Among weeks of civil unrest that included at least three deaths, numerous injuries, and widespread property damage, the Greek government has agreed to major economic adjustments in exchange for an IMF rescue. Among the measures required is the opening up of private markets in crucial areas of the economy, namely health care, transportation, and energy.
These steps will be taken in conjunction with tax increases and public sector pay freezes. The ability of the government to lay off public sector workers, whose “low levels of productivity and high wages are a big contributor to Greece’s debt problems,” should also substantially assist the country’s recovery.
It seems like the only part of this equation proposed here in the US, with our debt load ever closely mirroring that of Greece, is the tax increases. According to Art Laffer, our entire federal revenue could be replaced with a flat tax of 11 percent on individual gross income and 11 percent on net business income, even without accounting for the greater economic growth and increased revenue which would certainly follow. That solution would be much too simple and would decrease the power of politicians in Washington. It’s much simpler to talk about wealth redistribution and increase the taxes on the already over-taxed, even if it means stunting the longer-term economic growth of our economy.
The greater question is why we’re currently headed in the very direction Greece is being forced to leave because of the structure’s inherent unsustainability. If government-run health care, transportation, and energy are bad for an economy, why are we instituting such systems in our country in the midst of the greatest economic downturn in 80 years? If public sector workers, supported by unions who negotiate with government officials not representing the interests of taxpayers, end up with higher than average pay and benefits ($79,197 for federal workers v. $50,028 for private sector employees; with benefits, $119,982 federal v. $59,909 private) and their ranks are increasing faster than the ranks of those footing the bill, how do we grow ourselves out of a Greek-like mess?
In 1988, the debt was 51 percent of GDP and by 2020, it’s projected to hit 90 percent. Either we follow Greece now, before it becomes too late for us, or we just unite as a country, hold hands and chant, “Hope and change.” Surely that will save us.