Is Greece the future of America?

It may be possible to look into America’s future. How? Watch what’s going on in Greece. According to the Washington Post, “Greece needs to raise about €23 billion [more than $31 billion] in April and May to pay debts coming due. Greek officials say that either is impossible, or would require punitive interest rates — making it harder to bring the budget under control — unless Europe helps out.†So the Greek government awaits a bailout from Germany and France, but first it has to impress them that it is serious about fiscal austerity.

The Greek welfare state’s annual deficit is about 13 percent of its GDP and its accumulated debt is 113 percent of GDP. Meanwhile, the U.S. government’s overall debt is now on track to reach 90 percent of GDP by 2020, more than $20 trillion. Just last week the Congressional Budget Office said that over the next decade, the annual budget deficit will be $1.2 trillion more than the Obama administration has guessed. The 10-year figure is now projected to be $9.76 trillion. The annual deficit is about 10 percent of GDP.

Government spending is rising — and the new entitlement called health-care “reform†hasn’t passed yet. That’ll be good for a couple of trillion over the next decade.

The economic consequences of all that are likely to be dire. As the government tries to borrow more money, both to finance its programs and to pay the old debt that’s coming due, it will have to promise a better return to nervous lenders, such as China. But raising the interest rate will push other borrowers’ rates up, which in turn will put a damper on economic activity.

u      u      u

Unemployment will grow and revenues will shrink, but entitlement programs, such as Medicare and Social Security, will keep growing. They already face tens of trillions of dollars in unfunded liabilities and are heading toward bankruptcy. Military spending will also increase, along with most other government spending.

What will the politicians do when they find interest payments swallowing the budget, leaving them less and less money to shower on political supporters? They might resort to higher taxes, which would further dampen economic activity.

They might get the Federal Reserve to monetize the debt through inflation; but that would wreak economic havoc. Politicians aren’t likely to cut spending because it would jeopardize their careers. At that point, the government might default on its debts, a step that has much to recommend it.

Thus, the welfare state is a fiscal failure.

The welfare state has long been presented as the viable “third way,†a happy medium between laissez faire — full separation of state and economy — and state socialism — government control of the economy. Advocates of individual liberty have emphasized that the welfare state violates freedom because government takes wealth from those who produce it and transfers it to favored groups.

Defenders have responded that the welfare state embodies compassion: people with means give to those less fortunate. But forced transfers through government are not true compassion. A virtue like compassion requires free choice, but government gives you no choice. So the compassion of the welfare state is counterfeit. It’s more about distributing goodies at others’ expense to win votes for politicians.

Historically compassion had little to do with government programs for the poor and social insurance for the working and middle classes. Beginning as far back as Queen Elizabeth I poor laws were intended to control people who were potential sources of social strife; and social insurance beginning in Bismarck’s German welfare state was calculated to make working people dependent on the government.

In both cases the free society was subdued for the sake of those in power.

Now it is clearer than ever that the welfare state is not only morally flawed, it is also fiscally unsustainable. Politicians will always have an incentive to spend, while hiding the costs or pushing them onto future generations through debt. But reality doesn’t go away. It comes back to bite in unexpected ways.

We’re seeing it in Greece today. Tomorrow it will be other European welfare states. Then, if nothing changes, it will be America’s turn.

Sheldon Richman is senior fellow at The Future of Freedom Foundation (fff.org).

Latest News

South Kent School’s unofficial March reunion

Elmarko Jackson was named a 2023 McDonald’s All American in his senior year at South Kent School. He helped lead the Cardinals to a New England Prep School Athletic Conference (NEPSAC) AAA title victory and was recruited to play at the University of Kansas. This March he will play point guard for the Jayhawks when they enter the tournament as a No. 4 seed against (13) Samford University.

Riley Klein

SOUTH KENT — March Madness will feature seven former South Kent Cardinals who now play on Division 1 NCAA teams.

The top-tier high school basketball program will be well represented with graduates from each of the past three years heading to “The Big Dance.”

Keep ReadingShow less
Hotchkiss grads dancing with Yale

Nick Townsend helped Yale win the Ivy League.

Screenshot from ESPN+ Broadcast

LAKEVILLE — Yale University advanced to the NCAA men’s basketball tournament after a buzzer-beater win over Brown University in the Ivy League championship game Sunday, March 17.

On Yale’s roster this year are two graduates of The Hotchkiss School: Nick Townsend, class of ‘22, and Jack Molloy, class of ‘21. Townsend wears No. 42 and Molloy wears No. 33.

Keep ReadingShow less
Handbells of St. Andrew’s to ring out Easter morning

Anne Everett and Bonnie Rosborough wait their turn to sound notes as bell ringers practicing to take part in the Easter morning service at St. Andrew’s Church.

Kathryn Boughton

KENT—There will be a joyful noise in St. Andrew’s Church Easter morning when a set of handbells donated to the church some 40 years ago are used for the first time by a choir currently rehearsing with music director Susan Guse.

Guse said that the church got the valuable three-octave set when Harlem Valley Psychiatric Center closed in the late 1980s and the bells were donated to the church. “The center used the bells for music therapy for younger patients. Our priest then was chaplain there and when the center closed, he brought the bells here,” she explained.

Keep ReadingShow less
Picasso’s American debut was a financial flop
Picasso’s American debut was a financial flop
Penguin Random House

‘Picasso’s War” by Foreign Affairs senior editor Hugh Eakin, who has written about the art world for publications like The New York Review of Books, Vanity Fair, The New Yorker and The New York Times, is not about Pablo Picasso’s time in Nazi-occupied Paris and being harassed by the Gestapo, nor about his 1937 oil painting “Guernica,” in response to the aerial bombing of civilians in the Basque town during the Spanish Civil War.

Instead, the Penguin Random House book’s subtitle makes a clearer statement of intent: “How Modern Art Came To America.” This war was not between military forces but a cultural war combating America’s distaste for the emerging modernism that had flourished in Europe in the early decades of the 20th century.

Keep ReadingShow less