The Greek Crisis

Those of you not following the world news closely may have missed the fact that Greece is in a severe financial crisis - its government debt has simply gotten out of hand. Many European countries have this problem and will eventually face similar crises, but for Greece the crisis has arrived. Niall Ferguson has written a good article in today's Financial Times entitled A Greek crisis is coming to America. His point is obvious - the U.S. public debt is also growing at an unsustainable rate, and we too will face a Greek crisis sometime in the future - perhaps sooner than Washington politicians think.

Of all the pressing issues that face the nation today, I think none ranks higher than our public debt problem. The federal debt is probably the worst problem, especially with the future obligations imposed by Medicare, Medicaid and Social Security. But state finances are also in deep trouble. And this isn't just a short-term problem incurred by the current recession. It has been a growing problem for decades, and if the current Democratic administration gets its way with their proposed budget, it will rapidly get worse.

Realistically, we as a nation not only cannot afford more new and expensive government programs, however persuasive the arguments for them. We cannot even afford all the government programs we currently have. Either we need to raise taxes substantially (30-50% or more above current rates) to pay for all these programs and our two current wars, or we need to cut total government spending by at least 50%. Neither move will be popular, but there is no free lunch in the real world, whatever Congress thinks.

In the end, the Greeks, a small nation, may get bailed out by Germany, a far larger nation. If America hits such a crisis, who is big enough to bail us out? Nobody! That means we default on our debts, and if you think this recession was bad ...........