Imagine, if you will, a guy who fills out a loan application, but lies on it about his current financial situation, or he tells the truth about his bad situation but signs a promise to get his financial house in order if he can get this loan. Now let’s say he doesn’t make the changes he promised, but spends the money on the same things that got him into the mess he was in before the loan. When it’s time to make payments on the loan, he complains he doesn’t have the money and wants to renegotiate the terms of the existing loan and get a new one.
You’re the loan officer. What do you do? The guy’s telling you he needs the money to eat and to pay his other bills. But he didn’t change his free-spending ways like he promised and now he’s in a bind again. Is it prudent to give more cash to a guy who can’t change his spending habits, and can’t repay what you’ve already given him?
No, it’s not. That’s not being heartless; that’s just being a good steward of the bank’s money. And if you keep giving this guy money, and he doesn’t repay it, what about the depositors who’s money it is that you’re handing out? When they need their money, where will it be?
The guy I’m talking about is the country of Greece. And just like Margaret Thatcher’s description, their socialism was working great, right up until they ran out of other people’s money. You can only soak the rich for so long, and so they went to the European and international banks for bailouts. And more bailouts. But each time, though they promised to mend their free-spending, socialist ways, they didn’t and wound up in the same situation.
There are 2 major problems that this situation has highlighted. First, the European Union has certainly caused state sovereignty to seep out of the individual countries, such that it’s understandable why citizens of Greece would be insisting that the EU be held at least partially responsible. If Greece must bow to the EU on some matters, the EU must be willing to help. With great power-grabs come great responsibility.
But the other major problem is one that our own country needs to come to terms with. The Greek government got in over its head with promises it made to various groups. Welfare, pension, and other government payments got to the point where merely servicing those was drowning the country in debt. They made the promises, so they had to keep them. And when the government over-promised, the people voted in politicians who would give them more stuff, until the government had to tax and tax, and borrow and borrow, to keep up. And all that taxing and borrowing reduces economic growth and devalues the currency. So more taxing and more borrowing, and the death spiral continues.
So then, who should pay for the bad choices of the Greek people? Should we allow the Greeks to default on their obligations, and then have the German and the French people have to bail out their banks? How in the world is that fair? “But what about the Greek people?”, those on the Left were asking when those Greek people voted to stiff their creditors. “Why should they be punished for the actions of their government?” Well, because they voted for the guy who squandered the money and walked into the bank to ask for more. And if the Greeks are let off the hook, there are other European countries looking to try the same ploy. I’m looking at you, Spain, Portugal and Italy.
The problem is that the Greeks poked a big hole in their own boat, and no amount of bailing by themselves will keep them afloat. More bailers, if you will, would help, and the EU is going to continue to help in the bailing, but the Greeks need to agree to quit making the hole bigger, and take steps to plug it. That’s going to take some hard choices on their part, but that’s the problem with socialism. Once you get used to the idea of free money and benefits, you get to thinking that they are your “right”. Going back to fiscal responsibility is a much harder road to travel.
The Greeks are learning that lesson. Well, I hope they are. I’m not so sure after they voted to default on their loans. I also hope that we’ll learn it, too. But I begin to wonder about my fellow countrymen when I see how popular presidential candidate Bernie Sanders is, who is an avowed socialist. “Ignore the News, Vote for Sanders!”