Lest the media be able to rewrite the causes and dictate the outcomes of Greece's problems, I need to squash some misinformation and falsehoods. This latest writing was motivated by the Journal Sentinel's "Lessons from Greece" editorial. In which, they fabricate or ignore the causes, and deduce the completely wrong conclusions.
They proclaim, "The central problem in Greece was out-of-control spending on government programs for aging populations." They talk of Greece's budget deficit and their debt, but no evidence backs up the claim of "out-of-control spending" and there is no mention of the numbers concerning these programs for the aging. If that is what actually caused their fiscal worries, some data corroborating such should be presented.
In reality, average annual government expenditures in Greece totaled 50.4 percent of GDP. Total spending for the European Union as a whole equaled 50. 7 percent of GDP. As Michael Linden and Sabina Dewan state, "Over the past 10 years, Greece has consistently spent less, as a share of GDP, than the European Union as a whole."
The Journal then, typically, brings the "over spending" meme back around to gutting American programs - like Medicare, Medicaid, and Social Security. And, of course, they use the Peter G. Peterson Foundation to support such claims. Dean Baker has more on the true intentions of Mr. Peterson. [Whenever a Journal article cites the Peterson Foundation, the Wisconsin Policy Research Institute, or the Tax Foundation be very skeptical.]
The Journal creates false reasons for Greece's troubles, they then compare the U.S. to Greece. Investors will not have faith in Greece's ability to pay its debt, the U.S. has debt too, therefore, investors will soon have no faith in the U.S.. Paul Krugman explained why this connection is ridiculous and a red herring.
From here the Journal jumps ahead to an whole austerity program for the U.S. Yes, with aggregate demand stifled and the private sector neither spending nor hiring, the editors believe now would be a great time tighten our belts. WTF?! We need "prudent budgeting" to solve out debt. Whatever that nebulous statement means.
Governments must continue to spend now: repair and improve infrastructure - bridges, roads, electric grids, sewer systems, water ways, etc.. Without this necessary (and overdue) maintenance and government spending the economy would grind to a halt and unemployment would skyrocket. Spending more now to ensure growth (which enables us to pay off debt) is better than allowing unemployment to ravage a generation.
The lesson we should learn from Greece is that the neoliberal age of tax cuts and deregulation has left all nations vulnerable to the whims of bond traders.
For Further Reading:
A Principled Europe Would Not Leave Greece To Bleed
Being Rude to the Deficit Hawks
Deficit or Depression?
Economy Needs More Big Government
From Keynesianism to Neoliberalism
Greece's Spending Cuts Are Making The Crisis Worse
Social Security: The Phony Crisis
The Bubble Economy
The Debt Delusion
The Liability Con
This Time, Don't Buy What Rubin's Selling
Where Have All the Keynesians Gone?