WASHINGTON -- To understand the pertinence to America of events in Greece notice General Motors most recent misbehavior. A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears.
In the commercial Whitacre says GM has repaid our government loan in full. Rep. Paul Ryan R-Wis. noted that GM used government funds to pay back the government: It simply transferred $6.7 billion from one taxpayer-funded TARP account to another. The government still owns 60.8 percent of GMs common equity and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds dispersed to the automotive industry.
When Ryan and two colleagues asked the Treasury Department for clarification they got this careful reply: Treasury has never suggested that the loan repayment represented a full return of all government assistance. A Treasury press release did say GM Repays Treasury Loan in Full. The loan is however a small part of taxpayer exposure. Under crony capitalism when government and corporate America merge both dissemble.
Now American taxpayers also own a little bit of a small nation. They provide the U.S. contribution of 17 percent of the assets of the International Monetary Fund which is giving Greece $39 billion (the IMF also is contributing $321 billion to a stabilization fund for other eurozone nations with debt problems). So the U.S. government which would borrow 42 cents of every dollar it spends under the presidents 2011 budget is borrowing to rescue Greece and others from the consequences of their borrowing.
That nation whose GDP is below that of the Dallas-Fort Worth metropolitan area is too big to fail meaning too inconveniently connected to too many big banks. Bailing out Greece really rescues European banks that improvidently bought Greek bonds. Visit here for a useful New York Times graphic illustrating how European nations borrow from one another. For example Italy owes France (French banks) $511 billion a sum nearly equal to 20 percent of Frances GDP. About one-third of Portugals debt is held by Spain which has $238 billion of its debt held by Germany and $220 billion by France. Russell Roberts of George Mason University notes that this discourages prudence and wariness because when everyone has financed everyone else you can justify bailing everyone out.
At the Parthenon last week the Greek Communist Party which got 8 percent of the vote in the last national election draped banners emblazoned with the hammer and sickle: Peoples of Europe Rise Up. Of course. Arise ye prisoners of starvation exhorts The Internationale the lefts ancient anthem. But who is to arise against whom?
Time was the European left said it spoke for horny-handed sons of toil oppressed in dark Satanic mills. But Athens so-called anti-government mobs have been composed mostly of government employees going berserk about threats to their entitlements. Even Greek air force pilots went on strike. The government unable to say how many employees it has promises to count them. It cannot fire many of them because article 103 paragraph 4 of the Greek constitution says: Civil servants holding posts provided by law shall be permanent so long as these posts exist.
Americas projected $9.7 trillion in budget deficits in this decade will drive the nations debt to 90 percent of GDP (Greeces is 124 percent). So some people say that to avoid a Greek-style crisis America should adopt a value-added tax (VAT). But Europes most troubled nations -- the PIIGS: Portugal Ireland Italy Greece and Spain -- have VATs of 20 percent 21 percent 20 percent 21 percent and 16 percent respectively. As part of its austerity penance the Greek government is going to give itself more money by raising its VAT to 23 percent.
Germans are furious about being the biggest bailers in this bailout of a nation where tax evasion is pandemic. They have not been assuaged by being told by their chancellor Angela Merkel that the stakes are stupendous: Their money will save Europe. Hearing that Greeks bearing banners proclaiming Out with the IMF might think:
Why accept austerity (as that is understood in Greece -- no more annual bonuses of two months salary no more retirement at 53)? Suppose after pocketing some of the bailout we just threaten to collapse and make a mess of Europe?
Greece now knows the terrific strength of weakness. Beware of Greeks -- or any other people -- receiving gifts.
georgewill@washpost.com
WASHINGTON -- To understand the pertinence to America of events in Greece notice General Motors most recent misbehavior. A television commercial featuring CEO Ed Whitacre demonstrates the institutional murkiness and intellectual dishonesty that result when the line between public and private sectors disappears.
In the commercial Whitacre says GM has repaid our government loan in full. Rep. Paul Ryan R-Wis. noted that GM used government funds to pay back the government: It simply transferred $6.7 billion from one taxpayer-funded TARP account to another. The government still owns 60.8 percent of GMs common equity and the Congressional Budget Office projects that the government will lose about $34 billion of the $82 billion of TARP funds dispersed to the automotive industry.
When Ryan and two colleagues asked the Treasury Department for clarification they got this careful reply: Treasury has never suggested that the loan repayment represented a full return of all government assistance. A Treasury press release did say GM Repays Treasury Loan in Full. The loan is however a small part of taxpayer exposure. Under crony capitalism when government and corporate America merge both dissemble.
Now American taxpayers also own a little bit of a small nation. They provide the U.S. contribution of 17 percent of the assets of the International Monetary Fund which is giving Greece $39 billion (the IMF also is contributing $321 billion to a stabilization fund for other eurozone nations with debt problems). So the U.S. government which would borrow 42 cents of every dollar it spends under the presidents 2011 budget is borrowing to rescue Greece and others from the consequences of their borrowing.
That nation whose GDP is below that of the Dallas-Fort Worth metropolitan area is too big to fail meaning too inconveniently connected to too many big banks. Bailing out Greece really rescues European banks that improvidently bought Greek bonds. Visit here for a useful New York Times graphic illustrating how European nations borrow from one another. For example Italy owes France (French banks) $511 billion a sum nearly equal to 20 percent of Frances GDP. About one-third of Portugals debt is held by Spain which has $238 billion of its debt held by Germany and $220 billion by France. Russell Roberts of George Mason University notes that this discourages prudence and wariness because when everyone has financed everyone else you can justify bailing everyone out.
At the Parthenon last week the Greek Communist Party which got 8 percent of the vote in the last national election draped banners emblazoned with the hammer and sickle: Peoples of Europe Rise Up. Of course. Arise ye prisoners of starvation exhorts The Internationale the lefts ancient anthem. But who is to arise against whom?
Time was the European left said it spoke for horny-handed sons of toil oppressed in dark Satanic mills. But Athens so-called anti-government mobs have been composed mostly of government employees going berserk about threats to their entitlements. Even Greek air force pilots went on strike. The government unable to say how many employees it has promises to count them. It cannot fire many of them because article 103 paragraph 4 of the Greek constitution says: Civil servants holding posts provided by law shall be permanent so long as these posts exist.
Americas projected $9.7 trillion in budget deficits in this decade will drive the nations debt to 90 percent of GDP (Greeces is 124 percent). So some people say that to avoid a Greek-style crisis America should adopt a value-added tax (VAT). But Europes most troubled nations -- the PIIGS: Portugal Ireland Italy Greece and Spain -- have VATs of 20 percent 21 percent 20 percent 21 percent and 16 percent respectively. As part of its austerity penance the Greek government is going to give itself more money by raising its VAT to 23 percent.
Germans are furious about being the biggest bailers in this bailout of a nation where tax evasion is pandemic. They have not been assuaged by being told by their chancellor Angela Merkel that the stakes are stupendous: Their money will save Europe. Hearing that Greeks bearing banners proclaiming Out with the IMF might think:
Why accept austerity (as that is understood in Greece -- no more annual bonuses of two months salary no more retirement at 53)? Suppose after pocketing some of the bailout we just threaten to collapse and make a mess of Europe?
Greece now knows the terrific strength of weakness. Beware of Greeks -- or any other people -- receiving gifts.
georgewill@washpost.com
