Zakaria: What Greece teaches the U.S.

[deziloooooo]

Fareed Zakarias take on the comparison of the Greek financial mess with the US Financial mess...comparisons if any.

[ It will never be solved, in time , in his mind, Greece will impload and not come out of their crisis . Greece will defalt in time is his feeling, the math just does not add up for them to not default.}

and the USA financial problems, very solvable if the political will is there.

"Greece faces a much more fundamental problem. There isn't an easy economic solution.

Greece is simply not going to be able to pay back the loans that it owes. If you do the math, it is inconceivable."

Interview with Amir Bashir

"How the World Sees America is a video blog run by global correspondent Amar C. Bakshi and sponsored by The Washington Post and Newsweek Magazine. It features daily articles, which include text and short video clips, about citizens around the world impacted by The United States politically, economically and culturally"
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June 21st, 2011
07:43 PM ET

Zakaria: What Greece teaches the U.S.

Amar C. Bakshi: What lessons do you draw from Greece's economic crisis?

The situation in Greece highlights for me how different America’s economic crisis is from Europe’s economic crisis.

America’s economic crisis is one that is actually economically soluble but politically very difficult to solve.

If we were to repeal the Bush tax cuts, we'd get $4 trillion of revenue over the next 10 years. If we were to enact Simpson-Bowles, we’d get $1.5 trillion by closing various tax loopholes. With a few simple economic decisions, we can solve America’s budgetary problem.

Now, of course, you have long-term healthcare costs to deal with. That’s a huge problem and I don’t pretend it isn't. But in every other respect you can bring down America’s budget deficit to what would be among the lowest levels of any Western country.

Greece faces a much more fundamental problem. There isn't an easy economic solution.

Greece is simply not going to be able to pay back the loans that it owes. If you do the math, it is inconceivable.

That is what people like Alan Greenspan are pointing out. There’s simply no reasonable set of projections that will get you to a place where Greece is going to be able to pay back its loans.

So you can entirely understand why there is a great, great fear among European policy makers about a Greek default. If Greece defaults - and remember it would be the first rich country to default since 1939 - there would be a huge danger of a kind of Lehman Brothers-like spillover effect.

The question then is: What happens to all the money and investments in the Portuguese financial system, the Irish financial system and the Spanish system the hour after that default?

Everybody might get scared - thinking that all these countries are going to default too. Investors who thought that countries in the Eurozone would never default would get spooked. They would have just been proven wrong.

The financial systems of Portugal, Ireland, Spain and others would start hemorrhaging money. You could have a collapse of the European financial system because these economies are so intertwined.

Many of the banks holding all this Greek debt, of course, are German and French banks. So there’s this huge contagion effect.

So what should Germany and France do?

The Germans are trying to extract the best terms that they can before they provide yet another huge infusion of funds for a bailout. They will probably have to provide more than one more bailout.

In this way, Germany can kick the can down the road, so that a few years from now when the markets aren't watching or are less obsessed by this issue, Greece can do a kind of soft default.

That’s the best case scenario. It’s not a great scenario and it has highlighted the precise weakness of the euro, which is that it has combined monetary policy without combining fiscal policy. So you have, in effect, German monetary discipline without German fiscal discipline in places like Greece.

It is worth pointing out here (and this is why I tend to think that the American debate is so frustrating and tragic): America is not in that same place as Greece.

People keep saying, "We’re Greece." But we’re not Greece. We actually are in a situation where a few simple steps would be able to rectify the American economy.

What are some of those steps?

Returning us to tax rates we had under Bill Clinton hardly seems the most punitive thing in the world. If you look at Simpson-Bowles, a lot of what they’re dealing with is not deep, painful cuts. In many cases you’re going back to levels of spending you had in departments only five years ago.

And yet we can't get our act together.

The Europeans are generally dealing with a very complicated situation with no easy answers. We’re not. We’re dealing with a situation with actually a series of very simple answers and we’re just unwilling to deal with them because of our completely dysfunctional political system.

What do you think will happen in Europe?

If I had to bet money, I would bet that the Germans go kicking and screaming to provide another tranche of money to Greece in the hopes that they don’t have to do so again and again. I think that the Germans and the French will come together on the idea that they can't really let Greece default. They’re going to exhaust every last possibility to avoid it.

Eventually, the market will have so anticipated that Greece is going to default that they will be less threatened because there will be a kind of slow-motion collapse rather than an abrupt one.

What global impact does this have?

There are really only two world currencies other than the dollar - the euro and Japan's yen.

The euro has all these problems we’ve described. There is uncertainly about what the future of the currency itself will be five to ten years from now.

With the yen you have an economy that is demographically declining, hugely challenged by 20 years of stagnation and now the earthquake and tsunami. Japan has a debt to GDP ratio closing in on 200%.

In the land of the blind, the one-eyed man is king. The dollar is the one-eyed man

"

[AgeOfEnlightenmentSCP]

I know ***some people*** hate to hear this: America, and Americans are a different breed. We're NOT going to let it get to the point of Greece. The big government party ended when the TEA Party began. We are in a holding pattern being very patient and giving the responsible politicians we just elected in 2010 some leeway due to the political reality that the irresponsible bozos that caused most of this are mostly still very real policy obstacles. We will remove them in time, and then the conservatives will have to deliver.

[marshabar1]

Greece in debt to the tune of $44K per person.

U.S. in debt to the tune of $45K per person. Oh please raise the debt ceiling so the morons in Washington can spend us out of debt.

[Mkitty is pro kitty]

How about Germany? World's second biggest exporter, high union, high regulations...

We're NOT going to let it get to the point of Greece.

And we're NOT going to let it get to the point of Somalia, either. And what country should we be emulating? Where's that Super Free Market Capitalist Country?

[formerexpat]

Where's that Super Free Market Capitalist Country?

We are one of a kind. That's why we had such appeal to the best and brightest of all the other countries of the world.

The last thing you want to do is move towards the failed European model and lose that competitive advantage.

I wouldn't call Germany high union membership at under 20%. Now Italy at over 50% is high.

And regulations aren't bad. Germany, in many respects, have much more sensible regulations. Within healthcare, for example, they don't allow for frivolous and out of control lawsuits. As a result their doctors pay 1/10th the amount for their liability insurance compared to American doctors - and I'd guess defensive medicine is a hell of a lot less.

Where exactly did we solve that problem in Obamacare?

[eastcoastliberal]

Zakaria is spot on. We can easily fix our budget deficits with tax hikes.

[deziloooooo]

Jun 24, 2011 21:40:11 GMT -5 eastcoastliberal said:

Zakaria is spot on. We can easily fix our budget deficits with tax hikes.

Tax reform is important , and definitly cut expendatures, have to visit all the entitlments, also defense too...but it took awhile to get here, doesn't have to be done all at once , in a day so to speak...and investment by government in new technologies..seed Money, encourage..for the 21 st century industries, to make sure leadership is here , not elsewhere, we owe that to our future, especially since we will be taking away entitlement gurantees from them , so to make up for that, do all we as a nation that we can that there will be employment , good employment for the future ..least we can do.. that is our sacrifice for them.

That is not a dem or a pub sense..just good sense..

[Deleted]

Medicare must be cut before the debt ceiling is raised.

[ed1066]

Jun 24, 2011 22:15:49 GMT -5 @hardcorerepublican said:

Medicare must be cut before the debt ceiling is raised.

I was trying to respond to your last lame PM to me and , lo and behold, you were banned AGAIN, so I couldn't. Slow down, will ya, so I can get a word in, OK?

[magichat]

Jun 24, 2011 17:18:18 GMT -5 Mkitty is pro kitty said:

How about Germany? World's second biggest exporter, high union, high regulations...

We're NOT going to let it get to the point of Greece.

And we're NOT going to let it get to the point of Somalia, either. And what country should we be emulating? Where's that Super Free Market Capitalist Country?

We had it in this country until democrats and republicans screwed it up, please review the defintion of classical liberalism. Is this the 4th time I've pointed this out to you?

[reasonfreedom]

Jun 24, 2011 21:40:11 GMT -5 eastcoastliberal said:

Zakaria is spot on. We can easily fix our budget deficits with tax hikes.

We would have to hike taxes to over 50% plus cut spending to get out of the debt we have now. David Walker (ex-head of GAO) had shown the calculations in the I.O.U.S.A film. That is across the board too, can you afford that?

[Mkitty is pro kitty]

We are one of a kind.

We're number one in income disparity among industrialized nations. And with tax rates, isn't it an odd coincidence that the ones that have very low tax rates end up being like Central America or Somalia. Is that what we want to emulate?

We had it in this country until democrats and republicans screwed it up,

So, like 1800 and something, kinda before things like the industrial revolution really kicked in. So do you have anything other than wistful yearnings for a simpler time? Why don't you log off the dangfangled internet and churn some butter if you're going to shoehorn that into the conversation.

please review the defintion of classical liberalism.

I asked for a modern day example of that so called "super capitalist" whatever Conservatives are wanting. Please review what a non sequitor and being a preachy bore is before you go on another one of your high horsed tirades.

Is this the 4th time I've pointed this out to you?

I don't know, I don't pay much attention to you. Either provide an example of a MODERN (not something from last century, you know before things like superhighways and things that cost billions) successful capitalist country or STFU. Go play your broken record elsewhere; it's rather childish and OCDish to shoehorn that "classical liberalism" rant then complain about having to point it out to me.


Edited to remove name calling. MKitty, you know that is not allowed.


~MDW, Moderator

[jkapp]

>>Quote:We are one of a kind.



We're number one in income disparity among industrialized nations. And with tax rates, isn't it an odd coincidence that the ones that have very low tax rates end up being like Central America or Somalia. Is that what we want to emulate?<<

LOL...and we are in the best shape financially than those with lesser income disparities.

Emulating Spain, Greece, and the like is not that great, either, if we want to actually keep the nation from dying ecnomically. Of course, maybe that's your wish?

[skweet]

Fareed is right, albeit with his typical progressive liberal point of view. We are different than Greece, but that is in part because we haven't run off all of our "rain-makers", whereas Greece has. I don't know if the numbers of $44k per person in Greece and $45k per person in US are accurate, but I know that I carry $2MM in debt more comfortable than many people can carry a $10k car loan. It is simply a difference in strength, volume and diversity of profits and cash flow. The second part that he is right about is that we could tax our way out, but he forgets we could, also "cut-expenses" our way out too. Ultimately either choice we make we will force our consumers to bail us out, and they must as they were the beneficiary of our past "mis"-balancing choices. If we raise taxes (on the rich, or whomever), then consumers will pay higher prices for all goods and services, ultimately that is where taxes are collected. If we cut social programs, then consumers will have to purchase certain goods and services from the private which used to be provided by the gov't teet. The Socialist view (not Stalin, but the same economic ideals that he espoused) such as Zakaria's will want the government to take more, and give more (many republicans have agreed with this economic policy btw), big powerful government makes politicians more powerful. The Capitalist leaning people will want the government to shrink to the funding that is available (the starve the beast plan), thereby making government, and politicians, less powerful. Either way, the solution is within our reach, without resorting to default, and the consumer will have to pay about the same price with either choice. And Mr. Zakaria, please state that you are writing a pure opinion piece if you are going to leave out one side of the story.

[skweet]

<We're number one in income disparity among industrialized nations. And with tax rates, isn't it an odd coincidence that the ones that have very low tax rates end up being like Central America or Somalia. Is that what we want to emulate?>
We have a greater number of richer, rich people, and thank God, because they pay the bills for our social programs. Want to have fun, compare the disparity between our poor and the poor of other nations. And it gets worse the gap between US's poor and the poor of the rest of the world continues to spread, we must do something.