The Greece-ing of America?
There is a certain ebb and flow in the debate over whether U.S.-style capitalism is better than Europe’s welfare economies or vice versa. Most of the time the U.S. has the upper hand while Europeans and their American advocates play defense, but every now and then Europe enjoys a stretch of faster of faster growth and seemingly brighter future, and by extension, playground bragging rights
Naturally, neither place can solve its problems by somehow outperforming – or out debating – the other, and both Europe and America may very well end up in the same place that Greece is finding itself these days: Bankruptcy.
New York Times reporter David Leonhardt notes that as comical as the fiscal follies of the Greeks may seem, there’s no particular reason to believe that America is immune from the illness that is besetting Greek society:
The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.
America has long been plagued by federal budget deficits and an international trade deficit, yet the nation’s appetite for both increased government spending and increased private consumption have grown relentlessly. As Leonhardt writes, Americans are, collectively, “in favor of Medicare, Social Security, good schools, wide highways, a strong military — and low taxes.”
This path will inevitably lead to ruin. Can America change its ways before it is too late and various economic and fiscal emergency measures are required in order to< accommodate foreign lenders? Maybe, maybe not. Most people, I dare say, are like the Greeks when it comes to austerity measures: They deem them necessary burdens that should be shouldered by others.
In that spirit I strongly oppose any increase in tax rates. However, there are sacrifices I think are quite tolerable given the situations we’re in and heading towards. So how about curtailing spending and saving with pre-tax or tax-exempted income? Let’s get rid of 401(k) and IRA, and let’s reduce the deductions for health care insurance, mortgage interest payments, and charitable donations. By reducing exemptions and deductions the tax base is increased even though nominal tax rates aren’t.
While Greece, Portugal, Italy and Spain struggle with the over-expanded and under-funded public sectors most northern European countries, including Germany, The Netherlands, Sweden and Denmark, have taken steps to improve the long-term viability of their welfare states. The experiences in those countries suggest that drastic measures aren’t necessary if enough small steps are taken before economic apocalypse sets in.
But there will be pain and it should touch everyone, rich or poor, healthy or sick, young or old.
