Greek Prime Minister George Papandreou is set to announce a new cabinet in a concessionary move as he seeks support for new austerity measures. (BBC)
There are two events in the world right now that the citizens of the United States should pay very close attention to. First, Europe, currently in the manifestation of the riots in Greece.
Second, Canada, where the idea of what is essential seems skewed.
Let us start in Greece, where, along with Portugal, Spain and Ireland, is on the verge of not only bankruptcy, but defaulting on its loans. When you or I default, those holding the paper get something back. Car, house, first born child. But when a country defaults, it is not like the movers come in and scoop up the Parthenon. It is worse. For starters, everything the Greek government does, such as paying for…oh, wait, it has no money, it cannot pay for things, like roads, or salaries, or pensions. Then there are those left holding the bag. I can assure you that includes you and me in this case. Banks will take significant losses, similar to those of the housing crash in late 2007, early 2008. Stocks and bonds could become worthless, the Euro, the US dollar and the Yen will be impacted, causing prices to go up, most likely, and that could start the cycle of another recession – or re-entrench us in the one that we are still, for all practical purposes, in.
But why should the U.S. pay attention? For a couple of reasons. First, like Greece, there are a number of very large, very financially shaky pension funds that need to be addressed. The most recent one is a result of the cancelling of the Space Shuttle program. The US government, in the form of NASA is on the hook to fund that fund. But it is not the only one. Second, the United States is currently taking in much less money, in the form of taxes, than it need to just keep its head above water and pay back the interest on the debt, much less start paying down the principle. Finally, there is an increasingly large, disassociated middle class that is looking for an excuse to create havoc or take back the country as the Tea Party people would have us believe.
Sadly, there are even fewer solutions. Raising income taxes is not going to be well received when most people are having trouble making ends meet, and raising corporate taxes, while a viable solution, is also not seen a something that is politically smart. Couple this with an increasingly elderly population, who cannot afford their medical costs, a new population of elderly that have no pensions, or means and a society that has very little in terms of long term savings, and you are looking at a very grim situation.
And then there are those who hold the paper. Countries like China and Saudi Arabia. What sort of terms do you think they might be willing to negotiate to keep from foreclosing? I can assure you they will not be favourable to the United States.
Meanwhile, north of the border there are two interesting strikes going on. One, CUPW (the Canadian Union of Postal Workers) have been staging rolling strikes over…pension benefits (I detect a theme). So Canada Post, in an effort to mitigate the situation and take control has locked them out. Yes, that is correct. They have locked out the postal workers. Currently no mail is being delivered in Canada. But as strange as that sounds, it is not as strange as Air Canada’s situation. The employees at Air Canada went on strike (over … you guessed it…pensions) and in less than twelve hours later had been ordered back to work by the Federal Government. And yet the post offices remain closed.
Unions are getting a very bad name, both in the United States and in the formerly union friendly Great White North because most people, not in the union, see them as little more than squabbling children, fighting for an entitlement that most of the citizenry does not have. And that is why the United States needs to be paying particular attention. The unions in the US still have some weight, but they also have huge pension funds – and not all of them are healthy. And you can be sure some of them are carrying not only US debt, but European debt as well. If Greece falls, we could be plunged into a very long, very deep depression.
It is really time for the politicians on both sides of the border to stop playing politics and start making the hard choices. There are several programs and projects that can be cut, either to reduce spending or to redirect funds to other, more critical needs. But this is not the time to be cutting safety net programs. The writing is on the wall, these programs will be needed sooner, rather than later. If the number of unrepresented unemployed is any indication, there are far more Americans out of work, than are being reported. And that is a very, very, scary statistic. Just look at what idle hands are doing in the Middle East.