Is the U.S. next for a “Greek Tragedy”?

 Chris Wodke

http://www.summittrainingpublications.com/

If you watched the news over the past couple of weeks you've seen the riots in Athens. Greeks have taken to the streets to protest the proposed austerity measures.  Three people were killed when a bank was fire bombed.  The Greek government must make cuts to their entitlement programs as a condition of the bailout they are going to get from the International Monetary fund.  The U.S. is about a 20% contributor to the IMF, so our money will be involved in this bailout.  The question is can the same problems happen here?  There are some interesting parallels to the problems in Greece and similarities to our own situation here in the United States. We may well be headed to our own "Greek Tragedy".

The Greeks are running a deficit of 14 percent of GDP. In the U.S. we are not far behind with a deficit of 10 percent of GDP and growing.  Trillion dollar deficits are projected through the decade.

George Washington said " No pecuniary consideration is more urgent than the regular redemption and discharge of public debt; on none can delay be more injurious, or an economy of time more valuable."

Thomas Jefferson had similar concerns about running a huge public debt. He said: " I, however, place economy among the first and most important of republican virtues, and public debt as the greatest of the dangers to be feared."

How did the Greeks get into their current mess? They did it through large entitlements.  They have universal health care, short work weeks, high minimum wages, job security, early retirements (53 in Greece) and huge pension benefits.  People have fled the private sector to the secure and lucrative positions offered in the Government.

We  are already starting to see the strain here.  MPS announced this week they  must layoff almost 200 teachers due to budget problems. California and many other states would be bankrupt already if not for the Stimulus money. The next big bubble to burst in this country will be from unfunded pensions for government workers.  The pensions are underfunded by $450 billion nationwide for state employees according to a study by the American Enterprise Institute and reported in the Wall Street Journal.  Public employees contribute nothing to fund their own benefit packages. When the funds fall short, taxpayers will be asked to kick in more tax money. Money which takes away from the private sector and kills job growth.  Government is growing at an enormous rate.  The State of Wisconsin is not the biggest employer in our state.
 

The pay gap is huge. According to data complied by the Commerce Department, the average federal salary in 2008 was $119,982 compared with $59,909 for a private sector worker. The benefit package for the average federal worker was $40,785 compared to $9,981 for the private sector.  The government is growing faster than private industry. The demographics in both Greece and here in the U.S. make it impossible to support baby boomer workers as they retire. With zero population growth in both countries we do not have enough younger workers in the system paying taxes to support those retiring.  With longer life expectancy we have the making of an economic crisis.

Rush Limbaugh reported recently that unions in Chicago have already been protesting for a hike in taxes so they can continue to fund pension and other benefit programs. Labor unions protested at the State capitol for an increase in taxes to keep their benefits.  The rioters in Greece were protesting an increase in the retirement age from 53 to 55 and an end to a government subsides of their housing.  The protests in Greece were also organized by the unions.

Some politicians have begun to recognize the issue. Marco Rubio Republican candidate for Senator in Florida said recently: " The meltdown in Greece should be a wake up call for those who which to turn America into a high spending, high tax welfare state. The fact is the global boom masked what was in fact an unsustainable situation, not only in Greece but in countries like Italy and Spain. Not only are governments spending far more than they are collecting in taxes ( as we are in the U.S.), but wages have far outstripped worker productivity because of undisciplined governments and powerful unions. Entire countries have become profligate, unproductive, and uncompetitive. Unfortunately, the road ahead in these countries is going to be extremely difficult."

We need to take steps here before it is too late.  Our current level of spending will mean massive increases in taxes and fees. High taxes are ruinous to the private sector. The present economy is not generating jobs under our current tax structure.  The Greeks have also increased their  valued added tax (VAT) to 22%. Such a step has been talked about here. Our very freedoms are at stake.

Benjamen Franklin said: "Think what you do when you run into debt: you give to another the power over your liberty.   The current course of spending and taxes threatens our liberty and security. When investors lose confidence like they have in Greece, they will no longer buy bonds to fund your debt. We are following the same path and unless changes are made, are on course for our own "Greek Tragedy".
 

For more info: Contact Christine @ summittraining@yahoo.com

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