It’s not the meltdown, but the reaction to the meltdown.
We have all watched Greece closely to get a sort of foretaste of what to expect when a high-tax/big-entitlement system of redistribution finally implodes. True, all the symptoms of a spread-the-wealth society and its inevitably massive deficits are there: high taxes choking growth; endemic tax-cheating; an off-the-books black market; barter in lieu of a taxable paper trail; unsustainable public pensions; bloated government; and demographic crises. An aging and shrinking citizenry connives to avoid taxes or garner state subsidies, or both.
But what will be more chilling is the reaction to the imposed austerity plan. We are already seeing a collective tantrum over the idea that the Greeks should borrow massively to keep within an 8 percent deficit instead of borrowing unsustainably massively to preserve the normal 12 percent rate. One hour we hear shouts that the Germans owe more reparations for WWII, the next hour that cutting two bonus monthly pay periods would be akin to national suicide, the next that an overtaxed, overregulated private sector must be taxed more heavily and regulated more strictly in order to provide the necessary funds for an ever-expanding public work force.
Strikes and shut-downs will follow, as each group tries to demonstrate through the relative magnitude of its ensuing misery that it is more important than any other group and cannot be cut back. What will not follow, I suspect, is discussion of what life would otherwise be like, without EU subsidies, for a small country without many national resources, wedded to a statist and often controlled economy, and with an anemic private sector.
This reaction to the meltdown offers the real lesson for America. If we were to return to levels of federal spending circa 2002, adopt simple measures like adding a year or two to pension eligibility, or insist than any new entitlement be paid for as it is enacted, we would either have near instantaneous fiscal sobriety — or the sort of massive social disruption, blame-gaming, and “they did it” accusations we now see in Greece. As we head toward that Greek moment, it will be interesting to see how Americans react.