Do we have the guts to do what Greece is doing?

Do we have the guts to do what Greece is doing?
It is not very difficult to look at what is happening in Greece with such a huge debt and other countries in Europe following in its footstep and think, “Are they stupid or why can’t they see it?”
It is obvious that they want very generous benefits from the government that they simply can’t afford.
A rather simple individual could conclude that they need to cut benefits and raise taxes.
How are we in the US different than Greece?
With the kind of government that we have now, I believe that is a very pertinent question.
The numbers on our federal debt are becoming alarmingly similar. Our debt is projected to equal 140% of GDP within the next 20 years.
Greece’s debt by comparison, equals 115% percent of its GDP as of today.
Our GDP as it stands today is about 87.3 of GDP.
Let’s be clear on what all of this means:
When the government spends more than it receives in tax revenue, it borrows the rest by issuing US Treasury Securities. The US public debt or national debt, as it is called, is the sum of all these outstanding securities.
Please, let’s not confuse it with the trade deficit which is the difference between net imports and net exports.
The US might never face such a catastrophe, although it’s not impossible, for many reasons but the core reason of this problem, is the same.
Both governments have a bigger government than they are paying for. And since we are on the subject, the same thing happens in PR with our government.
Corruption and bad government are important causes of these huge negative numbers, but that is not the whole story.
We must stop blaming the government for everything and we must accept responsibility.
We still don’t know which kind of government we want or should have.
We all favor Medicare, Social Security, good schools available to all, paved roads, welfare programs, oh yes, and a strong military and this has to be done with lower taxes.
What is interesting is that whenever a politician talks about fixing some of these problems, there is a backlash against the politician and everyone jumps on him or her.
Greece owes $400 billion, Portugal owes $175 billion, and a stone throw away sits Italy with $2 trillion and Spain on the hook for $819 billion.
Taking a look at these numbers, how much confidence can a $1 trillion fund offer?
A very important question in everyone’s mind. How will Germany react?
For many years, there is a general consensus in Germany that unemployment can be tolerated but inflation not.
They can’t forget the fact that Hitler took over when they had galloping inflation and they fear it like the plague. However, a bold German effort to save Greece and maybe even Italy would go against this fear of allowing inflation to surface again and it would undermine confidence in the German’s ability to pay its debts.
Germany was caught between a rock and a hard place. If they helped Greece, they could undermine confidence in German solvency. If they didn’t help Greece, they would undermine the Euro. Both roads lead to inflation.
As it stands now, Germany’s debt to GDP ratio is 77 percent, not as bad as Italy’s 115 percent or Greece’s 125 percent, but heading steadily in that direction.
If Greece is allowed to default, inflation will certainly hit them as faith in the Euro diminishes.
Greece’s entire economic and political system will have to change for Greeks to be able to live up to their commitment.
How Greece performs will not only affect Greek citizens but the value of the Euro and every one of the 27 nations that make up the European bloc.
If we do a careful analysis we would find that the European Union is the world’s largest economy, called by many as the United States of Europe. I agree with Tom Friedman of the New York Times who says that “two United States are better than one”. A failure by the E.U will affect everything from possible exports the US can export the next few years to how many allies will the US have in the next war, if we have a next war.
What would that mean to us?
Our export driven recovery, fueled by improvements in Europe, is likely to disappear and the dollar will strengthen, making our exports less competitive in the world markets.
There is no question that the present US administration has chosen to increase our deficits and it now exceeds 80% of our GDP. It is ironic that President Bush, the much criticized President, left it at 60% when President Obama took office.
A friend of mine made me laugh when he said “The Obama deficit is a gift that keeps on giving”.
I will now make a statement that will surely attract lots of criticism.
Although the PR government, politicians, corruption, etc. has a lot to do with it, the main fault lies with all of us.
We all know that our government is a big bureaucratic elephant. We all know that the job it should do can be done with maybe half the people.
We elect a government that promises to trim it down, and after cutting 30,000 employees, everyone criticizes what was done!
Yes, there are ways of dealing with this situation that are better or worse, but the bottom line is that expenses must be cut and the people and a great percentage of my fellow members of the press simply don’t allow this to happen.
The message seems clear, curse the politician that goes beyond merely words and shows some fiscal restraint.
Let’s face it, this situation is unsustainable, we simply can’t in the US and here in PR continue accumulating these gigantic deficits.
What have the Greeks already done?
They increased the average retirement age for government employees from 61 to 65.
They cut the wages of every public sector employee by 20% and their pensions by 10%.
The value added tax was raised from 19 percent to 23 percent, and there has been an increase of about 30% on gas, alcohol and tobacco.
The number of municipalities is proposed to shrink from 1,000 to 400 and public owned companies from 6,000 to 2,000 to save money and bureaucratic red tape. Now hear this, so far, the deficit is down 40% from last year.
Is our deficit down 40% from last year? Of course not.
Are we willing to cut eliminate 60% of our municipal governments? Of course not.
We need leaders that are willing to take action even at the expense of losing the next election.
Otherwise, we will be in a heap of trouble and everyone will suffer sooner or later.