Greece is in trouble because its government spends a lot more than it raises in taxes and because their society allocates a lot of resources to the unproductive and/or non-working. How did the U.S. Congress respond to this crisis today? Our leaders cut the payroll tax while maintaining growing government spending and simultaneously continued the practice of paying former workers to stay home and play Xbox for more than one year.
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What did you expect? Raising taxes and cutting benefits doesn’t win elections.
Always thought US’s response to Greece would be to fund their government. Paying 75% if your income in taxes is still obscene, even if the 10% comprised by the progressive tax is lower than 20 years ago.
In fairness, it wasn’t a response to the European debt crisis, and the extension is only temporary, to get them past the 2012 elections. I think it’s more fair to characterize this as a “kick the can down the road” kind of decision.
It’s not a policy decision, it’s a stall tactic. We can only hope that the new Congress will make an actual policy decision (one way or the other), rather than repeating the same.
David: The extension is “only temporary”? The debt occasioned by sending government checks to non-working Americans will not be temporary. And “kick the can down the road” means “load up today’s children with debt”.
http://www.opencongress.org/bill/110-s2544/show seems to indicate that the “Emergency Unemployment Compensation Act of 2008” was introduced in January 22, 2008. So the “emergency” is now more than four years old. This makes “years of Xbox” more a structural part of our economy than a temporary vacation from reality. Structurally we are becoming more than more like Greece. Of course, one could argue that this a good thing, e.g., that Greeks enjoy an earlier retirement and a better lifestyle and that not too many Greeks have to work late due to fears of competition or unemployment (since so many either work for the government or in an environment where their government restricts competition). But that doesn’t seem to be what folks are arguing…
Philip,
Your point about extended unemployment insurance payments is well made. Though the current method of apportioning and (not) financing those payments is obviously unsustainable, it is becoming very clear that our economy is going to have to face even more major restructuring over the coming years.
Demographically, we are going to have an increasing number of retirees and the “permanent” unemployed. Those permanent unemployed are people whose jobs in manufacturing and agriculture have either been shipped overseas, replaced by expensive but relatively fixed-cost automation, or been filled by illegal immigrants. I’d call these the “first tier” unemployed, people who, in there old jobs, were directly productive, turning one thing into another and generating value. Most of the job losses here have probably already happened.
There will be a greater number of “second tier” unemployed. These will be the service sector employees whose jobs disappear due to the loss of the first tier’s jobs. This unemployment will probably be highly regional, hitting the Midwest and Plains most sharply. These job losses are probably just beginning, mainly due to inertia in the economy.
Then there will be some “third tier” losses, of general job losses in the white-collar world due to the lower overall economic output from the first two tiers. This will probably be minor compared to the first two.
Regardless, the picture here is one of a large number of jobs that are gone and are not going to return, no matter what the government or private sector cook up. Like it or not, we can’t really be an entire nation of programmers, investment bankers, and real estate agents. It is quite clear that some economic framework that can deal with these growing number of non-workers while maintaining a proper economic incentive structure for the rest of the nation will have to emerge, or the US really will be in the same situation as Greece within a few decades.
Josh: I don’t think that there is any inherent requirement that the percentage of workers in the U.S. (out of the total population) will fall. People respond to incentives. When the California state government offers a $241,000 pension starting at 51 to a firefighter (see http://online.wsj.com/article/SB124804047828063059.html.html on Pete Nowicki ), the guy reasonably responds by retiring. If at age 52 the checks stopped flowing from Sacramento, he would presumably respond by finding a job of some sort.
In countries where it isn’t possible to get government checks every month you don’t see widespread starvation. You might see people taking whatever jobs they can find at fairly low wages, but there is always a job out there for someone who wants to work.