The meltdown in Greece should be a wake-up call for those who wish to turn America into a high-spending, high-tax welfare state. The fact is, the global boom masked what was in fact an unsustainable situation, not only in Greece but in countries like Italy and Spain. Not only are governments spending far more than they are collecting in taxes (as we are in the U.S.), but wages have far outstripped worker productivity because of undisciplined governments and powerful unions. Entire countries have become profligate, unproductive, and uncompetitive. Unfortunately, the road ahead in these countries is going to be extremely difficult.
The question Americans should be asking is, Why do President Obama and the Democrats in Congress want to take America down this path? While our situation in America is not currently comparable to what is happening in these countries, those running Washington would take us down the same road of crushing tax rates, profligate spending and unsustainable government programs. The result, as we are now witnessing in Greece, is economic ruin and social unrest. What’s happening in Greece is a warning sign for us in America. Look how quickly things change when investors no longer have confidence in the ability of a government to pay its debts. Just a few months ago, Greece borrowed money at rates comparable to Germany or the United States.
Today, investors demand 19 percent interest for a two-year government note. We’re witnessing the devastation that that kind of sharp increase in borrowing costs inflicts on an economy. Moody’s suggested recently that if our government continues on its current path, U.S. debt would probably be downgraded within the next few years. The cost of addressing our runaway spending will be much higher in the future if we fail to tackle it head-on today.