I read quite a bit of European analysis of the economic situation there while I was following the lead-up and immediate aftermath of the French and Greek elections this past weekend. What really struck me about it was how everything was divided into a growth camp and an austerity camp. I don’t know how conservatives there let this happen, because I’ve never met anyone (other than a cancer patient) who would think austerity sounds better than growth. The two words are not on an equal footing. In the United States we talk, instead, about stimulus vs. debt-reduction. You’d think people would favor stimuli, but maybe we’d do better by “arousing” the economy. Someone ask Frank Luntz.
My point here is that in Europe there really isn’t any dispute that paying your bills comes at the cost of immediate economic growth. But here in the States, the Republicans insist that austerity creates growth. They deny that these two things stand in any opposition to each other. Or, as David Brooks puts it:
“Unlike the cyclicalists, we structuralists do not believe that the level of government spending is the main factor in determining how fast an economy grows.”
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“Running up huge deficits without fixing the underlying structure will not restore growth.”
I don’t think German Chancellor Angela Merkel has the balls to make such a shameless argument. Her position is that Germans shouldn’t have to take their money and hand it to Spaniards and Greeks just because they ran their economies into the ground. In our context, we might say that the people of Connecticut and New Jersey, who pay the most in taxes, shouldn’t have to give their money to the people of Alabama and Mississippi who pay the least. But, that’s not how our politics work, because we mostly take the “United” part of United States seriously. Instead, we focus on the injustice of taking money from rich people and using it to pay for roads, medical care, education, and the bills we’ve already rung up in the sands of Mesopotamia and Jalalabad.
Another way of looking at it is that Angela Merkel is telling the struggling countries of Europe to pay their goddamned bills to the people who loaned them the money. No one is telling anyone to do that here. The GOP would rather we default on our debts than that people pay our bills. Instead, they want to cut taxes on rich people even more while imposing austerity on everyone else.
Never mind that it doesn’t make sense to dry up the funds in the treasury when you’re trying to pay your bills. Never mind that austerity kills growth.
Not for nothing do the French call us les grands enfants.
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"But I will not let myself be reduced to silence."It’s not just that Germans don’t want to “hand their tax dollars” to Greece, it’s that Greece is very bad at collecting their own taxes.. both in the case of general tax collection, and collecting from their people who are evading taxation. I’ve not seen this fact pointed out much in Bloggo world.
WTF??
http://www.nytimes.com/2011/11/18/business/global/european-commission-urges-greece-to-tighten-tax-co
llection.html
http://www.nytimes.com/2012/02/03/world/europe/the-powerful-resist-change-to-greek-tax-system.html?p
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yeah, they might want to get on that.
This is true, but it’s actually a a naive way of looking at the problem. A low tax collection rate is the equivalent of low tax rate, just arrived at through the implementation structure of government rather than the lawmaking structure where nominal tax rates are legislated. If a bureaucracy is not collecting taxes at the same rate set by legislation, that is just how their particular democracy works — through push-back against implementing authorities rather than in the legislature, probably due to the EU’s tight restrictions on what legislative authorities are allowed to write into fiscal policy for the country.
Therefore, it is no easier to raise taxes (i.e. increase austerity) by better collection than it is to implement any other forms of austerity in a country that is as economically under-performing as Greece is today. Either way it’s austerity on someone who has already demonstrated the power to push back.
Furthermore, the Germans aren’t actually giving anything to Greece at all. They are rather bailing out Greece’s bankers, who are mostly German bankers. If Greece were to simply default, it is the German bankers who would suffer most, not Greeks. It is only the significant Greek constituency in favor of membership in the EU community that is preventing Greek authorities from doing what any self-respecting Latin American country regularly does with great success (such as Argentina recently) — just stop paying its bankers and start over with a clean balance sheet next year.
Naive?
I get it, but it’s called keeping the lights on. Infrastructure; roads, bridges, water and sewage treatment plants, etc., and services like police and fire fighers- how are they paid for?
Low taxation, whether via the law or by people breaking the law and not paying taxes- the impact is the same- infrastructure and services will fail and the people will suffer.
This is the same sort of idiocy we see with the teabaggers; they moan and whine about “big, expensive government” yet they don’t hesitate to pick up the phone to call their local fire department when their house is on fire. and the fire department better respond in 60 seconds or less!
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Right, however, it’s the German bankers and others insisting on austerity, a significant cut in entitlements for the Greek people- which is why we see them rioting.
I have to think the Greek people are thinking “what’s in it for us if we stay in the EU?” If as you say, they can punish German bankers and shorten the length of their economic recovery by defaulting on their debt and pulling out of the EU, what’s to stop them from doing it?
That’s the big mystery. What’s stopping them from doing what countries normally do in that circumstance? (Or like American counties and cities of similar size to Greece do on a somewhat regular basis?) It appears to be that there the idea of belonging to the eurozone itself — a value-based proposition more than an interest-based one, still carries enough weight among particularly left-oriented voters and officials to prevent stressing the EU membership, and German bankers are taking advantage of that to hold them hostage to their own pro-EU values. There is no process for expelling a country from the EU or the euro for economic bad behavior, so there’s no institutional reason for this — it must be driven by Greece’s own internal politics.
“If a bureaucracy is not collecting taxes at the same rate set by legislation, that is just how their particular democracy works — through push-back against implementing authorities rather than in the legislature, probably due to the EU’s tight restrictions on what legislative authorities are allowed to write into fiscal policy for the country.”
Yes, that might be a sociopolitical description of “how their democracy works.” A check on that would be whether taxes were enforced better before 1981, when Greece joined the EEC.
Another thing I wonder is whether this non-enforcement and non-payment was evenly distributed. If it’s anything like the legal loopholes that exist in the USA, one would expect to find that the wealthy and corporations did a much better job of not paying than ordinary working folks did. And it’s not democratic, either, if the less wealthy have to cough up more to make up for the non-payment of the more wealthy.
But the obvious problem with that kind of non-enforcement is that it screws up the budgets. Not only must there be a shortfall, but it’s a shortfall that was not even accounted for in the budget. Basically you never take in the income that your books say you will. So it’s hardly surprising that a huge deficit developed.
Good point. I wouldn’t presume that non-payment of taxes is equally distributed, just like legislated tax policy isn’t equally distributed either. Perceived unfairness, right or wrong, that occurs in legislated policy often finds ways of being addressed during implementation of that policy in any number of ways, such as lack of enforcement for non-payment. In Greece, political stalemate preventing fiscal policy from being adopted might just be solved, traditionally, by people agreeing on the broad outlines of the law but comfortable in their ability to negotiate alternative outcomes on an individual basis, and it probably allows the pro-business right in that country to agree to fund more social programs than they otherwise would have.
If taxes and pieces of paper or electronic currency units were really the energy that provides for government work to happen, this might be a real problem. But, of course they’re not — they are just proxy counters for real economic and human resources that do such work, much of which are unobservable. (The number of economic disagreements that are due to mistaking proxy measurements for things like income, GDP, money etc. and the real, unobservable things they are supposed to be estimating is very large.) Greece might have always just gotten along this way well enough, but the euro now requires it more strictly apply the proxies of taxes and deficits to real resources than it really needs to in that country to get work done, thus the conflict.