to see your point or how that contradicts the facts I posted.

Edited May 7, 2010 by bushwacked

[Azazello1313]

I fail to see your point or how that contradicts of the facts I posted.

 

there were a lot of democrats who supported the war, therefore saying it had bipartisan support is completely accurate.

[bushwacked]

there were a lot of democrats who supported the war, therefore saying it had bipartisan support is completely accurate.

 

Wrong.

 

This is fairly simple. They was a lot of bipartisan support to authorize the president to use force, and follow through with it, if necessary. There wasn't bipartisan support for a 8+ year invasion/occupation (i.e..the "Bush War"). Hell, the Bush administration was even against that publicly.

[Azazello1313]

This is fairly simple. They was a lot of bipartisan support to authorize the president to use force, and follow through with it, if necessary. There wasn't bipartisan support for a 8+ year invasion/occupation (i.e..the "Bush War"). Hell, the Bush administration was even against that publicly.

 

so what you're saying is, they were for the war when it started, but once it became more difficult and expensive than anticipated, many of them changed their mind and decided to be against it.

 

OK, I can agree with that.

[westvirginia]

aaaaand we are off track!!

 

There is only ONE track when it comes to politicians. They are liars. They should not be trusted. They will beat their grandmother with a baseball bat if it means getting more votes. But since you want to deflect and the evidence presented was against your earlier position I can see why you'd make this point.

[westvirginia]

so what you're saying is, they were for the war when it started, but once it became more difficult and expensive than anticipated, many of them changed their mind and decided to be against it.

 

OK, I can agree with that.

 

Awww, it's just so haaaaaaard...

[bushwacked]

so what you're saying is, they were for the war when it started, but once it became more difficult and expensive than anticipated, many of them changed their mind and decided to be against it.

 

OK, I can agree with that.

 

No, that's what you're saying because you lost the argument.

[Azazello1313]

Last week in Greece, a bank was firebombed by left-wing protesters, killing three people. The protesters were upset that as a result of the financial crisis, the Greek government is freezing public sector wages and taking other austerity measures.

 

Compare and contrast: In America, Tea Partiers peacefully march and demand their government spend less money to head off an impending crisis before it happens. In Greece, they evade taxes, wait until the economy collapses, then kill bank employees when the government is forced to cut benefits.

 

Which strikes you as the more sensible response to government fiscal recklessness?

[westvirginia]

And all the wonderful "progressives" insist (without a shred of evidence, anecdotal or otherwise) the TEA party members are so prone to violence.

[bushwacked]

And all the wonderful "progressives" insist (without a shred of evidence, anecdotal or otherwise) the TEA party members are so prone to violence.

 

What huddlers have been "insisting" that tea partiers are prone to violence? Sounds like you're resorting to a simplistically schticky strawman. The contention, backed up by recent polling numbers, is that the tea bagging moment is largely comprised of the far right of the right wingers and their mainstream influence will be somewhat limited, and maybe even backfire.

Edited May 10, 2010 by bushwacked

[Azazello1313]

At the end of last week, the US looked hard at Greece and was scared. So tiny an economy should not be bringing all of Europe low and even threatening to explode the euro, but it is. What started as a US financial crisis plunged Europe into recession; was Europe about to return the compliment? What, Americans began to wonder, did Europe’s problems tell them about their own?

 

The cause of the present turmoil, Greek public debt, has aroused fears of a wider sovereign-debt crisis and heightened concern about US government borrowing. More immediately, investors are asking, what if the European Union keeps making a hash of the problem? Will there be a second European banking crisis, and would it infect the US financial system? Even if the answer is no, the US recovery is still fragile. The economy would not be immune to another slump in EU demand.

 

These fears can be exaggerated, but none is unfounded. In any event, fears do not have to be well-reasoned to make a bad situation worse and justify themselves.

 

The least substantial line of alarm is Greece as fiscal harbinger. The US might not be Greece, say pessimists, but California could be. Here is a state so strapped for cash that it recently resorted to paying its workers with IOUs rather than money. (If that is not default, it is the next best thing.) Could California do for the US what Greece is doing for the EU?

 

Unlikely, is the answer. California is a bigger economy: in that sense its problem is on a larger scale. But its debts and deficits are puny compared with Greece’s. Other defences and safety-valves, notably lacking in Europe, are to hand: an activist federal government, a compliant central bank, a currency that cannot conceivably split apart.

 

The parallel should not be dismissed altogether. A country whose government borrows beyond its capacity must eventually pay the price. Greece does teach that lesson, in case anybody had forgotten it – and in the US, some have. But the greater worry for the US at the moment is not that Europe shows where it is heading but that secondary effects from Greece and any widening emergency will squash its fledgling recovery.

 

These influences are pushing in opposite directions. A flight to safety from European markets brings investors back to US bonds and pushes US interest rates lower. On the other hand, it depresses the euro, which makes US exports less competitive in a crucial market. If Europe’s economic recovery – which is both weak and delayed as compared with the US – should fail altogether, the US will not be immune.

 

Financial contagion is the other big risk. Suppose Greece defaults. That will spread losses across the European banking system. Pressure to default could mount on other European countries, starting with Portugal and Spain but maybe spreading further. Just how badly US banks and non-banks are exposed to to these risks – directly, or through credit default swaps and other derivatives – may be unclear until it happens. Any new financial waves would crash over a US government whose fiscal capacity is all but maxed out and a country whose willingness to rescue banks is exhausted.

 

Up to now, the US has wanted to think that Greece was a European problem that could be left to the EU to solve. Both parts of that supposition have turned out to be wrong. In recent days, the administration said it pressed for a speedier resolution of the Greek mess, and the involvement of the International Monetary Fund in the deal to supply new lending gave the US formal standing on the issue. Yet the problem is no closer to being solved.

 

The EU-IMF adjustment programme for Greece improves on the previous EU position that Greece must bear all the costs of its troubles alone – but not by much. European and international taxpayers are now on the hook, too. Greece’s creditors are not, however, which is wrong. Partly for that reason, the new plan is nearly as delusional as the old one. As Arvind Subramanian argued on this page last week, it implies three years of crippling austerity, at the end of which Greece’s flattened economy will have to support a far larger public debt than today’s. (This is assuming things go well.) The plan resolves nothing. It is a delaying action at best, and a pretty desperate one at that.

 

Default looks ever more likely. This can be planned, with some hope of keeping things orderly – though the best chance of that has now been missed. Or it can be unplanned, after a further period of denial in which the problem worsens. Notice the irony. Conventional wisdom holds that early-resolution mechanisms are needed for failing banks and non-banks: the key thing is to get in front of the problem. But a similar logic applies to distressed governments, especially where sharing pain with creditors is concerned. This lesson, evidently, will have to be learnt all over again.

 

The harder question is whether even a Greek default will resolve Europe’s difficulties. My bet would be no. Greece has a huge primary budget deficit. At least for a time after a debt restructuring it would struggle to find lenders. So even with its debts written down to nothing, it faces a period of fiscal austerity that will be wrenching at best and politically impossible at worst – with no central bank to support demand, and no currency of its own to devalue.

 

The EU says that default must be avoided at any cost. I say default will happen. The EU says exit from the euro is not an option. I would not count on that, either. In any event, the US had better brace itself.

 

gulp

[Jimmy Neutron]

gulp

 

More like a

[westvirginia]

What huddlers have been "insisting" that tea partiers are prone to violence? Sounds like you're resorting to a simplistically schticky strawman. The contention, backed up by recent polling numbers, is that the tea bagging moment is largely comprised of the far right of the right wingers and their mainstream influence will be somewhat limited, and maybe even backfire.

 

I didn't say huddlers, I said progressives. And slick willie.

[The Irish Doggy]

Ah the party of fear and loathing is alive and well.

[Jimmy Neutron]

Ah the party of fear and loathing is alive and well.

 

 

...like there's just one of them.