The major themes within the economy these days continue to be upcoming tax increases, new proposed bailouts and wealth transfer programs, and increasing federal debt.
Matthew Lynn, the author of “Bust,” a forthcoming book on the Greek debt crisis, says that the debt crisis in Europe may be undermined by opposition to bailouts. What he has to say about Europe is insightful and potentially transferable to the U.S.
Mr. Lynn says “Slovakia has understandably refused to ratify its share of the rescue package. Any political system needs to be both fair and reasonable to command support. The terms of the bailout are neither. You can’t tell relatively poor, hard-working people who have played by the rules, like the Slovaks, that they have to help out countries that didn’t, such as Greece. You might get away with it once or twice, but if the euro area is simply a mechanism for transferring wealth from the industrious to the feckless, it is hard to see it surviving. The responsible nations are going to want out at some point. Slovakia will no doubt be ignored. The EU doesn’t pay much attention to protests from its smaller members, particularly from Eastern Europe. But Portugal and Ireland, which will also have to help Greece, may join the protest soon. Even if they don’t, the billions in aid and loan guarantees promised for Greece and the other deficit countries can’t be taken for granted. The new government in Slovakia was elected on a platform of opposing the bailout. ‘Say no to the Greeks’ is a great campaign theme and will surely be copied in the region.”
The pockets of the U.S. that weren’t over-leveraged, have high graduation rates, and are better positioned for prosperity may, like Slovakia, begin to question continued bailouts. Just like the Slovakians, these Americans are feeling relatively poor these days by way of future tax increases and an insecure job market. They also see that their ability to move forward in prosperity may be in jeopardy by an increasing federal debt, aided by government leaders and pockets of overleveraged Americans. They may be wondering if all of the bailouts are fair. With federal debt increases to support transfer payments to low performers and tax increases for the high performers as far as the eyes can see, any sense of poorness and unfairness isn’t likely to go away soon.
Related Information in Prosperity View
- Debt a Threat to Global Economy – Roubini
- Spend, Save and Invest – Our Moral Hazard
- Tax Cuts for the Rich Increases The Taxes They Pay – The Wealthy Are Different
- Debt in Emerging and Developed Economies: A Reversal That Will Affect How We Invest
- Future for Economies After Financial Crisis – Perspectives from MIT
- Tax The Rich? But What If The Rich Start To Leave?
- Multiculturalism and the Unwillingness of the Rich to Pay More Than Their Fair Share
- Emerging Markets Continue to Grow – Mark Mobius
