In less than one week Americans will head to the polls to elect the next leader of the free world. While some claim that there is not much difference between the major parties and the visions they present for our future, the difference could not be starker. Lost in the whirlwind of ads about side issues and memes including Big Bird, binders and bayonets the critical issue is whether Americans want to emulate the Greek model or return to the tried and true American model.
The problem facing Greece is not simply that they have a welfare state, or a large government. Other nations have governments that spend a large portion of national GDP (annual economic output) that are not facing the economic chaos experienced by the Greeks. Sweden is a prime example of a nation with a government that is deeply embedded in the economy. No one would accuse Sweden of being a bastion of free market capitalism yet when faced with an economic crunch in the 1990s the government trimmed its sails and adjusted its methods. Samuel Gregg at The American Spectator noted the impressive results:
Greece on the other hand took advantage of the low interest rates that came with its membership in the European Monetary Union and use of the euro and continued spending and borrowing. The Greek government was not especially strong financially when it was admitted into the euro but was able to borrow money at the same rate as economies like Germany. As debt in Greece climbed so did concerns about the government’s ability to meet its obligations. If the Greek government was not able to roll its debt over and defaulted on payments it would affect the entire euro zone. The ratio of government debt to GDP in Greece grew past the 100% mark reaching 189% earlier this month.
The European Union and others stepped in to provide loans and assist in the restructuring of Greek debt in an attempt to stabilize the situation and save the euro. Greece is but the first euro zone member to be affected with Ireland, Italy and Spain also experiencing high debt to GDP levels, bank insolvency and possible default on sovereign debt. Italy and Spain, respectively the eighth and twelfth largest economies in the world, are greater cause for concern because their default or collapse would mean the end of the euro.
Because of their financial hardship and dependence on other organizations for their survival these nations are losing control of their future. In order to continue to receive support the Greeks have been forced to implement several rounds of austerity measures, with the latest demand being the imposition of a six day work week. Italians had their new Prime Minister ‘chosen‘ for them by the European Central Bank.
Federal spending in the United States has reached 24% of GDP during the course of the Obama administration, the highest since the end of World War II. This rate stands in contrast to the 18% rate of spending during the Clinton administration. The national debt has grown since the end of World War II but economic growth held down the debt as a percentage of GDP and kept it at a manageable level. Increasing Federal spending has been tied to expanding entitlements which now consume 62% of the Federal budget. President Obama further increased spending with the stimulus bill, cash for clunkers, loan guarantees to failing green energy firms and Obamacare while Senate Democrats have refused to pass a budget since 2009. The Federal government has been funded through a series of continuing resolutions that have essentially kept government spending at record highs. In 2008 candidate Obama labeled the $4 trillion in debt run up under President Bush as unpatriotic and then as President he went ahead and added a similar amount in half the time.
The national debt of the United States recently crossed the $16 trillion mark and passed 100% of GDP. With a debt that is set to be double GDP by 2037 if nothing changes the US could soon find itself at the mercy of its creditors and unfriendly international organizations. At that point discussions about puppets, women’s rights and funding for the military will be moot. Someone else will be calling the shots and we will have to go along, in short, we will have lost control of our destiny.
When voters go to the polls to cast their ballot for President the state of the economy should be the first issue on their minds. Which candidate will work to restore sanity to the federal budget? Which candidate understands that adults have to make trade offs when choosing where to allocate limited resources? Which candidate understands that robbing future generations for the benefit of the present is not compassionate but callous?
In a few short days we will find out if Americans know the answer.