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Following the elections in Greece and France on Sunday, many are speculating on the future of Greece in the European Union. Some suggest that Greece may try to renegotiate the recently passed measures designed to curb spending and bring their national debt under control in favor of short-term stimulus and spending programs. If this is the case then Greece may have come full circle in this fiscal crisis.
Starting with spending that outpaced revenue to create massive deficits and add to their national debt, Greece guaranteed that curbing spending would be a difficult road. It was not until late in 2011 that Greece and the rest of the world realized what was at stake when a national debt could compromise the borrowing ability of a country. Until this point there was very little discussion that Greece, or the United States, would not be able to continue to borrow while pushing debt further and further into the future. Not anymore.
With their debt at 160 percent of their economy, Greece was close to a default of its debt, putting the country’s financial system and the euro in jeopardy. Thus, the international community stepped in to provide a series of bailouts that were meant to relieve Greece’s financial strains, but at a cost. In order to meet the demands of the bailouts, Greece was required to restructure its debt, make significant tax increases and cut public salaries, jobs, and pensions, and put the country on the path to reduce its national debt to a sustainable level.
Unfortunately, short term promises or “pro-growth” spending sound better than cutting spending to an electorate. The main difference between Greece’s curb of spending and the one taking place here in the US, that most seem to miss, is that Greece’s cuts were forced by external politicians and bureaucrats that had nothing to do with the populace’s desire to maintain a stable financial system. They were a condition for the country to receive the needed funds to avoid a default on their debt, and have been considered a burden by Greeks since they were passed. Here at home, the majority of Americans want Congress to cut spending.
The sad part is, it was not the spending cuts that pushed Greece into a recession with 21.8 percent unemployment. It was the reckless and careless spending by its leaders that pushed the country to default, prompting a correction by Germany and the EU to keep the country from defaulting, a fate much worse than curbed spending and reduced entitlements.
But, if the Greek people would like to take a look at their future with short term “pro-growth” spending, they need look no further than right here in the United States. Here in the U.S. we have been using “pro-growth” spending in the form of bailouts and short-term patches. While we have yet to default, all we have to show for that spending is a slow and anemic recovery that has not come close to expectations and is pushing our country into trillion dollar deficits each year. Instead of us learning a lesson from Greece, Greece could learn a less from us.