Greece’s bankruptcy proves one thing: welfare states are wasteful and unsustainable. Since the early 1970s when Greece transitioned from a military dictatorship to a republic, the country has had one socialist government after another. Years of government largess in the areas of education, health care, paid vacations, and early retirement has brought the nation to its knees and has made it the current number one beggar nation in the world.
Of course, it wasn’t just the wild spending that got the Greek people in trouble. It was the fraudulent financial records their government submitted to its benefactors to keep the gravy train rolling. It was also the lack of courage Greek politicians had in making sure that all those government goodies were paid for with tax increases. You see, Greek politicians for too long were like the parent who just couldn’t say no to their children – ever. Now, out of necessity, some of the toys bestowed on the Greek children by their government are being taken way, and they are throwing a tantrum in the streets of Athens.
Governments like Greece that ultimately do not control their own currency have about two options when the bills come due and the till is dry – default or grovel at the feet of big bankers to loan you more money with which to financially hang yourself. Greece, of course, has turned to groveling, but at a huge cost. In order to get bailed out, the Greek government had to enact measures that are foreign to the Greek people. It had to get its financial house in order by cutting benefits to the citizenry. Hence, all the stomping of feet, banging of heads, crying, and screaming in the streets.
But, enough about Greece, let’s discuss why this matter is important to the average American. It is because our gravy train is on the same track as Greece’s. The only difference is that we can inflate our currency wildly to pay the bills, but only to a point. Remember the opening line of this article: welfare states are wasteful and unsustainable. They are wasteful because they entail taking resources from productive members of society and giving them to unproductive members of society. Thomas Jefferson warned us about that when he said, “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” In other words, government should not be in the business of diverting money away from enterprises (new factories, inventions, jobs) that make our economy grow and giving it to groups that contribute little to the well-being of society. Yes, these groups I speak of include the banking cartel, the military industrial complex, and individual welfare kings and queens.
Welfare states are also unsustainable because you have to fool all the people all of the time, but at the same time you cannot fool the laws of nature. It is easy to convince a large segment of society that welfare spending is compassionate and is the cost of building a civil society, especially since you aren’t raising their taxes to pay for it. It‘s a piece of cake to convince the underprivileged that they are entitled to public assistance because they somehow are the victims of a harsh economy. As for the banking cartel and military industrial complex, they will gladly accept low-interest loans, bailout funds, and big government contracts as a normal course of doing business. In this scenario everyone wins. The working man has low taxes, the underprivileged have income security, the corporate elites have implicit government guarantees against failure and, most importantly, the ruling elite collects campaign contributions and votes which install them in office usually for however long they want to “serve.”
For the last forty years in America this has been the routine, and our leaders kept telling us that this was not too good to be true. “We are the United States. We have the strongest economy in the world. Someone will always be there to buy our debt – the Europeans, Japanese, Middle East, and China. Besides, the deficits and national debt don’t matter.” Do you remember when Dick Cheney told us that one?
But, deficits do matter. And our national debt is a powder keg waiting to explode. The laws of nature will catch up with us just like they caught up with Greece. If and when the Federal Reserve raises interest rates to attempt to quell inflation, the new interest payment on our national debt will be crippling to the federal budget. If the Fed never raises rates again, our economy will be relegated to the same level as Zimbabwe’s. At that point, perhaps the Fed governors will attempt to print our way out of trouble. The only problem is that no one will be interested in buying our debt.