Greece needs government spending reform
Greece's problem is a government that spends more than it has, reflects The Seattle Times editorial board. And that is a problem not exclusive to the Greeks.
THE crisis of public finance in Greece feels familiar. The Greek state ran deficits for years, under governments of the left and the right. With the recession, the deficit ballooned to 13.6 percent of Greece's economic output.
In fiscal 2009 the U.S. deficit was 9.9 percent of output. America's deficit was not at the nosebleed level of Greece, but it was higher than in 65 years and almost three-quarters as high as Greece's. The Greek crisis is a warning that there are limits.
Greece's debt is more than one year's entire national output, which ours is not yet. Greece has the further problem that it owes its debt in euros, a currency its central bank cannot print more of. The Greek government had to go hat in hand to France and Germany, reminding them of the billions in Greek bonds owned by French and German banks.
Greece is being bailed out. But notice the price exacted from the people. Public workers in Greece, who get paid for 14 months a year, lose their extra month's pay at Christmas, and again at Easter, and are back to a celestial 12. Pensioners also lose the 13th and 14th months. The retirement age for women advances five years, to 65, the same as men.
All this is being done by a socialist government. It didn't have much of a choice.
The Greek government will also be clamping down on tax evasion by the wealthy. It will raise tax rates on fuel, alcohol and tobacco. It will raise the value-added tax, which is a kind of sales tax on various stages of production, to 23 percent from 21 percent.
Greeks have responded with a general strike. The difficulty with general strikes, as Seattle learned with its own general strike 91 years ago, is gaining anything by doing them.
Greece's problem is a government that spends more than it has. It cannot be fixed by quitting work and torching a bank. It can be fixed only by adjusting spending to the money available.
And that is a problem not only for the Greeks.