Will U.S. leaders learn lesson from Europe's fiscal crisis
Last week’s elections in France and Greece may spell disaster for the financial future of both nations. France elected an avowed socialist, one Francois Hollande, to replace more conservative Nicolas Sarkozy. Message? Forget fiscal austerity, spend, spend, spend.
Greece, that nation in perpetual chaos, decided it was better to elect the center-right New Democracy party (11 seats of 300 in parliament, which was a loss of 34 percent of seats held after the 2009 election, and the Socialist Party, which had controlled Green for decades, was only able to garner 14 percent of the votes cast. So the Socialists decided to form a coalition with the radical left, the Syriza Party, which opposes the terms of Greece’s agreement with its foreign lenders.
There in lies the problem: the leftist coalition in Greece and the Socialists in France want nothing to do with austerity, or curbing their appetite for entitlements, even though the results of such a mind set will lead to national bankruptcy for both nations. However, because France and Greece are tied inextricably to the European community, their fate may seal the fate for other European nations. If Europe fails to gain control of its economic infrastructure, it could case Europe and the world into a depression.
How does this impact the U.S.? Trade with Europe could, in essence, grind to a halt. That would further limit U.S. growth and have the potential to sideline more American workers as the U.S. economy struggles to climb out of its economic pit. More unemployment, home foreclosures and business closures could spell disaster here at home.
What’s the solution? It’s far greater than any one person could ever outline in a brief editorial. However, without spending cuts, lower taxes on individuals and businesses, one thing is certain — the U.S. will follow Greece and France into economic chaos and eventual disintegration.
Nobel winners for economics like Milton Friedman, Robert Lucas and Edward Prescott argue that the current Keynesian policies are counterproductive to long-term fiscal responsibility, whereas supply side economic policies and establishing rational expectations is more likely to put people back to work, grow the economy, fill the nation’s coffers full and generate business and industrial expansion.
It’s a safe bet that if we take our medicine now, it will be a much smaller pill to swallow, than if we wait, and remain on our current path ending up in a fiscal crisis like France or Greece.
Ultimately, it’s our choice. We elect the leaders that shoot square with us, or elect those who feed us a line that only leads to ruin. Believe it or not that does impact all of us.