WASHINGTON -- To understand the pertinence to America of events in
Greece, notice General Motors' most recent misbehavior. A television
commercial featuring CEO Ed Whitacre demonstrates the institutional
murkiness and intellectual dishonesty that result when the line between
public and private sectors disappears.
In the commercial, Whitacre says GM has "repaid our government loan
in full." Rep. Paul Ryan, R-Wis., noted that GM used government funds to
pay back the government: It "simply transferred $6.7 billion from one
taxpayer-funded TARP account to another." The government still owns 60.8
percent of GM's common equity, and the Congressional Budget Office
projects that the government will lose about $34 billion of the $82
billion of TARP funds dispersed to the automotive industry.
When Ryan and two colleagues asked the Treasury Department for
clarification, they got this careful reply: "Treasury has never
suggested that the loan repayment represented a full return of all
government assistance." A Treasury press release did say "GM Repays
Treasury Loan in Full." The loan is, however, a small part of taxpayer
exposure. Under crony capitalism, when government and corporate America
merge, both dissemble.
Now American taxpayers also own a little bit of a small nation. They
provide the U.S. contribution of 17 percent of the assets of the
International Monetary Fund, which is giving Greece $39 billion (the IMF
also is contributing $321 billion to a "stabilization" fund for other
eurozone nations with debt problems). So the U.S. government, which
would borrow 42 cents of every dollar it spends under the president's
2011 budget, is borrowing to rescue Greece and others from the
consequences of their borrowing.
That nation, whose GDP is below that of the Dallas-Fort Worth
metropolitan area, is "too big to fail," meaning too inconveniently
connected to too many big banks. Bailing out Greece really rescues
European banks that improvidently bought Greek bonds. Visit
here for a useful New York Times graphic illustrating how European
nations borrow from one another. For example, Italy owes France (French
banks) $511 billion, a sum nearly equal to 20 percent of France's GDP.
About one-third of Portugal's debt is held by Spain, which has $238
billion of its debt held by Germany and $220 billion by France. Russell
Roberts of George Mason University notes that this "discourages prudence
and wariness" because when "everyone has financed everyone else, you can
justify bailing everyone out."
At the Parthenon last week, the Greek Communist Party, which got 8
percent of the vote in the last national election, draped banners
emblazoned with the hammer and sickle: "Peoples of Europe Rise Up." Of
course. "Arise ye prisoners of starvation" exhorts "The Internationale,"
the left's ancient anthem. But who is to arise against whom?
Time was, the European left said it spoke for horny-handed sons of
toil oppressed in dark Satanic mills. But Athens' so-called
"anti-government mobs" have been composed mostly of government employees
going berserk about threats to their entitlements. Even Greek air force
pilots went on strike. The government, unable to say how many employees
it has, promises to count them. It cannot fire many of them because
article 103, paragraph 4 of the Greek constitution says: "Civil servants
holding posts provided by law shall be permanent so long as these posts
exist."
America's projected $9.7 trillion in budget deficits in this decade
will drive the nation's debt to 90 percent of GDP (Greece's is 124
percent). So some people say that to avoid a Greek-style crisis, America
should adopt a value-added tax (VAT). But Europe's most troubled nations
-- the PIIGS: Portugal, Ireland, Italy, Greece and Spain -- have VATs of
20 percent, 21 percent, 20 percent, 21 percent and 16 percent,
respectively. As part of its austerity penance, the Greek government is
going to give itself more money by raising its VAT to 23 percent.
Germans are furious about being the biggest bailers in this bailout
of a nation where tax evasion is pandemic. They have not been assuaged
by being told by their chancellor, Angela Merkel, that the stakes are
stupendous: Their money will save "Europe." Hearing that, Greeks bearing
banners proclaiming "Out with the IMF" might think:
Why accept "austerity" (as that is understood in Greece -- no more
annual bonuses of two months' salary, no more retirement at 53)?
Suppose, after pocketing some of the bailout, we just threaten to
collapse and make a mess of "Europe"?
Greece now knows the terrific strength of weakness. Beware of Greeks
-- or any other people -- receiving gifts.