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Posts Tagged ‘Greece’

Way back in 2009, I narrated a video explaining that people worry too much about deficits and debt. Red ink isn’t desirable, to be sure, but I pointed out that the real problem is government spending.

And the bottom line is that most types of government spending are bad for an economy, regardless of whether they are financed by taxes or borrowing.

It is possible, of course, for a nation to have a debt crisis. But keep in mind that this simply means a government has accumulated so much debt that investors no longer trust that they will receive payments on government bonds.

That’s not a good outcome, but replacing debt-financed spending with tax-financed spending is like jumping out of the frying pan and into the fire. Or the fire into the frying pan, if you prefer. In either case, politicians are ignoring the real problem.

Greece is a cautionary example. Thanks to a period of overspending, Greek politicians drove the country into a debt crisis. But this dark cloud had a silver lining. The good news (at least relatively speaking) is that the government no longer could borrow from the private sector to finance more spending.

But the bad news is that Greek politicians subsequently hammered the economy with huge tax increases in hopes of propping up the country’s bloated welfare state. And the “troika” made a bad situation worse with bailout funds (mostly to protect big banks that unwisely lent money to Greek politicians, but that’s a separate story).

In other words, Greece got in trouble because of too much government spending and it remains in trouble because of too much government spending. As is the case for many other European nations.

And I fear the United States is slowly but surely heading in that direction. I elaborate about the problem of government spending – and the concomitant symptom of red ink – in this interview with the Mises Institute.

For all intents and purposes, I’m trying to convince people that deficits and debt are bad, but they’re bad mostly because they are a sign that government is too big. Sort of like a brain tumor being the real problem and headaches being a warning sign.

I feel like Goldilocks on this issue. Except instead of porridge that is too hot or too cold, I deal with people on both sides who think red ink is either wonderful or terrible.

For an example of the former group, here’s some of what Stephanie Kelton wrote for the New York Times last October.

…bigger deficits wouldn’t wreck the nation’s finances. …Lawmakers are obsessed with avoiding an increase in the deficit. …It’s also holding us back. Politicians of both parties should stop using the deficit as a guide to public policy. Instead, they should be advancing legislation aimed at raising living standards and delivering…long-term prosperity.

Hard to disagree with the above excerpt.

But here’s the part I don’t like. She’s a believer in the perpetual motion machine of Keynesian economics. She thinks deficits are actually good for the economy and she wants to use debt to finance an ever-larger burden of government spending.

Government spending adds new money to the economy, and taxes take some of that money out again. …we should think of the government’s spending as self-financing since it pays its bills by sending new money into the economy. …the deficit itself could be deployed as a potent weapon in the fights against inequality, poverty and economic stagnation.

Ugh.

Now let’s check out the view of the so-called deficit hawks who think red ink is an abomination.

Here are some passages from a Hill report on the battle over last year’s tax plan.

A handful of GOP deficit hawks are worried that their party’s tax plan could add trillions to the deficit, deepening a debt crisis for future generations. …The tax plan could cost the government $1.5 trillion in revenue over the next decade… Sen. Bob Corker (R-Tenn.), who recently announced his retirement at the end of this Congress, has warned he’ll oppose the tax plan if it adds to the deficit. …In a separate interview, he told The New York Times that the debt is “the greatest threat to our nation,” more dangerous than the Islamic State in Iraq and Syria, or North Korea.

Ugh, again.

The threat isn’t the red ink. The real danger is an ever-increasing burden of government spending, driven by entitlements.

Besides, the GOP tax bill actually is a long-run tax increase!

Let’s close with a video on the topic from Marginal Revolution. It has too much Keynesianism in it for my tastes, but the discussion of Argentina’s default is useful for those who wonder about whether the United States is going to have a debt meltdown at some point.

P.S. I don’t agree with Keynesians and I don’t agree with the self-styled deficit hawks. But I can appreciate that both groups have a consistent approach to public finance. What really galls me are the statist hypocrites who are cheerleaders for debt when there are proposals to increase government spending, but then do a back flip and pretend that debt is terrible and must be reduced when tax increases are being discussed.

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I’ve written that it’s theoretically possible for Greece to pay its debts and restore prosperity.

After all, it’s simply a matter of obeying fiscal policy’s Golden Rule and reforming a suffocating tax system.

But I’ve always figured none of that will happen because Greek voters would never vote for a government that favors Reagan-style or Thatcher-style economic reforms.

Simply stated, there are too may Greek people living off the state. But that’s just part of the problem. An even bigger obstacle to reform is that the people have decided that it’s morally acceptable to mooch off the government.

As a result, I’ve assumed that Greece has passed a tipping point because the moral foundation of Greek society has been corroded by dependency. And it’s very difficult to put that toothpaste back in the tube.

But maybe I’ve been wrong. Courtesy of the great people at the Atlas Network, here’s some remarkable polling data from Greece.

…the people may finally be fed up with big government, runaway spending, public-sector corruption, and job-killing regulations. A recent in-depth survey, published by the daily Kathimerini newspaper and the new think tank Dianeosis, reveals that Greek society seems to be experiencing an ideological sea change.

On a philosophical level, Greeks seem to be embracing the principles of classical liberalism.

In Greece, the term “liberalism” retains its classical meaning of support for individual liberty, free markets, and social tolerance. The latest finding from the Dianeosis poll shows that 27 percent of respondents identify as either liberal or neoliberal, together making the largest ideological group for the country’s overall population. These ideas have taken even stronger hold among the rising generation, with an astonishing 50 percent of Greek youth identifying as either liberals or neoliberals.

And this translates into greater support for small-government policies.

About 60 percent agree that government is intervening too much in economic matters, and thereby prevents the private sector from creating jobs and wealth.

Here’s some of the relevant polling data.

It’s also encouraging to see that there was movement in the right direction between April 2015 and December 2016.

On a policy level, the Greeks now seem to recognize that the state is too big.

Even more telling is that the majority of Greeks, 55 percent, believe that lower taxation is preferable even if that results in less government welfare. This finding is particularly important because two years ago only 39.2 percent agreed with that statement.

Here are those numbers from the survey.

The last bit of good news from the survey is that Greeks have positive feelings about market-oriented terms.

Greeks today also seem to show overwhelming support for many fundamental concepts of the free-market tradition. About 73 percent agreed that “markets” have a positive connotation…a primary reason for this turn toward free markets is that the government regimes in Greece have clearly failed, thereby tainting their devotion to destructive statism and populism. This has caused many Greeks to consider economic freedom as a viable solution for the country’s devastating problems.

On the other hand, the country they most want to mimic is Sweden.

And it’s not even close (though I wonder if this chart would look different if Switzerland and Hong Kong were options).

You may be wondering (like me) how the Greeks can tell pollsters they want smaller government while simultaneously picking Sweden as a role model?

The pessimistic answer is that Greeks don’t know what they’re talking about. Or maybe they are hypocrites, willing to pay lip service to economic liberty but ultimately yearning for a cradle-to-grave welfare state.

The optimistic answer is that Sweden actually is a pretty good role model.

Check out this comparison of Greece and Sweden, based on data from Economic Freedom of the World. Sweden is ranked #27, which is in the top-20 percent of nations for economic liberty. Greece, by contrast, is way down at #116.

Yes, both countries have terrible fiscal policy, but it turns out that Sweden is very market-oriented in areas like money, trade, regulation, and rule of law. And even though it still has a long way to go, Sweden significantly improved fiscal policy in the 1990s and has even enjoyed some modest improvement in recent years.

That’s definitely not the case in Greece.

In other words, I certainly don’t mind if Swedish policy is the short-run goal for Greek voters. If they ever get to that point, then I’ll try to convince them to go the Full Hong Kong.

P.S. In the real world, are there any examples of countries that have escaped statism and enjoyed something akin to a Greece-to-Sweden jump in economic liberty?

The answer is yes. Chile would be an obvious example, as would certain post-Soviet Bloc nations such as Estonia.

It would be great to add Greece to the collection.

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Greece has confirmed that a nation can spend itself into a fiscal crisis.

And the Greek experience also has confirmed that bailouts exacerbate a fiscal crisis by enabling more bad policy, while also rewarding spendthrift politicians and reckless lenders (as I predicted when Greece’s finances first began to unravel).

So now let’s look at a third question: Can a country tax itself to death? Greek politicians are doing their best to see if this is possible, with a seemingly endless parade of tax increases (so many that even the tax-loving folks at the IMF have balked).

At the very least, they’ve pushed the private sector into hospice care.

Let’s peruse a couple of recent stories from Ekathimerini, an English-language Greek news outlet. We’ll start with a rather grim look at a very punitive tax regime that is aggressively grabbing money from taxpayers with arrears.

Tax authorities have confiscated the salaries, pensions and assets of more that 180,000 taxpayers since the start of the year, but expired debts to the state have continued to rise, reaching almost 100 billion euros, as the taxpaying capacity of the Greeks is all but exhausted. In the month of October, authorities made almost 1,000 confiscations a day from people with debts to the state of more than 500 euros. In the first 10 months of the year, the state confiscated some 4 billion euros.

But the Greek government is losing a race. The more it raises taxes, the more people fall behind.

in October alone, the unpaid tax obligations of households and enterprises came to 1.2 billion euros. Unpaid taxes from January to October amounted to 10.44 billion euros, which brings the total including unpaid debts from previous years to almost 100 billion euros (99.8 billion), or about 55 percent of the country’s gross domestic product. The inability of citizens and businesses to meet their obligations is also confirmed by the course of public revenues, which this year have declined by more than 2.5 billion euros. The same situation is expected to continue into next year, as the new tax burdens and increased social security contributions look set to send debts to the state soaring.

The fact that revenues have declined should be a glaring signal to politicians that they are past the revenue-maximizing point on the Laffer Curve.

But the government probably won’t be satisfied until everyone in the private sector is in debt to the state.

There are now 4.17 million taxpayers who owe the state money. This means that one in every two taxpayers is in arrears to the state, with 1,724,708 taxpayers facing the risk of forced collection measures. Of the 99.8 billion euros of total debt, just 10-15 billion euros is still considered to be collectible.

Here’s another article from Ekathimerini that looks at how Greece is doubling down on suicidal fiscal policy.

Greece is defying the prevalent trend among the world’s industrialized nations for reducing tax rates in order to boost investment and competitiveness… According to the report, in contrast to the majority of OECD member states, Greece has raised taxes and social security contributions as government policy is geared toward reaching fiscal targets, even though this inevitably harms the crisis-hit country’s competitiveness.

It’s hard to think of a tax that Greek politicians haven’t increased.

Greece…is also the only one among them that increased taxes on labor and corporate profits. …eight OECD member states reduced rates in 2017 on an average of 2.7 percent…, in stark contrast to Greece, which…has the highest corporate tax rates in the OECD compared to 2008. Many countries also offered breaks and reductions on income tax, …also cutting social contributions in 2015-2016. Not so Greece, which in 2016 raised both, thereby increasing the overall burden on low-income earners by 1.5 percent. Greece was also the only country in the OECD to raise value-added tax rates in 2016.

And what was accomplished by all these tax increases? Less tax revenue and recession. That’s a lose-lose scenario by almost any standard.

…in the 2014-2015 period, 25 of the 32 countries for which data is available recorded an increase in tax-to-GDP levels. The report…mentions Greece as an exception to this trend as well, noting that the country was in recession in that two-year period.

Even an establishment outlet like the U.K.-based Financial Times has noticed.

Unemployment is at 23 per cent and 44 per cent of those aged 15-24 are out of work. More than a fifth of Greeks get by without basics such as heating or a telephone connection. …Sweeping new taxes imposed across the economy have already left communities scrabbling to survive. …this year will bring €1bn worth of new taxes on cars, telecoms, television, fuel, cigarettes, coffee and beer… New taxes have eroded disposable incomes still further. Value added tax has increased to 24 per cent on food, disproportionately hurting the poor, for whom living costs represent a far higher proportion of income. Most detested is the Enfia property levy, which brings in €2.65bn a year – roughly €650 from each of Greece’s four million households. …recent direct taxes like the new estate tax have affected households that have seen their income decline greatly during the crisis. The rise of VAT, meanwhile, only adds to the cost of life of poor families.” …this month, new levies will mean the taxes paid by his business will jump 29 per cent.

Interestingly, the article acknowledges that profligate politicians created the mess, while also noting that the Greek people also deserve blame.

…blame is laid on the politicians who spent the 27 years of Greece’s EU membership before the crisis loading the country with debt to fund increased defence expenditure, more public sector jobs and higher pension and other social benefit payments. …“The Greek people should be blamed. We voted for these people,” he concludes.

The problem, of course, is that Greek voters don’t show any interest in now voting for politicians who will clean up the mess. Simply stated, too many people in the country are living off the government.

In other words, even though it’s mathematically possible to fix the problems, the erosion of societal capital suggests that Greece may have reached the point of collapse.

From a fiscal perspective, this chart from OECD data confirms that policy is getting worse rather than better. Measured as a share of economic output, taxes and spending have both become a bigger burden over the past 10 years.

What makes this chart especially depressing is that economic output is lower today than it was in 2005, which means that the problem isn’t so much that annual tax receipts and spending level are climbing, but rather that the private economy is declining.

Let’s close with an additional look at the moribund Greek economy and a discussion of how the bailouts have made a bad situation even worse.

The Wall Street Journal editorialized on the impact of ever-higher taxes and a still-stifling bureaucratic business environment.

…the bailout is not in fact working, if you think the goal should be to restore Athens to sound public finances and to offer Greeks economic hope for the future. The European Commission’s autumn forecast predicts eurozone economic growth of 2.2% this year, the fastest in a decade. But Greece is falling further behind. …Investment has collapsed in the country, to 11% of GDP last year from 26% of GDP in 2007. …The bailouts are creating a dangerous situation in which the government has enough cash to meet its debts but no one else in Greece can thrive.

And here’s the scary part. What happens when there’s another global recession? The already-bad numbers in Greece will get even worse. Not a pleasant thought.

P.S. If you want to know why I’m not optimistic about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies? I’d be more hopeful if Greek politicians instead had learned some lessons from Slovakia or Latvia.

P.P.S. Notwithstanding a the constant stream of bad policy, I am capable of feeling sorry for Greece.

P.P.P.S. Newer readers may not be familiar with my collection of Greek-related humor. This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations. Speaking of stereotypes, the Greeks are in a tight race with the Italians and Germans for being considered untrustworthy.

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I like the Baltic nations, as illustrated by what I wrote last year.

I’m a big fan of…Estonia, Latvia, and Lithuania. These three countries emerged from the collapse of the Soviet Empire and they have taken advantage of their independence to become successful market-driven economies. One key to their relative success is tax policy. All three nations have flat taxes. And the Baltic nations all deserve great praise for cutting the burden of government spending in response to the global financial crisis/great recession (an approach that produced much better results than the Keynesian policies and/or tax hikes that were imposed in many other countries).

No wonder the Baltic nations are doing a good job of achieving economic convergence.

I’ve specifically praised Estonia on several occasions.

Estonia’s system is so good (particularly its approach to business taxation) that the Tax Foundation ranks it as the best in the OECD. …Estonia…may be my favorite Baltic nation if for no other reason than the humiliation it caused for Paul Krugman.

Indeed, I strongly recommend this TV program that explored the country’s improbable success. And here’s some data showing that Estonia is leading the Baltics in convergence.

Now I have a new reason to admire Estonia. Having experienced the brutality of both fascism and communism, they have little tolerance for those who make excuses for totalitarianism. And the issue has become newsworthy since Greece decided to boycott a ceremony to remember the victims of communism and fascism.

Estonian Minister of Justice Urmas Reinsalu responded to his Greek counterpart, Stavros Kontonis following the uproar caused by the decision by Greece to not participate in the recent European Day of Remembrance for Victims of Stalinism and Nazism in Estonia.

The letter sent by Reinsalu is a masterpiece of moral clarity. He unambiguously condemns all ideologies that are contrary to free societies. Let’s look at some excerpts.

Our values are human rights, democracy and the rule of low, to which I see no alternative. This is why I am opposed to any ideology or any political movement that negates these values or which treads upon them once it has assumed power. In this regard there is no difference between Nazism, Fascism or Communism.

Amen. That’s basically what I wrote just a few days ago.

Reinsalu points out that free societies (sometimes called liberal democracies, with “liberal” used in the “classical liberal” sense) don’t oppress people, which is inherent with fascist and communist regimes.

Condemnation of crimes against humanity must be particularly important for us as ministers of justice whose task it is to uphold law and justice. …Every person, irrespective of his or her skin colour, national or ethnic origin, occupation or socio-economic status, has the right to live in dignity within the framework of a democratic state based on the rule of law. All dictatorships – be they Nazi, Fascist or Communist – have robbed millions of their own citizens but also citizens of conquered states and subjugated peoples.

The Estonian Justice Minister refers to the bitter experience of his nation.

Unlike Greece, Estonia has the experience of living under two occupations, under two totalitarian dictatorships. …In light of the experience of my country and people, I strongly dispute your claim that Communism also had positive aspects. ……in 1949, …the communist regime deported nearly 2 percent of the population of Estonia only because they as individual farmers refused to go along with the Communist agricultural experiment and join a collective farm. This was in addition to the tens of thousands who had already been imprisoned in the Gulag prison camps or deported and exiled earlier. Thousands more would follow, taken into prison up to mid-1950.

He points out that communism is incompatible with freedom.

…it is not possible to build freedom, democracy and the rule of law on the foundation of Communist ideology. …this has been attempted… This has always culminated in economic disaster and the gradual destruction of the rule of law…there are also countries and peoples for whom the price of a lesson in Communism has been millions of human lives.

The bottom line, he writes, is that all forms of totalitarianism should be summarily rejected.

…we must condemn all attempts or actions that incite others to destroy peoples or societal groups…there is no need to differentiate. It makes no difference to a victim if he is murdered in the name of a better future for the Aryan race or because he belongs to a social class that has no place in a Communist society. We must remember all of the victims of all totalitarian and authoritarian dictatorships.

Kudos for Minister Reinsalu. He doesn’t shrink from telling the truth about communism and other forms of dictatorship.

None of this should be interpreted to mean that western societies are perfect. Heck, I spend most of my time criticizing bad policy in the United States and other western nations. But there’s no moral equivalence.

Here’s Reinsalu’s entire letter, which contains additional points.

I’ll close by elaborating on one of his points. Reinsalu wrote about the miserable track record of communism and made some powerful points.

But I think he was too diplomatic. He should have highlighted the jaw-dropping body count of communist regimes.

He did mention some of the horrid policies of the Soviet Union (perhaps more than 60 million victims), but he also could have listed the incomprehensible misery that communism caused in places such as Cuba, Cambodia, and North Korea. Or China back in the Mao era.

That being said, his letter is a very powerful indictment of the moral bankruptcy of his Greek counterpart (which perhaps isn’t a surprise given the ideology of the Syriza government).

And it’s also an indictment of all of the apologists for communist tyranny.

P.S. Poland is another country that experienced the dual brutality of fascism and communism. So it shouldn’t be surprise that Poles share the same moral clarity as Estonians.

Perhaps this is why Poland has done a reasonably good job of undoing bad Soviet policies.

P.P.S. While I’m a fan of nations such as Estonia and Poland, they need further market-based reforms to compensate for demographic decline.

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I’ve put forth lots of arguments against tax increases, mostly focusing on why higher tax rates will depress growth and encourage more government spending.

Today, let’s look at a practical, real-world example.

I wrote a column for The Hill looking at why Greece is a fiscal and economic train wreck. I have lots of interesting background and history in the article, including the fact that Greece got into the mess by overspending and also explaining that politicians like Merkel only got involved because they wanted to bail out their domestic banks that foolishly lent lots of money to the Greek government.

But the most newsworthy part of my column was to expose the fact that “austerity” hasn’t worked in Greece because the private sector has been suffocated by giant tax hikes.

…the troika…imposed the wrong kind of fiscal reforms. …what mostly happened is that Greek politicians dramatically increased the nation’s already punitive tax burden. The Organization for Economic Cooperation and Development’s fiscal database tells a very ugly story. …on the eve of the crisis, the tax burden in Greece totaled 38.9 percent of GDP. This year, taxes are projected to reach 52.0 percent of economic output. Every major tax in Greece has been dramatically increased, including personal income taxes, corporate income taxes, value-added taxes, and property taxes. It’s been a taxpalooza… What’s happened on the spending side of the fiscal ledger? Have there been “savage” and “draconian” budget cuts? …there have been some cuts, but the burden of government spending is still a heavy weight on the Greek economy. Outlays totaled 54.1 percent of GDP in 2009 and now government is consuming 52.2 percent of economic output.

For what it’s worth, the spending numbers would look better if the economy was stronger. In other words, Greece’s performance wouldn’t be so dismal if GDP was growing rather than shrinking.

And that’s why tax increases are so misguided. They give politicians an excuse to avoid much-needed spending cuts while also hindering growth, investment and job creation.

Let’s close by reviewing Greece’s performance according to Economic Freedom of the World. The overall score for Greece has dropped slightly since 2009, but the real story is that the nation’s fiscal score has dramatically worsened, falling from 5.61 to 4.66 on a 0-10 scale. In other words, during a period of time in which Greece was supposed to sober up and become more fiscally responsible, the politicians engaged in an orgy of tax hikes and Greece went from a failing grade for fiscal policy to a miserably failing grade.

Here’s a the relevant graph from the EFW website. As you can see, the score has been dropping for a decade, not just since 2009.

This is remarkable result. Greek politicians should have been pushing the nation’s fiscal score to at least 7 out of 10, if not 8 out of 10. Instead, the score has gone in the wrong direction because of tax increases.

Though I don’t expect Hillary and Bernie to learn the right lesson.

P.S. For more information, here’s my five-picture explanation of the Greek mess.

P.P.S. And if you want to know why I’m so dour about Greece’s future, how can you expect good policy from a nation that subsidizes pedophiles and requires stool samples to set up online companies?

P.P.P.S. Let’s close by recycling my collection of Greek-related humor.

This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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I don’t like tax increases, but I like having additional evidence that higher tax rates change behavior. So when my leftist friends “win” by imposing tax hikes, I try to make lemonade out of lemons by pointing out “supply-side” effects.

I’m hoping that if leftists see how tax hikes are “successful” in discouraging things that they think are bad (such as consumers buying sugary soda or foreigners buying property), then maybe they’ll realize it’s not such a good idea to tax – and therefore discourage – things that everyone presumably agrees are desirable (such as work, saving, investment, and entrepreneurship).

Though I sometimes worry that they actually do understand that taxes impact pro-growth behavior and simply don’t care.

But one thing that clearly is true is that they get very worried if tax increases threaten their political viability.

This is why Becket Adams, in a column for the Washington Examiner, is rather amused that Mayor Kenney of Philadelphia has been caught with his hand in the tax cookie jar.

Philadelphia Mayor Jim Kenney fought hard to pass a new tax on soda and other sugary drinks. He won, and the 1.5-cents-per-ounce tax is now in place, affecting both merchants and consumers, because that’s how taxes work. Businesses pay the levies, and they offset the cost by charging higher prices. That is as basic as it gets. The only person who doesn’t seem to understand this is Kenney, who is now accusing business owners of extortion. “They’re gouging their own customers,” the mayor said.

Yes, consumers are being extorted and gouged, but the Mayor isn’t actually upset about that.

He’s irked because people are learning that it’s his fault.

Philadelphians are obviously outraged by the skyrocketing cost of things as simple as a soda, which has prompted some businesses to post signs explaining why the drinks are now do damned expensive. Kenney said that this effort by businesses to explain the rising cost is “wrong” and “misleading.” The mayor apparently thought the city council could impose a major new tax on businesses, and that customers somehow wouldn’t be affected.

In other words, it’s probably safe to say that Mayor Kenney has no regrets about the soda tax. He’s just not pleased that he can’t blame merchants for the price increase.

The International Monetary Fund, by contrast, may actually have learned a real lesson that higher taxes aren’t always a good idea. That bureaucracy is infamous for blindly supporting tax increases, but if we can believe this story from the Wall Street Journal, even those bureaucrats don’t think additional tax hikes in Greece would be a good idea.

IMF officials have said Greece’s economy is already overtaxed. New taxes that came into affect on Jan. 1 are squeezing household incomes further. Economists say even-higher income taxes—in the form of lower tax-free income allowances—could add to a mountain of unpaid taxes. Greeks currently owe the state €94 billion ($99 billion), equivalent to 54% of gross domestic product, and rising, in taxes that they can’t pay.

Here are some stories to illustrate the onerous tax system in Greece, starting with a retired couple that will probably lose their house because of a new property tax.

…the 87-year-old former economist and his 81-year-old wife are unable to repay the property tax imposed on their 70-year old house, a family inheritance. The annual tax is around ‎€33,000, but Mr. Kokkalis’s pension—already cut by half—is €28,000 a year. The couple borrowed money when the tax was imposed, initially as a temporary austerity measure in 2011. But they are already behind on nearly €200,000 of tax payments and can’t borrow more. Mr. Kokkalis says the state is calculating tax based on outdated property prices that have since collapsed, and that if he tried to sell the house now, nobody would be interested. “They impose taxes on an imaginary value,” Mr. Kokkalis says. “This is confiscation.”

I’ve already written about this punitive property tax. The good news is that property taxes generally are transparent, so people know how much they’re paying.

The bad news is that the tax in Greece is far too onerous.

And I’ve also noted that small businesses are being wiped out in Greece as well. The WSJ has a new example.

Tax increases under previous rounds of austerity have put a middle-class lifestyle beyond reach for many. “Our only goal now is survival,” says arts teacher Mimi Bonanou. Until recent years she also made a living as a practicing artist, selling her works in Greece and abroad. But increasingly heavy taxes that self-employed Greeks must pay at the start of each year, based on the state’s often-ambitious forecast of their incomes, have forced her to rely on teaching alone.

All things considered, Greece is a painful example that a country can’t tax its way to prosperity (though some politicians never learned that lesson).

Moreover, it’s nice to have further evidence that even the IMF recognizes that Greece is on the wrong side of the Laffer Curve.

And if a left-leaning bureaucracy is now willing to admit that excessive taxation can lead to less revenue, maybe eventually the Republicans on Capitol Hill will install people at the Joint Committee on Taxation who also understand this elementary insight.

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In 2008, government spending consumed 50.9 percent of economic output in Greece according to OECD fiscal data. That same year, Greece’s score from Economic Freedom of the World was 7.12 (on a 0-10 scale), which was rather poor for a supposedly developed country and only #60 for all nations.

Then the fiscal crisis hit and Greece supposedly has atoned for its profligacy and gone through a tough period of “austerity” to reduce the burden of government spending and cut back on onerous levels of bureaucracy and red tape.

How much progress has occurred? Have Greek politicians, with the help of the European Commission, International Monetary Fund, and European Central Bank (the infamous “troika”), scaled back government and freed up the private sector?

Nope.

The OECD data shows that the burden of government spending is now 53.1 percent of economic output. And the latest data from Economic Freedom of the World shows that Greece’s score has dropped to 6.93 (dropping the country to #86 in the rankings).

In other words, Greece suffered a crisis caused by too much government and too much statism and the politicians (along with outside “experts”) decided that the solution was to….drum roll, please…increase the relative size and scope of government.

As one Greek observer noted in a column for CapX, this has not been a very successful recipe.

…how has the Troika been performing? 3 adjustment programs, 12 reviews, 220 billion Euros and 7 years down the road, the results are abysmal: 179% debt, 0% growth, 25.1% unemployment.

To be fair, there has been some spending restraint since the crisis began. In some years, the budget even shrank. The problem, though, is that the private sector has been battered by huge tax increases, thus crippling incentive to create jobs and growth.

If you want to get a sense of what’s happening, this New York Times story is a very sobering example. Apparently the tax burden is so oppressive that people don’t want to inherit property.

At law courts throughout Greece, people are lining up to file papers renouncing their inheritance. …they are turning their backs on what used to be a pillar of Greece’s economy and society: real estate. …In 2013, two years after a property tax was introduced (previously, real estate tax revenue came mainly from transfers or conveyance taxes), 29,200 people declined to accept their inheritance, according to the Justice Ministry. In 2015, the number had climbed to 45,627, an increase of 56 percent in two years. Reports from across the country suggest that this year, too, large numbers of people are refusing to inherit. …People once hoped that if they came into property they could sell it and live easier; now they fear that they will be unable to sell it and the taxes will drag them down. …After many years in which only very valuable properties were taxed, many Greeks went from paying almost no taxes on real estate to not having enough money to pay. In 2010, property taxes accounted for 0.26 percent of gross domestic product, while this year they are around 2 percent, according to state budget figures. …Arrears in tax payments at the end of September were at 92.8 billion euros and keep increasing by about 1 billion each month.

But give Greek politicians credit for a perverse form of perseverance. They’re doing everything they can to squeeze even more money from oppressed taxpayers. Indeed, the U.K.-based Times reports that they’re even spying on social media to see if people have lifestyles that seem extravagant compared to the income they report to tax police.

Finance ministry officials said that an operation named “24 hours” will monitor about 1.8 million Greeks believed to be declaring an income inconsistent with their lavish lifestyles they enjoy and display on websites. Trifon Alexiades, the deputy finance minister, said: “It may sound ludicrous, but this is a serious effort to crosscheck information about those suspected of concealing wealth.” Tax authorities will begin operating software in September for a month-long trial. “Under this new scheme, auditors will be able to access taxpayers’ Facebook, Twitter and Instagram accounts to extract information and details of assets that may not have declared,” a Greek news site reported.

Ugh, I guess this is the kind of policy you get with you mix French-style economic advice and German-style tax enforcement. Geesh, maybe the IRS isn’t so bad after all.

And it doesn’t seem the current left-wing government is learning from all these mistakes. The EU Observer reports that it wants to make the nation’s infamous bureaucracy even bigger.

Alexis Tsipras’ Greek government plans to hire 20,000 civil servants over the next year to help Greece’s austerity hit education and health services. Government officials believe that the hiring will not run into objections from representatives of Greece’s international creditors, Kathimerini newspaper reports.

By the way, Greek politicians think more spending is the right recipe, even if it means more spending in other nations. Here’s some of what was reported back in June by Bloomberg.

Greek Finance Minister Euclid Tsakalotos urged Germany to take advantage of record-low borrowing costs and invest more to spur the economy, saying Europe should seize the chance to modernize its infrastructure. …Failure to provide the euro area with a Keynesian-type stimulus would risk leaving the region with insufficient infrastructure, said Tsakalotos, whose country has the biggest ratio of debt to gross domestic product in Europe. European Union budget rules should be changed so that investment spending is excluded when calculating whether countries have met deficit targets, he said.

I guess this could be called an example of misery-loves-company economic advice. Germany has actually been complying with Mitchell’s Golden Rule in recent years (and part of last decade also) and its economy is in decent shape.

But Greek politicians are basically saying, “Hey, you should be more like us.”

Heck, the Prime Minister of Greece already is trying to create a coalition of fiscally mismanaged nations.

Greek prime minister Alexis Tsipras on Thursday invited leaders of six southern EU states to meet…in a bid to form a strong southern alliance and counter the stance of countries in Northern Europe. Athens News Agency reports the states invited will include France, Italy, Spain, Portugal, Cyprus and Malta.

The article doesn’t say what this alliance would accomplish, though presumably Tsipras hopes it will be a unified voice for more handouts. Maybe it can agitate for something really crazy such as eurobonds.

I’m also amused that Greek officials think businesses will invest in a highly-taxed economy merely if politicians promise not to raise taxes even further. I’m not joking. Here are some excerpts from a Reuters report.

Greece is offering big investors more than a decade of no increases in their taxes, in an effort to promote entrepreneurship in a country struggling to return to growth after almost seven years of recession. …Under the law, investment plans exceeding 20 million euros and creating at least 40 new jobs could choose a stable tax regime with no tax increases for 12 years once the investment is concluded.

By the way, just in case you think promising not to go even further in the wrong direction is akin to a step in the right direction, you need to keep reading the article because you’ll discover the plan is based on cronyism.

Alternatively, they can apply for a subsidy, amounting to 10 percent of the plan and up to 5 million euros.

And if you want to understand why Greece is hopeless, check out what the Economy Minister said about how any new investments will get “quick” approval.

Stathakis said that Athens will seek to shorten approval time for investment plans to three months instead of the two to three years it takes now.

Needless to say, the approval time in a market economy is zero because people don’t have to get permission from bureaucrats before creating jobs and investing money.

But in Greece, if you curry favor with the mandarins, you’ll “only” have to wait three months. I guess that’s to be expected in a nation where bureaucrats demand stool samples before you can set up an online company.

And since we’re on the topic of regulation and red tape, this is a good time to point out that the Greek government apparently is good at passing laws to liberalize the economy but not very good at implementing them.

Guy Verhofstadt, leader of the European Liberals and Democrats, is very critical… “Greece is passing a lot of legislation, but is not implementing it. It is shocking to see that 74% of the legislation that has been adopted since the first bailout package has never been implemented.”

But let’s look at the bright side. This means 26 percent has been implemented. Of course, that 26 percent presumably includes all the tax increases.

In any event, Greece has a miserable track record when it comes to following through on commitments to reduce state intervention. The government was supposed to engage in sweeping privatizations, but the gap between projections and performance is enormous.

Last but not least, I’ve always thought the ultimate sign of incompetence is when a government can’t even waste money effectively. I’ve already noted that Japan and the U.K. have met this test, and now I can add Greece to the list.

Hundreds of millions of available EU funds have yet to be used by the Greek state to help migrants and refugees. Administrative bottlenecks on the Greek side mean that…The European Commission…will soon be sending someone to Athens to help the government resolve its issues in an effort to better spend the money.

You may be wondering what’s the purpose of today’s attack on Greece. Is it because I think poorly of Greeks? Well, I despise Greek moochers, but I have the same view of French moochers and American moochers, so that’s not the answer.

You also may be thinking this is just another excuse for me to say “I told you so” about the failure of bailouts. Sure, I’m happy to pat myself on the back, even though any non-comatose person should have known bad things were going to happen.

My real goal is to warn that the miserable results in Greece will be replicated if we try the same policy in America. There are several states that are on a very bad trajectory, such as California and Illinois. I don’t know if things will blow up during the next recession or afterwards, but if there’s any hope of forcing politicians to make sensible choices in Sacramento and Springfield, it will be very important for Washington to reject all pleas for handouts.

Likewise, pension funds for state and local government bureaucrats are ticking time bombs. Once again, prudent reforms will only be possible if politicians conclude that there’s no hope for bailouts from Uncle Sam.

The bottom line is that politicians will continue to make mistakes if they can make other people pay the price. That’s today lesson.

P.S. Even though Greece’s debt is sustainable, I would prefer a default if it meant no more bailouts. Yes, Greek politicians would be reneging on their past obligations, but the good news is that they wouldn’t be able to borrow any more money and (hopefully) would have no choice but to copy Latvia and adopt good policy.

P.P.S. Though it’s an open question whether Greece can be saved. Many productive people already have escaped the nation and most of the ones who have stayed are part of the problem.

P.P.P.S. To offset the grim message of today’s column, let’s close with some Greek-related humor.

This cartoon is quite  good, but this this one is my favorite. And the final cartoon in this post also has a Greek theme.

We also have a couple of videos. The first one features a video about…well, I’m not sure, but we’ll call it a European romantic comedy and the second one features a Greek comic pontificating about Germany.

Last but not least, here are some very un-PC maps of how various peoples – including the Greeks – view different European nations.

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