The notion that American taxpayers are about to subsidize another Greek bailout (via the Keystone Cops at the IMF) is way beyond economically foolish. It is also morally offensive.
To turn Winston Churchill’s famous quote upside down: “Never have so many paid so much to subsidize such an undeserving few.”
Let’s start with a few facts:
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o Greece’s GDP is roughly equal to the GDP of Maryland.
o Greece’s population is roughly equal to the population of Ohio.
o Despite that small size, in both terms of population and economic output, Greece already has received a bailout of about $150 billion (actual amount fluctuates with the exchange rate).
o Don’t forget the indirect bailout resulting from purchases of Greek government bonds by the European Central Bank.
o Now Greece is angling for another bailout of about $150 billion.
Is there any possible justification for throwing good money after bad with another bailout. Well, if you’re a politician from Germany or France and your big banks (i.e., some of your major campaign contributors) foolishly bought lots of government bonds from Greece, the answer might be yes. After all, screwing taxpayers to benefit insiders is a longstanding tradition in Europe.
But from a taxpayer perspective, either in Europe or the United States, the answer is no. Or, to be more technical and scientific, the answer is “Hell no, are you friggin’ out of your mind?!?”
Consider these fun facts from a recent column by John Lott and then decide whether the corrupt politicians of Greece (and the special interest groups that receive handouts and subsidies from the Greek government) deserve to have their hands in the pockets of American taxpayers.
Despite Greece’s promises, government spending is up over last year’s already bloated levels, the deficit is bigger than ever, and it has utterly failed to meet the promised sell-off of some government assets. Not a single public bureaucrat has been laid off so far. …Greece can pay off €300 of the €347 billion debt by selling off shares the government owns in publicly traded companies and much of its real estate holdings. The government owns stock in casinos, hotels, resorts, railways, docks, as well as utilities providing electricity and water. But Greek unions fiercely oppose even partial privatizations. Rolling blackouts are promised this week to dissuade the government from selling of even 17 percent of its stake in the Public Power Corporation. …Greeks apparently believe that they have Europe and the world over a barrel, that they can make the rest of the world pay their bills by threatening to default. Greece’s default would be painful for everyone, but for Europe and the United States, indeed for the world, the alternative would be even worse. If politicians in Ireland, Portugal, Spain, Italy, and other countries think that their bills will be picked up by taxpayers in other countries, they won’t control their spending and they won’t sell off assets to pay off these debts. Countries such as Greece have to be convinced that they will bear a real cost if they don’t fix their financial houses while they still have the assets to cover their debts. …The real problem is the incentives we are giving to other countries. We have to make sure that “Kicking the can down the road” isn’t an option.
Just for good measure, here are a few more interesting factoids in a Wall Street Journal column by Holman Jenkins.
[Greece is] one of the most corrupt, crony-ridden, patronage-ridden, inefficient, silly economies in Christendom. …The state railroad maintains a payroll four times larger than its ticket sales. When a military officer dies, his pension continues for his unwed daughter as long as she remains unwed. Various workers are allowed to retire with a full state pension at age 45.
To be blunt, Greek politicians have miserably failed. Wait, that’s not right. You can’t say someone has failed when they haven’t even tried. Let’s be more accurate and say that Greek politicians have succeeded. They have scammed money from taxpayers in other nations to prop up a venal and corrupt system of patronage and spoils. Sure, they’ve made a few cosmetic changes and trimmed around the edges, but handouts from abroad have enabled them to perpetuate a bloated state. And now they’re using a perverse form of blackmail (aided and abetted by big banks) to seek even more money.
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Let’s now re-ask the earlier question: Should American taxpayer finance the corrupt big-government policies of Greece?
Or perhaps we should think like economists, so let’s rephrase the question: Should we misallocate capital so that funds are diverted from private investment to corrupt Greek politicians?
Or maybe we should think like parents who have to worry about spoiling a child and the signal that sends to the other kids, so let’s ask the question this way: Should we encourage bad behavior in Spain, Italy, Portugal, etc, by giving another bailout to Greece’s corrupt politicians?
Or should we think about this issue from the perspective of addiction counselors and rephrase the question: Should we reward self-destructive behavior by providing more money to corrupt political elites in Greece?
Or how about we think like moral human beings, and ask the real question: Should we take money from people who earned it and give it to people who think they are entitled to live at the expense of others?
Since we paraphrased Churchill earlier, let’s answer these questions by butchering Shakespeare: “A bailout from every angle would smell to high Heaven.”
I wrote back in February of 2010 that a Greek bailout would be a mistake and every development since that time has confirmed that initial commentary.
But that doesn’t matter. Politicians have a different way of looking at things. They look at a policy and wonder whether it increases their power and generates campaign contributions. And when you understand their motives, you begin to realize why they will answer yes to the previous set of questions.
[…] moral hazard? Do they blame the market for the sovereign-debt crisis, when the mess is the result of over-spending governments? Rate this: Share this:PrintEmailFacebookTwitterMoredeliciousDiggFarkLinkedInRedditStumbleUponLike […]
[…] So you won’t be surprised to learn that I’m opposed to bailouts. I’m against bailing out banks. I’m against bailing out car companies. I’m against bailing out governments. […]
Greeks are venal, disgusting, lazy, dirty and morally bankrupt animals. Sort of like all Europeans. We fought and died to save them from the Nazis and from the Commies while they sat back and relaxed throughout WW2 and the Cold War, then sucked up Marshall Aid. Well now the pigeons have come home to sleep. To hell with them all and their twisted Eastern Christianity.
It would be nice to see this article or a future article give a summarized total accounting of U.S. government lending to this country over the past couple of years.
Also, I would like to have this lending voted on by the U.S. Congress – like a treaty. This is too much money in an era when we are broke. And to give money to a people that do not appreciate it and are not ready for reform is a crazy, crazy thing to do.
[…] a recent post, I explained some of the reasons why Greece should not get another bailout. I cover some of the same points in this Bloomberg interview, but my favorite part is when I state […]
[…] Source: https://danieljmitchell.wordpress.com/2011/06/26/should-american-taxpayers-finance-another-big-fat-gr… […]
Greece needs to sell off their stocks, hotels, and casinos and pay their own debt. Who would take out a loan they can’t repay and then give the money as a handout to a neighbor so that the neighbor won’t have to sell his vacation home and sports car? That’s what Americans will be doing for Greece via the IMF. If we do it, we can expect Democrats to argue that we have at least as much obligation to bail out our own failing States.
“[Greece is] one of the most corrupt, crony-ridden, patronage-ridden, inefficient, silly economies in Christendom. ”
Only because California, New York, and Illinois are not part of Christendom any more.
Greece is just the California of Europe.
Rule 1 of lending: You don’t lend money to allow companies to meet payroll. The inability to meet payroll is the most obvious indicator of a failed business model. It points to gigantic flaws that cannot be papered-over by “doing more of the same”. Money “lent” to Greece will be like the money “lent” to GM – it will never be repaid as the “loan” does nothing to correct systemic flaws in the business model.
Rule 2 of lending: if you owe the bank $1 million then the bank owns you; if you owe the bank $1 billion then you own the bank. The banks can either walk away from what they’ve already lost or walk away from an even larger amount in the future. It’s almost as if there was a global conspiracy to loan people money who lacked the ability to repay the loan. Let’s bankrupt everybody and let George Soros sort it out?
Let Greece sink on its own dead weight. Historically it has done that before and seems comfortable with it. No nation or financcial institution should be allowed to loan to Greece again. Those child should be left on their own.
Then talk to Ireland and Portugal about repayment and see how seriously they take it.
Remember: Thomas Ball’s immolation, he gave his life for your children.
But wait, you haven’t considered whether people might WANT to stay and work an extra half-hour a day for two years to help all these poor bankers. We ARE a generous people, after all.
“When your neighbor’s house is on fire, it’s time to look to your own.”
The threats look different, of course, but I don’t think there’s been a time since World War II when that adage was more applicable to the United States.
[…] does default, it will do so “unexpectedly.”Cato’s Dan Mitchell points out that U.S. taxpayers are helping fund the Greek bailout through the International Monetary Fund, and offers these interesting facts:Greece’s GDP is roughly equal to the GDP of […]
“Greece can pay off €300 of the €347 billion debt by selling off shares the government owns in publicly traded companies and much of its real estate holdings.”
Well then, in an IDEAL world, the solution is obvious:
1. France and Germany buy €300 billion worth of assets from the Greek government, transferring the money directly to the French and German banks who own Greek debt;
2. France and Germany then proceed to sell off the assets, recouping the investment.
[…] MITCHELL: Should American Taxpayers Finance Another Big Fat Greek Bailout? “Never have so many paid so much to subsidize such an undeserving […]
Art, don’t forget,
Greeks invented Democracy, but also simultaneously invented Ostracism. America, through the Bill or Rights, was the first nation to adopt Democracy but reject ostracism and try to limit the round-robin democratic mechanism through witch Joe gets together with Jack to form a majority today so they can screw Jim, only to be screwed by Jim and Jack the next day, on and on into perpetuity…
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$150 billion for Greece (110bn euro) amounts to about $14,000 per Greek.
The average Greek would probably settle for:
– “Borrowing” the additional $14,000 from the Northern Europeans (Borrow? half of that Europeans should already expect to never see again),
– Supplement it with another $12,000 from his own meager, dis-incentivized, relaxed and despondent productivity, to a total mediocre $26,000 per capita GDP and
– Head for the beach.
Poorer but working less, under the sun, swimming at the sandy seashore.
Until Germans realize this dynamic and resist their politicians who, like all politicians, gain power money and fame from centralization redistribution and central planning, do not expect much to change in Europe.
But why should those productive of Germans put up a big fight? For decades, under the moral framework of Social-Democracy they have been forced to subsidize the standard of living for those who have chosen mediocrity within their own borders. Extending same treatment to mediocre Greeks is a simple rational extension of that concept and, indeed, a natural extension in a unifying Europe. Germans will sound increasingly dissonant, supporting the Welfare State within their own borders but refusing extension of same moral framework within a unified Europe. Wealth transfer is primarily what Germans signed up to when they created the European Union. It is time they come to terms with that fact.
So, chances are that, one way or another, those productive individuals left within Europe will be convinced to be weighed down with yet additional mandatory compassion.
Under the Welfare-State Social-Democracy incentives to produce, Eurozone economies as a whole are already perpetually growing along a lackluster sub-par 1-2% annual growth trendline — in a world that is growing 4-5% on average (so pathetic are future expectations in Europe that Germany, growing at 2% passes as a “Tiger” economy in the Eurozone). What will forcing those productive individuals left within Europe to support even more mediocrity do? Other than accelerate the fate of economic extinction Europe has been on for the past 2-3 decades?
Americans who under the production incentives of “hope and change” have now probably already descended to a new depressed 2% long-term growth trendline, are headed in the same direction. Three billion people in the developing world have woken up to even moderate economic freedom. They have no time and interest in waiting for the outcome of America’s irreversible experiment with yet another indolence promoting Social-Democratic Welfare-State.
Time to prepare your kids to grow up more equal – to the world average that is…
Democracy in action in the “cradle of democracy.”
As long as people insist on being shareholders in the Federal corporation, imported statutory persons, aliens in the state they reside in, i.e., United States citizens, they have given their consent to anything that is done in their name. They have nothing to say about it. U. S. citizens can shut up and pay their taxes.
Complete agreement.
The problem (not only in Europe) is that states do not intend to reduce their spending. Another solution is not yet. The solution is not raising taxes, the solution is only leaner state.