Greece is one of the poorest kids on the European bloc. It also is one of the most carelessly socialistic, which largely explains why it is so poor.

The birthplace of democracy, today it is a model of socialistic excess: deficit spending, confiscatory taxation, Marxist public-sector unions, government ownership, nationalized health-care, excessive federal intrusion into private lives. Greece's debt obligations exceed its gross domestic product (GDP) by a factor heading fast toward 2. In today's jargon, the place is a paradigmatic entitlement society.

A member of the European Union (EU), Greece is one of 16 countries to have dropped its own currency -- in its case, the drachma -- and embraced the euro. The consequence has been this: Unable to reduce its debt by inflating its own currency, Greece has had to call upon other EU countries to bail it out.

The EU was set up with no mechanism to do that. The plan just established pledges about $1 trillion from numerous countries (including, through the International Monetary Fund (IMF), the United States) to help euro countries such as Greece -- and, soon, Portugal, Ireland, Italy, and Spain? -- so debt-ridden they cannot pay their bills.

Ideally, the $1 trillion fund would impose fiscal discipline on sovereign wastrels, but in fact there may be no way to do that. Greece has tried it, sort of, and rioters have taken to the streets in Athens and Salonika. Perhaps the operative question is: What happens if the most socialistic European economies don't get their game together, and keep spending and entitling their citizenries -- and the $1 trillion back-up fund runs out?...

...WHICH brings us to this side of the Atlantic.

The federal government owns the currency and owns the only presses that turn out dollars. Even with that, it boasts an accumulated deficit of $13 trillion -- headed for, oh, $23 trillion by 2020. Over the years, legislation has been approved requiring the federal budget to be balanced, but no one pays any attention to such anachronistic thinking anymore.

The states and cities are different. Under their constitutions or charters, they must balance their budgets. In 2009, states collected $686 billion in tax revenues, down 11.4 percent from tax revenues collected in 2008. Yet, in the words of one news account, "their costs...are skyrocketing: Investment losses have forced many states to make added contributions to pension funds, while the recession and recovery have increased demand for social services such as food stamps and health care."

Further, according to another news account, "for fiscal 2011, 38 states project combined budget shortfalls of $89 billion...(and) 31 states expect budget gaps totaling $73.5 billion in 2012."

The most socialistic states (in the American vernacular the operative words are "liberal" or "progressive") -- California, New Jersey, Illinois, and New York -- are essentially bankrupt, and are thrashing mightily to figure out what to do. California alone has a state retirement plan with unfunded liabilities of half-a-trillion dollars. Federal unfunded mandates on states, such as Medicaid, force states to fund federal programs. Taxpayers resist paying more; public employees (too often unionized) resist accepting less. Ever more, incessantly told and now believing they are entitled, insist on every promised government service and handout.

And separately, cities from Detroit to Los Angeles to Harrisburg, Pennsylvania, are bankrupt or on their way.

As in Greece and Portugal and Spain.

DESPITE what Obama wants for them, Americans are not yet so socialized as most Europeans -- not so accepting of the socialism that describes the European continent. Yet not even the Germans are willing to pay higher taxes for the wastefulness of the EU's more welfaristic members such as Greece: Post-bailout elections in Germany took the upper house -- the Bundestag -- from the center-right coalition headed by Prime Minister Angela Merkel.

Here, in, for instance, California and Minnesota, Republican governors cannot get significant budget-balancing measures through their legislatures. And the times, they may be a-changin'. Think Jon Corzine (New Jersey), Martha Coakley (Massachusetts), Charlie Crist (Florida), Robert Bennett (Utah), and Arlen Specter (Pennsylvania). What's more, last weekend Maine's Republicans adopted a wholly new platform -- committing it to the principles espoused in the U.S. and Maine constitutions. Both documents, by the way, mention rights to such things as life and liberty. Neither mentions any entitlement to government cash.

In Greece and the American states, are we seeing at last an end to welfarist, socialistic, entitlement societies? Maybe. Or maybe we're getting 3-D glimpses of our own chaotic entitlement future. In Europe and here, the light on the freight train heading toward the living room now is clearly in view and growing bigger. Some, here in the states anyway, are doing what they can to scramble into the engine house and pull the brake. Yet the more predictive scene may play out on the barricades in the Athenian streets where representative democracy began.

 

Available at Amazon.com:

The Great Gamble

At War with the Weather: Managing Large-Scale Risks in a New Era of Catastrophes

 

 

(C) 2010 William Pfaff