Do American States And Municipalities Believe They Can Play Greek Games And Get Away With It?
Published in The Tennessean, Sunday, May 20, 2012 and
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by Richard J. Grant
Athens was not built in a day. Whatever its geographical
advantages and disadvantages throughout the centuries, the attitudes and
decisions of its citizens have played no small part in its fate to the present
day. Although we might wish to look fondly on Greek contributions to philosophy
and culture, recent political choices have wrought economic and cultural
consequences that have made the word “Greece” synonymous with “failure.”
As if to demonstrate that there are no Third World countries,
but only Third World governments, recent Greek governments have raised
expectations and spent far more than they are capable of collecting as tax
revenue. The corruption and economic stagnation that accompany the growth of any
government’s reach and power, untempered by respect for private property rights,
now threaten all those foolish enough to promise bailout money.
Many of the same people who just voted for socialist
political parties now withdraw as much cash as possible from their bank
accounts. Everyone knows that an exit from the euro would be engineered only to
enable the Greek government to issue its own currency in the hope that it might
use that power to tax away from its citizens the purchasing power that they
will not freely give up.
Someone must pay for government spending. If an informed electorate
is willing to accept the commensurate tax rates, then it is sustainable.
Seemingly unaware that First World status is social capital that
must be maintained through eternal vigilance, the government of the United
States has heaped new regulatory burdens upon its citizens, and 40 percent of its
annual spending is borrowed. Were Archimedes an economist, he might now warn us
that with a bit more leverage we too could move toward Greece.
California has just discovered that its budget deficit will rise
to almost double what was predicted at the beginning of the year. Many of the
same Californians who voted for higher spending, higher tax rates, and heavier
regulations have been moving to more-conservative, lower-tax states such as
Tennessee.
Even states like Tennessee have pockets of foolishness. Nashville’s
mayor is requesting a 13-percent increase in property-tax rates. In case
taxpayers balk, they are threatened with police layoffs and reductions in
teacher hiring – a classic political ploy. Knowing that such services are
voters’ highest priorities, the mayor acts as though they are his lowest
priorities, which he would cut first.
Three years ago, the Metro government accepted an $8 million
federal grant to hire 50 police officers. But the money would have to be paid
back if Metro failed to keep the officers after three years. With this explicit
obligation and the expectation of sufficient future property-tax revenues,
Nashville’s government leveraged its property speculation.
Now the city is forced to do what it should have done before:
live within its means and set its own priorities. Instead, it jeopardized its
10th Amendment protections by taking federal grants with the inevitable strings
attached.
On joining the European Union, Greece put its sovereignty at
risk. The profligacy and shortsighted governance that led to its dependence on
bailouts gradually reduced the value of that sovereignty.
Living on the confidence of past prosperity, many American
states and municipalities believe they can play the same game and get away with
it. It might be a long way from Nashville to Athens, but they have more in
common than a Parthenon.
Richard J. Grant is a Professor
of Finance and Economics at Lipscomb University and a Senior Fellow at the Beacon Center of Tennessee.
His column appears on Sundays.
E-mail messages received at: rjg@richardjgrant.com
Follow on Twitter: @RichardJGrant1