What If The US Were Like The EU?

The corporate media propagandists have portrayed Greece as a debtor nation unable to get its fiscal house in order due to the laziness and greed of its people. They fail to report that Greece is only in its current situation largely as the result of the US-created mortgage crisis and the greed of huge international banks.

It’s more convenient to blame the Greek crisis on pensions and a bloated government.

But the fact is, prior to the mortgage crisis, the nation’s debt was roughly 8.3 percent of GDP. Then Goldman-Sachs…yes that Goldman-Sachs…”helped” Greece hide its debt through a risky, off-the-books derivative. When the world markets crashed in 2008, Greece’s debt-to-GDP ratio exploded to 100 percent of GDP. And that number continues to climb.

Why?

As many of the world’s most respected economists will tell you, increased debt is the inevitable result of extreme austerity. As Greece increases lay-offs of government employees, the unemployed workers have less to spend. As a result, small businesses suffer, which results in more lay-offs and lower tax revenues. The result is a downward spiral from which it is difficult to escape.

For example, Greece’s unemployment now stands at approximately 28 percent or roughly the same percentage as the US during the Great Depression! Worse, youth unemployment is nearly 50 percent. And 40 percent of Greece’s children now live in poverty. But pay no attention to those numbers…the international banks are profiting and, as long as Greece remains in the EU, most of the world’s stock markets are soaring.

The problem is that the EU has no form of wealth redistribution like that of the US. Imagine if we treated our poorest states in the same manner the EU is treating Greece. North Dakota now has a debt ratio of -89 percent. In other words, in 2014, North Dakota received $7.51 from the federal government for every $1.00 it contributed in federal income taxes. Many other states also routinely run in the red. Ironically, most of those are also politically red. Alabama, Alaska, Arizona, Indiana, Kentucky, Mississippi, Montana, South Carolina, West Virginia and Wisconsin all receive more from the federal government than they contribute. Should we then force austerity on them and force them to payback the difference with interest?

That’s what the EU is doing to Greece.

And what of California, Colorado, Delaware, Illinois, Massachusetts, Minnesota, Nebraska, New York, New Jersey, Rhode Island, et al, who contribute far more in taxes than they receive? California contributes $236.5 billion more than it receives. That’s enough to single-handedly cover the deficits of Alabama, Alaska, Arizona, Indiana, Kentucky, Mississippi, Montana, North Dakota, Tennessee and West Virginia combined. What if we had the EU system and California acted like Germany? Many of those states would now be facing excruciating austerity, skyrocketing unemployment and debilitating poverty.

Teapublicans are fond of saying that, unless we cut spending and cut taxes, the US will become another Greece. That’s simply not true. Economically, our nation has little in common with Greece. The only way our economy could begin to resemble Greece’s is if we resort to self-imposed austerity as the Teapublicans recommend.

The Austerity Fraud.

For more than 30 years, conservatives have pushed for smaller government. Their battle cry is to “Starve the Beast,” the beast being our federal government. They have demanded more and more tax cuts, especially for the wealthy, and they finally got them under President George W. Bush. Yet, when the tax cuts led to large deficits, Richard “The Dick” Cheney and other conservatives famously stated that “deficits don’t matter.”

Of course, when President Obama took office, their attitude suddenly changed.

Despite having driven our economy off a cliff, conservatives demanded that the new administration cut spending in order to bring the deficit and debt under control. To prove their point that these were the biggest challenges facing our nation (bigger than rampant unemployment, the housing crisis, losses by pension funds and the depressed stock markets), conservatives cited a Harvard University study by Reinhart and Rogoff which stated that economies suffer whenever a nation’s debt surpasses 90 percent of GDP.

This study was cited over and over by conservative politicians and conservative media.

Unfortunately for conservatives, it was recently debunked by a graduate student who found numerous statistical and computational inaccuracies which completely altered the study’s conclusions. Turns out, there were numerous exceptions to the Reinhart-Rogoff rule.

As for the effects of austerity measures, one need only look to Europe to see what happens when concern over deficits and debt trump job creation. Following strict austerity measures in both Greece and Spain, unemployment among young people now exceeds 60 and 50 percent, respectively. Both countries are facing major upheaval as the unemployed have taken to the streets to riot. In England, France and Italy, the effects of austerity have been less dramatic. Nevertheless, austerity has pushed their economies back into recession.

Had President Obama followed the advice of conservatives, we, too, could be struggling through another deep recession. Despite conservative claims to the contrary, the economic stimulus worked. For the past 3 years, we have not only recovered the jobs lost as the result of the Bush recession. We have added 1.5 additional jobs, and we would have added many more if not for layoffs in the public sector forced by Republican-controlled state houses.

We might well be back on the road to full recovery had the Teapublicans not taken  control of the House in 2011.

Virtually every economist has stated that the budget restraints imposed by our Teapublican Congress have hampered our economic recovery. Indeed, a recent article in The New York Times states that deficit reduction has already cost our economy at least 2 percent growth and 1 percent employment. And the budget cuts forced by sequestration have yet to fully take hold!

But don’t look for conservatives to give up on austerity any time soon. Despite our fragile recovery, they’re still demanding severe cuts to federal programs. They have proposed cuts to “entitlements” such as Social Security, Medicare and Medicaid. They want to eliminate or severely reduce unemployment insurance, SNAP (food stamps), Pell grants, Fannie Mae and Freddie Mac. They even want to cut or eliminate the United States Postal Service!

During the last election, Teapublican candidates said they would target entire departments for elimination, including the Environmental Protection Agency, the Education Department, the Commerce Department and the Bureau of Alcohol Tobacco Firearms and Explosives. Some want to get rid of the Federal Reserve and return to the gold standard.

Given a limited (and false) understanding of history and our Constitution, today’s conservatives believe that the only constitutionally-allowed functions of the federal government are defense, homeland security, border security and highway construction. For everything else, you’re on your own.

It’s easy to see what these policies would do to our nation. Just look at Somalia.