Optimistic that nearly a trillion dollars of bailout funds could help stabilize the economic and civil unrest engulfing Greece, the markets rallied from last week’s bizarre performance to post the biggest one-year gains in more than a year. Hopefully this good news can help silence the chattering classes who are attributing all economic ills to the troubled Mediterranean nation, and end this media-driven frenzy.
So the European Union has just written a 145 billion dollar check to bailout the bankrupt nation of Greece, what can we take away from it? How can the United States learn from one government’s total financial failure? Lesson number one: we are not Greece. Greece consists of only 2% of the entire European Union economy. We have single states here in the US with bigger GDP numbers than Greece. Take some of those states—-the ones with high deficits (New York, Illinois, New Jersey and California, for instance) —and compare their debt to that owed in vulnerable EU countries like Greece as a percentage of the GDP. Here’s the striking contrast: debt to GDP ratios in high deficit states were below 15% during 2009-2009, while this ratio was well above 60% for vulnerable EU countries, including Greece. Punishing interest rates as a condition of EU membership guidelines further accelerated Greece’s financial woes to the point of default. We don’t have to worry about that here.
If we’re going learn anything from what Greece has taught us, it must be to limit the scope and power of our federal government. Greece got into this mess because it was a toxic environment for any free market enterprise. An international study measuring the overall ease of doing business found Greece 109th out of 183 countries in the world, ranking worse than such bastions of economic freedom like Egypt, Zambia, and Rwanda. It’s an economy dominated by corrupt bureaucrats and powerful public unions; high taxes and onerous regulation. In essence, it’s the model of the welfare state. For the sake of our future sovereignty, we must retire those politicians that are leading us down the same path of socialism and disorder.
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