What lesson does Greece's present state of affairs teach us?

Lesson: don’t promise that which will later bite you in the ass!

Well said @CaptainHarley

It’s the word “free”. People forget nothing is free. Everything costs.

Seems to me everyone wants the government to provide more and more but no one wants to pay the taxes needed to support the freebies. And as you say, this is not just happening in Greece. I don’t know where it is going to end. I don’t think the middle class working person should be required to subsidize the lifestyle choices of the rest of the world. Somewhere along the road everyone should just pay their own way.

@rooeytoo good point.

What would have to happen for people to see that? I mean some university students are protesting because paying 12% of the cost of university education is too much. They want it free or frozen,, and the gov. wants to hike it to 17% by 2017.

….present state of affairs teach us?

Borrow more money from China!
Yeah, that’s the answer…

That a proper manufacturing base and exporting economy is essential. An economy based on fluff and bubbles like finances, services and tourism will break your neck.

That if you hide your money under the bed and avoid paying taxes your country will go broke….......

Margaret Thatcher already taught the lesson when she noted that the problem with socialism is that you eventually run out of somebody else’s money. The current American electorate doesn’t seem to be in the mood for learning lessons. Not yet anyway.

@rooeytoo Is absolutely right. The problem in Greece is that virtually everyone is a scofflaw when it comes to paying taxes, yet they all want generous retirement benefits from their government. @josie on the other hand parrots the apostles of the .001% who want it all. If there is a lesson to learn from Greece, it is that we need to have a serious, substantive and non rancorous national discussion about what we think government should do for us, and what should be left to the individual or the private sector. When we reach something close to a consensus on that, then we need to bite the bullet and pay for what we want. And that includes the .01% people and above paying at least as much as the average secretary working for them pays in taxes.

The depth of social services in Greece were, and are, not the problem. The main problem, as I understand it, was that everyone in the EU councils knew that Greece simply didn’t have the economy to join the Eurozone, but was too polite to call Greece on their lies about this. So when Greece did join, creditors offered them interest rates at the same rate as other countries in the EU, like Germany…but as it turns out, Greece’s economy does not operate at the same level as Germany’s, for the reasons ragingloli stated above. Also, the tax collectors kept awful records for some reason, and they did have some useless government programs, like a commission to drain a lake that had been dry for a decade. I think the lessons to be learned are don’t lie, don’t pretend others aren’t lying when you know they are, keep really good records, and don’t take loans unless you really need them. I do not think Greece’s fail points to problems with the notions of free university, single-payer healthcare, longer vacations, earlier retirement, etc.

To all you who are saying socialism = irresponsible government overspending, an interesting thing to note is that the Greek government stopped lying about their debt level as soon as the Communist party won the election.

The Milton Friedman, Chicago School, IMF, trickle-down, supply-side economists were and still are wrong.

There are two lessons, actually.

One is don’t have a bloated entitlement state, especially when you are not in charge of your own monetary policy.

The second—and arguably more important lesson today—is that if you are in recession with high unemployment and debt, don’t enact austerity policies because they will make it worse.

One involves the cause of the problem, the other involves attempts to solve the problem.

Don’t borrow too much.

@Qingu You are correct about the timing of austerity policies.
The problem is, that when the ecomomic climate improves, the same people who oppose austerity then change the discussion, arguing that they can now afford central government largesse. That is nothing more than wanting your cake and eating it too. No wonder people are confused, angry, and polarized. Shame on elected politicians for jerking their constituents respective chains. Shame on the electorate for putting up with it.

@josie, that’s not true. Liberals supported austerity—raising taxes and cutting spending—under Clinton, and oppose it now. It’s the standard liberal economic doctrine.

Conservatives are the ones who spend wildly and enact budget-busting tax cuts during boon times: Reagan and W Bush most famously.

What are you proposing @Qingu?

It’s simple, really. With 8 percent, unemployment and a still-lukewarm private sector, the government needs to spend more money. It needs to give aid to states so that states don’t have to fire teachers and librarians. It needs to employ construction workers to fix our infrastructure. This kind of stuff directly leads to jobs. And while it will increase our debt, right now our debt is the lesser of two evils (and the markets agree—treasury bonds are still trading low).

As soon as unemployment falls and GDP starts growing at a healthy rate, however, the government should raise taxes and cut spending so we can pay down our debt. A lot of those spending cuts will happen automatically, by the way: less unemployed people means less money spent on the mandatory safety net. And with more people working, that’s a bigger tax base, which means more revenue.

We should not raise taxes on poor and middle class people during high unemployment. Those people tend to spend most of their money. The money they spend gets pumped into the economy and helps employ other people. Rich people, on the other hand, spend relatively little of their money and save the rest. The money they save does not get pumped into the economy, and raising their taxes will only marginally slow down economic growth. (Also, many wealthy people—despite their hysterical bitching about it—would not even notice a tax increase on their bottom line, and probably don’t even know what their tax rate is to begin with). So we should raise wealthy people’s taxes soon. Letting the Bush tax cuts expire next year for people making over 250k would be a good start. We shouldn’t raise taxes on the middle class until unemployment gets down to, oh, 5 or 6 percent at most.

Oh, and I also think our defense budget should be cut in half. And ideally the tax brackets for rich people would increase stepwise by 10% for brackets over 250k, up to 80% for the billion-dollar tax bracket.

Probably a pipe dream on both accounts though.

@Qingu “It’s the standard liberal economic doctrine.”
Sounds like Keynes to me. He advocated increased government spending, even deficit spending, in lean times and government cutbacks, and pay off debt, while the economy is gangbusters. This way the government is a moderating influence on the economy for more steady progress.
Not sure if liberals have a clear claim on that. “Conservatives” certainly do not, they don’t ever seem to get around to paying off government debt, and seem concerned about it only as an excuse to cut the kinds of spending they don’t like (non-military).

@dabbler It is Keynesian and it does work. What doesn’t work is the Milton Friedman Chicago School of economics. Pure wishful thinking.

@ETpro, monetary policy does work. It has its place. Friedman and Keynes’ contributions to economics are not mutually exclusive.

Monetary policy doesn’t work much now because we are at zero-bound. But it’s still a useful tool in general.

It looks like Obama is now embracing Reagan’s policies. Of course, it is all rhetoric and Obama’s version of history in an attempt to garner support. I wonder how Obama invoking Reagan’s policies sets with his supporters who do nothing but criticize and throw hate at Reagan and Friedman?

@bkcunningham, I think the point Obama is making by bringing up Reagan is that his policies are actually bipartisan; even Saint Reagan supported tax increases on occasion, and the tax rates he’s advocating are lower than in Reagan’s day.

He is making the point that the Republican party is so completely off the rails today that it thinks Reagan’s tax policy is socialist class warfare.

What do you think?

And re. the following?
1)publicly funded education
2) publicly funded health care
3)low retirement age 57? in some countries
4)long vacation period
.
Even if the rich and filthy rich start paying more taxes, when the country (Greece) is in such trouble can it keep this luxuries?

@flo The retirement age and vacation policy most likely needs to change. But don’t discount the revenue increase that enforcing their tax laws would have, It isn’t just the super wealthy that are tax scofflaws in Greece, it is endemic.

@ETpro yes I think most people can work at least till 65 for sure or 68.

I don’t think I implied that enfocing the tax laws would not increase the revenue, and that it is just the super wealthy that are the scoflaws. You have to let me know how you thought that.

I was hoping @Qingu would answer what the percentage of the filthy rich plus the rich, that can help bring about the minimum desirable state of stability in Greece? Not enough I’m guessing. Still they should be taxed more anyway.

I think the super rich should pay more than they are now, but what about earners 150,000 to $249,999/year? What percentage should they pay?

@Qingu re. ”Probably a pipe dream on both accounts though.” Is there a solution that is not a pipe dream?

@flo I was reacting to the line, “Even if the rich and filthy rich start paying more taxes, when the country (Greece) is in such trouble can it keep this luxuries?” While they may not be able to, it isn’t low tax rates for the rich and super rich that has hurt Greece, it is that nearly all Greeks cheat on taxes, rich and poor alike. With their poor revenue collection, they can’t even afford necessities.

@ETpro I agree completely. I was thinking of the civil servants insisting that the gov. not touch their luxuries, which is completely unreasonable.

@Qingu Do you have a solution that is practical not a pipe dream. What should happen in Greece right now?

@flo, I honestly don’t know what the hell Europe should do. I think any solution would need to involve the entire continent and not just Greece. It seems likely, based on my limited knowledge, that the central countries (mainly Germany) are going to have accept a much greater role in bailing out the periphery, just like wealthy states in America help fund social spending in poor states. But I dunno. Maybe the Euro should just break up instead.

Also it’s important to note that the debt crisis has now spread to Spain and Portugal… neither of which actually had a debt problem before the recession started. It further shows that (1) austerity is not the answer and (2) the answer is going to have to be Europe-wide.

@flo As far as I can see, unreasonable and Greece are synonymous.

@Qingu Looking at the US model where Liberal states fund far-right-wing conservative states that insist only conservative values work, economically, I fear the same would happen in Europe. I totally agree that all EU states have an interest in solving their financial problems.

I don’t know how austerity is not the answer. You are suggesting if I have been mismanaging my money I should put it all on the shoulder of my neighbors who have been managing their affairs well enough. What is the lesson in that?

Austerity in times of economic crises is not the answer because it means that the government, by definition, reduces the money flow into the already struggling economy, hurting it further.
Government employed people spend money on things, supporting the economy. So do unemployed people who receive benefits. As does the government directly when it purchases products to run itself. Once you start cutting budgets, benefits and salaries, you cut important financial lifelines to the economy, leading to further economic deterioration.

@flo, first of all, countries are fundamentally different from households. You cannot base economic policy on analogies.

Let’s consider what is going on in Greece and now Spain, Italy, Portugal. You have double-digit unemployment coupled with incredibly low or negative GDP growth. GDP is consumer spending plus government spending. Low GDP means low employment since businesses won’t hire if it looks like nobody is going to buy their products. So you’re in a vicious cycle where more people are unemployed, which means they can’t buy stuff, which lowers GDP, which means businesses hire less people, which means even more people are unemployed… and so on.

What does austerity do to this situation? It makes it worse. The government employs people. Cutting government spending directly increases unemployment. Austerity policies also typically include tax increases. Taxing people more, especially lower-classes, means they spend less. That cuts into GDP, which increases unemployment. Austerity is by definition “contractionary.”

The purpose of austerity policies is ostensibly to pay down the debt. You could argue that increasing unemployment is worth it in order to pay down the debt. But this would be a stupid argument since if you have double digit unemployment your tax base is incredibly low, and shrinking employment further means shrinking your revenues further.

You cannot pay down your debt if your country is not working. Or to put it in a crude but applicable analogy, you can’t pay off your credit card bill if you don’t have income with which to pay it.

Another point: you have turned this into a moralizing issue. You’re suggesting that the problem countries mismanaged their affairs while central economies did not. This applies to Greece. It does not apply to Spain and Portugal. They had surpluses and low debt before the crisis hit. The nature of their economy made them more vulnerable to a housing bubble.

@Qingu @ragingloli I started out asking about
1)publicly funded education
2) publicly funded health care
3)low retirement age 57? in some countries
4)long vacation period
That is what I was hoping to be addressed here.
I know they can’t afford thenecessities as @ETpro pointed out.
So austerity has to mean cutting down the the number of employees? I thought it could mean the amount excess from each employee.

Austerity is broadly defined. AFAIK it’s always in Europe involved slashing government workforces. Though I imagine they’ve tried to mitigate it to some extent by cutting hours.

Cutting hours is also contractionary though, for the same reason that raising taxes. If you cut working-class and middle class hours, they spend less money. Spending less money = businesses responding to slack demands = higher unemployment.

@Qingu what is the solution that doesn’t go under the heading a “pipe dream” though?
What do you think the countries that are not yet in trouble do to keep from being in the same situation? Feel free to address the too low age of retirement, please read in my last posts, “publicly funded University”. and so on. There is no reason for having university publicly funded, anywhere, IMO.

@flo, I’m hesitant to answer because I haven’t been paying as much attention to Europe as American stuff.

The basic problem is that countries on the euro can set fiscal policy (taxing and spending), but they can’t print money. The US can do both, which is partly why we do not have a debt crisis despite having a massive debt (the interest on US treasuries is incredibly low and has been for years). The interest on Greek, Spanish, Portugal and Italy debt on the other hand is soaring, partly because the market knows that these governments cannot print money to cover the debt.

Printing money is “bad” in that in normal circumstances it leads to inflation; but in a liquidity trap recession it is the lesser of two evils because the velocity of money is low. This is why the Fed in the US has been able to triple the monetary base (i.e. printing money) since 2007 without resulting in inflation. The extra money, in a liquidity trap, is beneficial to a depressed economy when nobody is spending and credit is tight. The Fed also has powers over the money supply that individual euro countries lack: the Fed can set interest rates to curb inflation, Euro countries can’t.

So basically, Euro countries lack a basic and essential tool to fight recessions by virtue of being on the Euro. So there doesn’t seem to be a solution in sight unless (1) the Euro becomes more unified, with individual countries becoming like states in the US, with a single continental fiscal and monetary policy, or (2) the Euro breaks up. I’m actually not sure that either of these count as “pipe dreams”—they’d be highly disruptive for sure, but I haven’t really seen evidence of another way out of the mess.

I’m not sure why you brought up the low age of retirement. Obviously that contributes to the debt in Greece. But as I’ve pointed out repeatedly, other countries facing debt crises today in Europe did not have a debt problem before the recession. This is why I cautioned against “moralizing.” If that’s your only explanation, that Greece was a profligrate spender, then you have no explanation for what happened in these other countries.

The fact that “austerity policies” are based on this moralizing narrative makes them nonsensical in addition to completely counterproductive.

It’s easy to say that countries can avoid debt crises by not having debts, but in a recession many countries will go into debt because of depressed revenues from high unemployment. So in these cases you can avoid turning your high debt into a debt crisis (i.e. out of control interest rates) by: (1) maintaining unified fiscal and monetary policy, and (2) managing recessions well to keep unemployment down with temporary fiscal stimulus. Canada and Australia managed to do both these things very well. The US did just okay. Europe is fucked.

@Qingu Now that is a great answer. One lots of Americans determined to shoot themselves in the foot need to learn—soon.

”The fact that “austerity policies” are based on this moralizing narrative makes them nonsensical in addition to completely counterproductive.”

”...you have turned this into a moralizing issue. You’re suggesting that the problem countries mismanaged their affairs while central economies did not. This applies to Greece”
Does the “This applies to Greece” part say that you are also “moralizing”? I left it out last post because I thought it didn’t need pointing out.

”The fact that “austerity policies” are based on this moralizing narrative makes them nonsensical in addition to completely counterproductive.”

”If that’s your only explanation, that Greece was a profligrate spender, then you have no explanation for what happened in these other countries.” I don’t have the explanation/s, that is why I am asking the questions.

I brought up the too low retirement age because as you pointed out ”Obviously that contributes to the debt in Greece”

By the way you’re right about the excess amount of vacation period and publicly funded university:)

@Qingu sorry the last statement you must be wondering where you wrote anything about that.

Okay, @flo. Do you understand that having lots of debt from vacations and university spending has jack shit to do with how to solve the problem in Greece, and absolutley nothing to do with Spain and Portugal? I’m not sure why you keep on bringing this issue up.

@Qingu
Me my third post from the last:
What do you think the countries that are not yet in trouble do to keep from being in the same situation?
You:“Having lots of debt from vacations and university spending has nothing to do with…..because…..” Please fill in the blank.

@flo, you didn’t even read my posts, did you? Be honest.

@Qingu . So, you’re saying to me what I could have say to you. Greece Spain Portugal Ireland, are already in trouble

In countries where they have
-University tuition fees, 85% or so paid by the taxpayer, crazy. How much money goes toward that every year?
-Long vacation periods how much can be saved by reducing it to 3 weeks let’s say?
-Retirement age so low, how much goes to that?
There must be other things that make for bloated , entitled is the word someone used above.

@flo I do not disagree on any line item except college tuition. Thomas Jefferson was the father of public education here in the USA at a time when is was a universally revolutionary idea. His private letters reveal that he really wanted to establish a nationwide network of state universities that would be financed by the public and available to any qualified student. The conservative landed gentry of his day were vehemently opposed to this. They wanted to ensure that only those who were already wealthy would be able to give their children a university education. You have to wonder how many George Washington Carvers we deliberately deprived of an education that would let them contribute to society just to protect those who already had it all.

Private Universities make perfect sense, but I believe Jefferson was absolutely right that public financing of state universities was in the public interest. Unfortunately, it was a struggle for him to even sell public education to the high school level; and the growing chorus of Greedy Oligarch Pigs among us would love to put an end to that. They want to privatize all education and issue vouchers, Of course, as soon as that’s in place, prices will balloon to the point only the Oligarchs will be able to afford education of any kind.

@ETpro I totally agree that public funding of education is a no-brainer.
Good public education is The Best investment a democratic government can make.

California had just about the best schools in the U.S. from elementary through post-grad universtities. Thanks to that excellent system California led a lot of technical industries (aerospace, computers…) for decades, rivalled only by the Boston/Cambridge area.

Thanks to Prop 13 and Mr. Reagan who started the hammering on the university budgets, the K-12 schools are struggling in most of the state (except in wealthy communites who manage to make sure their kids get good schools) and the universities are much more expensive (barrier for even the middle-class) and have closed departments that don’t get industrial sponsorships.

Now California does not have enough well-schooled students for its tech industries.

@flo, what part of “Spain and Portugal were not running deficits before the financial crisis” are you having trouble internalizing?

Seriously: Spain and Portugal did not have deficits before the recession hit. Why are you talking about bloated government spending and retirement programs?

Canada and Australia have extensive public tuition programs and other huge state entitlement programs. They did not engage in austerity programs. They spent heavily to renew employment. They are the success stories of the Great Recession.

This isn’t hard.

Tertiary education is not free in Australia. See here.

Low interest government funded college loans are the fairest method. Students perform better when they have a vested interest in their education.

@ETpro I haven’t indicated I’m in favor of ensuring
… that only those who were already wealthy would be able to give their children a university education”
I am not for completely private, esp. if we re talking about US tuition fees My last OP here might indicate that.

Students who believe education is the greatest investment, are in favor of contributing to it by working full time for a time or working part time. And they want their contribution and partly the tax payers contribution to fund those who are disadvantaged the most.

@dabbler ”Good public education is The Best investment a democratic government can make.” is the statement the students who want eveything to be as close to “free” as possible to everybody. That just says that education is wasted on them. Some of them have to have a meeting just to condemn violence. That also indicates that edcation is wasted on them.

Just plain publicly funded or close to it for everyone leads to abuse like some students being permanent students because it is just too cheap. The same thing with health, it is ridiculous how much waste there is. People can go to their doctor or emergency for every ridiculous thing. So, I’m not for one extreme or the other.

@rooeytoo You got it, both in your first post and in your last.
“Somewhere along the road everyone should just pay their own way.” as much as possible.

@flo From where do you get your information?
“statement the students who want eveything to be as close to “free” as possible to everybody.”
I made the statement, I’m not a student, you’re wrong. And I didn’t say free, but when university is too expensive for everyone but the upper class that is a real problem for democracy.

“That just says that education is wasted on them.” How, exactly, does it say that?

“Some of them have to have a meeting just to condemn violence.” What does that mean and what does that have to do with anything?

Most students are working hard to improve their lives and become more productive citizens. People with degrees tend to make more money and pay more taxes over their lifetimes. “Somewhere along the road everyone should just pay their own way.” Put your money where your typing hand is, help it happen.

Some people will abuse any system, free or not. A few deadbeats is a stupid reason to throw a whole successful paradigm out the window.

@dabbler I only addressed you because you are the one who made the statement not because I think yuou are a student or anything else.

By the way, the students who want eveything to be as close to “free” as possible to everybody”. Let me add a word _“claim to want…” Because by preferring not to pay enough tuition they want others to do the paying for them ” so it can’t be they want everything to be free for everyone.sorry

”Most students are working hard to improve their lives and become more productive citizens” That is the way it should be, and they are most likey not the ones who reach for the freebies. They are the ones who want to pay for their education as much as possible as long as it is not oppressive amount.

”People with degrees tend to make more money and pay more taxes over their lifetimes.”
tend is the key word. People who never went to university, plumbers for eg. make more more money and pay more taxes over their life times too, so that is neither here nor there.

”Whether you end up making more money or not everyone should make their own way, as much as possible.” that is not arguable. Unless we should be for mooching off as much as possible.

“And I didn’t say free, but when university is too expensive for everyone but the upper class that is a real problem for democracy.” Do you mean what you got from my post before the last, (“I am not for completely private, esp. if we re talking about U.S tuition fees“_is that I want expensive education? Interesting.

“A few deadbeats is a stupid reason to throw a whole successful paradigm out the window.”
If it is successful, (on the surface it may look successful) it would even be way more successful without the unescessary waste.

Also, I only gave 2 of the examples, but it doesn’t mean it is only “a few deadbeats” as you put it, who abuse it. Most of us waste things without thinking about it just because it seems free, no different from using clean water to wash the driveway.

People who make more money don’t necessarily pay more tax, much to Warren Buffet’s chagrin.

@flo Kids are graduating from college today with tens and sometimes even hundreds of thousands of dollars in debt and having to move back in with mom and dad because they can’t get any work that pays a living wage. Meanwhile the wealthiest Americans have seen their income go up over 300%. This is what 30 years of piss-down economics has gotten us. You want to stay that course. Can’t you see where it leads?

@flo
”People with degrees tend to make more money and pay more taxes over their lifetimes.” What I mean is that they will make more money than they would have otherwise. That is provable. People with degrees make on average 1.25 million $ more over their lifetimes than people with similar backgrounds and IQs who did not get degrees. They are more productive and they pay more taxes than they would have otherwise.
A plumber will too, which is a good reason for public funding for trades schools, thanks for pointing that out. That is also a great public investment.

“It would even be way more successful without the unescessary waste.” Sure what wouldn’t. But it’s clear public education would be way less successful if you shut it down. Inefficiencies happen in any system, I challenge you to point to one without them, you can’t. Do you have any particular recommendations to improve the efficiency of public education that have some basis in fact? (Hint: cutting teachers’ salaries and benefits does Not work.)

“People who make more money don’t necessarily pay more tax, much to Warren Buffet’s chagrin.” People in the middle class do, and that the overwhelming majority of folks with college degrees.

“They are the ones who want to pay for their education as much as possible as long as it is not oppressive amount.” Show me one person who wants to pay as much as possible for their education. People want to pay as little as possible for college education because, except for trust fund beneficiaries, that is a time in one’s life when one has little money. That does not make them moochers.
“and they are most likey not the ones who reach for the freebies.” Do you have any facts about your moochers who are reaching for freebies or is that just anecdotal conjecture ?
What portion of students are your freebie moochers? Even when it was less expensive college is way more trouble than it’s worth if you don’t want to be there.

Seriously, why has a college education gotten so expensive?

Tuition fees are oppressive a lot of times, in the U.S anyway. Some say “artificially infalated” tuition fees.
Here is a looooong article. I have no idea if it provides any recommendations.

@dabbler
People who make more money don’t necessarily pay more tax, meaning the wealthiest et al. Edit to add: The university educated wealthiest are among the ones who don’t pay enough tax.

I’m not done yet…

Also

@flo Right, that’s why I specifically noted the middle-class college graduates. Your wealthiest are the exception that proves the rule. I’d glad you agree with me.

@dabbler ”People with degrees make on average 1.25 million $ more over their lifetimes than people with similar backgrounds and IQs who did not get degrees. They are more productive and they pay more taxes than they would have otherwise.” Right, and that is why they can easily pay back the cost of their education during their lifetime. If you were focused on the topic, you would have seen that.

I can go on but I would just be wasting time showing that you’re not focused on the topic.

@flo Who’s not focusing ?!? That was my original point.
”Good public education is The Best investment a democratic government can make.”
I’m not sure what you’re trying to prove but you have repeated claimed I’m wrong then proven my points.

@dabbler You are not responding to the paragraph before the last. What do you think that means?