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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsGreece isn't to Socialistic, it's too Republican
The social safety net has been in operation for years without bankrupting Greece. It took the "free market" Banks to put them in the hole. And now it still isn't the social programs they can't afford, it's that the people, especially the wealthy, just don't pay taxes.
http://www.nytimes.com/2012/06/06/business/global/greece-warns-of-going-broke-as-taxes-dry-up.html?_r=1
It's the "taxes are bad for the country" mentality that has screwed them. that's not socialist Democrats, that's good ol' Tea Party Republicans.
Egalitarian Thug
(12,448 posts)Wounded Bear
(58,706 posts)and nothing is because of the things they do and support.
edhopper
(33,615 posts)"we are going to turn into Greece" That might be true, but only if they get there way, not because of Democratic policies!
PoliticAverse
(26,366 posts)Yeah cause they could borrow money to pay for it. Eventually the debt gets so big that the well dries up.
Financing yearly expenses by borrowing just isn't sustainable.
edhopper
(33,615 posts)It was the bank failures that put them in crisis and the money they are borrowing are mostly to prop up the banks, NOT provide for the people.
And as the article states, a big problem is the failure of many, especially the wealthy, to pay taxes. Austerity has been a complete failure throughout Europe.
4th law of robotics
(6,801 posts)We've been pulling water out of aquifers in the southwest to sustain agriculture for more than 4 decades.
So far the wells haven't run dry.
That doesn't mean it's sustainable.
The crises just hasn't hit yet.
We have a bit more flexibility because we print our own currency but ultimately we will have to face up to the same problem the greeks are going through.
Long term debt is not sustainable.
edhopper
(33,615 posts)the debt is from a failure to collect taxes from those that owe and the bailout of the Banks. Not the social safety net.
4th law of robotics
(6,801 posts)one is that debts are sustainable as you stated above, but they are not.
The other is that it isn't the social safety net but the failure of the Greek government to collect taxes that is the problem. On this most people agree (although I disagree with you that it is *only* the rich not paying their taxes).
Either way the reason for being forced in to austerity by others isn't the belief that austerity will magically solve everything. It's because the Greeks have shown they are unwilling to actually crack down on tax evaders. So with their only option to raise more revenue off the table the only other alternative is to cut spending.
Ideally they would crack down on their shadow economy and collect the roughly 30% more in taxes that they are losing every year to evaders. They won't. It's too enshrined in their national psyche. So that doesn't leave a lot of options.
edhopper
(33,615 posts)There does seem to be a belief in Europe that austerity will solve things, though the evidence contradicts it. They are trying it in Spain and Britain and Portugal and Ireland, with disastrous results. I don't think they are trying to get Greece to make them collect taxes, I think they want to save the Banks at the expense of the poor.
4th law of robotics
(6,801 posts)and you've been running on deficits so long no one will extend you any more credit?
edhopper
(33,615 posts)pampango
(24,692 posts)and you don't want to know which party that is.
hack89
(39,171 posts)global trade is conducted in euros or dollars. Those drachmas will be worthless - who in their right mind.would accept payment in drachmas.
edhopper
(33,615 posts)4th law of robotics
(6,801 posts)Icelands problems were that the private banking companies took on too much bad debt and risked collapsed. It wasn't public debt tied to the governments inability to raise revenue.
And Sweden is doing alright.
girl gone mad
(20,634 posts)Private debt levels expanded greatly in the years leading up to the crisis. Public debt levels were relatively stable. It wasn't until the crisis hit that the public debt levels soared as those bad bank debts were pushed onto the sovereign balance sheet.
When our banks socialized their losses, we printed to cover these toxic debts. Then we expanded our deficit through stimulus, tax cuts and automatic stabilizers to halt our depressionary trajectory. Greece (and Spain, Ireland, etc.) was unable do the same because they are essentially chained to an ersatz gold standard.
Greece should exit the Euro, then improve tax collections (an extremely over-hyped issue, in my view). Once Greece restores currency sovereignty, they will have the flexibility to stimulate their economy as needed and they can devalue their currency to be trade competitive. The longer they wait, the more they lose out on the advantages of an early exit.
hack89
(39,171 posts)they applied for admission last year.
Sweden has a strong and dynamic economy coupled to an efficient government and a populace that willingly pays high taxes. Greece has none of those.
4th law of robotics
(6,801 posts)it was preventable in the past but now I don't really see a way around it either.
Of course that doesn't eliminate the underlying problem. It merely gives them some greater control over their monetary policy allowing them a bit of flexibility.
If they don't fix the underlying problems this will happen again whether they leave or not.
girl gone mad
(20,634 posts)That's it, really.
You can try to blame tax collections, but get serious. If tax collections were indeed the problem, Greece would be confronting inflation, not deflation. If tax avoidance and tax evasion were to blame, Germany, the UK and the USA would be right there in the same boat with Greece.
Greece cannot be competitive on the Euro and now Greece is forced to borrow from the broken capital markets just to fund its basic government operations - a position no modern first world nation should be in.
4th law of robotics
(6,801 posts)I present reams of evidence and the only response I get is "no".
Not "no . . . because . . . " and then sources to back it up.
Just no.
It's like arguing with a not particularly creative creationist.
-as you can see by this fossil evidence . .
"no"
Well really it's irrefutable at this point.
"no"
But the vast weight of evidence . . .
"no"
Sigh.
You could cover the entire country of Greece in the reports done on their rampant tax evasion (NO!). Even the Greeks themselves acknowledge it's a problem (NO!). And that failure to raise sufficient tax revenue (NO!) is a serious problem (NO!).
My training is in science. So I really don't know what to do with this rhetoric style. In my experience if you want to refute what someone says you have to provide a reason. Just standing up and yelling "NU UH!!!!!" during a presentation will get you politely escorted out of the conference.
edhopper
(33,615 posts)girl gone mad's evidence that is not social spending, but the bank failures turned into sovereign debt that is the real culprit. Coupled with the inability to manage their own currency, as Iceland and Sweden did.
I do not find your point that austerity is the irrefutable answer, well...irrefutable.
4th law of robotics
(6,801 posts)She made a claim.
She didn't present any evidence to back it up.
Just like "god told me so" is perfectly acceptable evidence for some people though I suppose that is sufficient for the true-believers.
edhopper
(33,615 posts)seems their debt exploded with the banking crisis. Not from years social spending.
My initial point remains. Their problem is from private banks and not enough revenue and NOT too much social spending. Dem vs Rep viewpoints.
4th law of robotics
(6,801 posts)As you can clearly see Greece's debt and other Euro-zone nations increased as a result of the crises.
As you can also clearly see Greece carried a much higher debt than anyone else during the *good* years and now the rest of the Euro-zone, with this crises, is still not as bad off debtwise as Greece was during the boom years.
Do you acknowledge this?
edhopper
(33,615 posts)So I suppose you think Japan is worse than Greece?
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4th law of robotics
(6,801 posts)and everyone else that perhaps Greece had some issues going in that made them uniquely vulnerable (like say their inability to raise sufficient revenue due to tax evasion no matter what the economic situation)?
edhopper
(33,615 posts)and not the Democratic idea of a social safety net that is the problem. This was brought to a crisis by the bank failures and the decision of the Euro Central Bank to keep the banks afloat rather than go the Iceland and Sweden route. All that money going into Greece isn't for the populace, it's to shore up the failing banks. And in turn they are demanding the people suffer through useless austerity. Which is only making things worse. As it is in Spain, Britain, Ireland, Portugal, Italy......
4th law of robotics
(6,801 posts)they aren't avoiding paying their taxes because they don't think the state has the right to collect taxes. They're doing it because there is no penalty in not paying your taxes.
It's a combination of wanting a social safety net but not wanting to pay for it. Which doesn't mesh nicely with any american party.
Iceland/Sweden both go after tax evaders. You cannot compare them with Greece.
edhopper
(33,615 posts)Please read my OP.
I was referring to how those two countries dealt with the banks. Shut em down, nationalize, recapitalize. Not pour good money after bad on them.
girl gone mad
(20,634 posts)Period.
Greece's tax collections were stable. In fact, as a percentage of GDP, Greece's tax collections were increasing before the crisis hit.
Why on earth are you blaming Greece's troubles on an underlying factor that was improving? You call me a creationist? You are arguing against the available evidence.
You have no answers to the questions I've posed to you.
How would increasing tax collections benefit Greece now, in the midst of a deflationary depression?
Why is Greece suffering a deflationary depression if the problem is insufficient taxation?
How can insufficient taxation be the cause of the crisis when lower rates of taxation did not cause a similar crisis in the years before?
How can you still blame insufficient taxation when Greece continues to collect more (as a %GDP) in taxes than before the crisis, yet their situation is only deteriorating?
Think about it, genius.
Could it be that perhaps your taxation theory is complete garbage?
4th law of robotics
(6,801 posts)they aren't in the position of convincing outside investors to subsidize their spending.
Very different.
girl gone mad
(20,634 posts)not poor tax collections, caused the crisis in Greece.
Once again, Greece's debt levels remained stable right up until the banks' maniacal global debt frenzy came crashing to a halt.
Greece had no problem funding its sovereign debt in the capital markets in the years preceding the financial crisis. Most of the financial institutions funding Greece's debt were very astute organizations, with access to the best financial analysts in the world. They looked at the data, did the analysis and bought the bonds at market rates. No one was holding a gun to their heads and forcing them to purchase Greek debt throughout those years.
The Eurozone was always doomed to disaster subsequent to a severe financial crisis. As Wynne Godley wrote in 1992,
In other words, this was an entirely predictable series of events brought about by short-sighted technocrats who decided a currency union sans fiscal and political union would be a good experiment for Europe. When the crisis hit around the world, monetarily sovereign nations were able to print, spend, lower taxes and increase deficits as needed to restore some semblance of fiscal balance. Monetarily non-sovereign nations such as Greece were forced to rely on the broken capital markets right at the worst possible moment to fund their sovereign debts, newly bloated with transferred toxic bank debts.
Greek politicians won lousy terms for exchange on entry into the Euro and as a result Greece was never trade competitive within the EMU. Germany was the victor at Maastricht. German banks were also big winners in the Greek bailout packages, with virtually all of the funds doled out by the Troika returning to the coffers of European financial elite within days.
The lesson here is that no country should sign away its currency sovereignty, especially in return for so little.
Chan790
(20,176 posts)The problem is that austerity doesn't work...as a repeatedly-proven failure-of-policy, it should be out of consideration too.
That leaves two less options on the table.
At this point, I'm in favor of letting the banks fail...and forcing Germany to eat the loss on the funds they lent. Cost of doing business, cost of pushing austerity for the Germans. At least it's easier to rebuilt from a total Greek collapse than a 3/4 Greek collapse.
4th law of robotics
(6,801 posts)Saying "screw you, we're going to welch on our debts" will get you out of the immediate debt crises.
But it doesn't change the fact that without collecting more revenue (by enforcing tax laws or magic, both are equally likely) or by cutting spending (unpopular) they will still be running a deficit.
You cannot run a deficit if you can't raise credit unless you're planning on printing your own money by exiting the Euro and dealing with massive runaway inflation (which works out to austerity in everything but name; doubling social spending when the currency drops to a tenth of its original value is still a cut no matter how you spin it).
Please explain how they are going to raise the funds necessary to cover their current expenses, or even more if they decide to try a stimulus, without being able to raise tax revenue or get credit.
4th law of robotics
(6,801 posts)not just the rich, most Greeks participate in this.
And they aren't doing it out of some conviction that the government should be smaller or anything like that. It's simply because they would rather keep their money and there's no social or legal reason for them not to evade taxes (people are fine with knowing that you're a tax evader and while it is technically illegal it is well worth the risk due to poor enforcement).
HiPointDem
(20,729 posts)4th law of robotics
(6,801 posts)and I know that no matter how many sources I post you won't believe it but here you go:
http://www.theatlantic.com/business/archive/2010/02/how-tax-evasion-is-complicating-greek-rescue-efforts/36365/
http://www.thinkonthat.com/archives/1055
http://en.wikipedia.org/wiki/Economy_of_Greece#Taxation_and_tax_evasion
http://articles.cnn.com/2011-10-27/world/world_europe_greece-tax-evasion_1_tax-evasion-prime-minister-george-papandreou-income-taxes?_s=PM:EUROPE
I know I won't convince you but I am curious at the motivation behind this denial: could you explain to me why you refuse to acknowledge that Greeks have a higher than average rate of tax evasion?
girl gone mad
(20,634 posts)the wealthy evading taxes in the U.S., corporations purchasing politicians to avoid any and all taxes, our insanely bloated tax code full of loopholes and shelters, and average citizens not paying taxes on under the table transactions (increasingly common in the U.S.).
The reality for the average Greek citizen is that their taxes are automatically collected from their paychecks and VAT is collected at the time of purchase of goods. The reality for the average Greek citizen is that these taxes are extremely burdensome.
This narrative is just a distraction.
4th law of robotics
(6,801 posts)maybe in total number of articles, perhaps. But not in terms of rates of a tax evasion.
Yes, all countries have shirkers.
But it is not evenly distributed. More people (as a percentage) evade their taxes in Greece than most other first world countries (possibly all, but they're definitely in the top tier on this).
The reality for the average Greek citizen is that their taxes are automatically collected from their paychecks and VAT is collected at the time of purchase of goods. The reality for the average Greek citizen is that these taxes are extremely burdensome.
If only there were some way to get around this automatic tax. Something dark and shady. Like a "shadow" economy or something.
But of course they would never think of that: http://www.telegraph.co.uk/finance/financialcrisis/8770724/Greeces-shadow-economy-raises-fresh-fears.html
/greeces shadow economy for reference is just under twice what it is in Germany.
So same question to you: why, in light of overwhelming evidence, do you find it impossible to accept that tax evasion is a significant problem in Greece and not just at the top but throughout society?
TheKentuckian
(25,029 posts)Austerity will crush demand and reduce possible revenues which will feedback into more demands for austerity. Eventually, they will be destroyed as a functional society and there will be nothing else to cut and a massively depressed economy with no demand.
I see no way that this will make matters anything but worse.
If Greece can be forced into an insane exercise in austerity then if tax collection/policy is the problem (and little doubt it is a piece of it) then they can be forced into tax reform but there is a global agenda that doesn't want that, they want the austerity even though it will definitely weaken the economy by crippling demand which means less revenues.
Of course the wealthy are the main culprit, they have all the damn money. Maybe Greece's wealth differential isn't nearly as out of whack as ours but I suspect it is very significant.
The "shadow economy" is significantly fueled by austerity, what response would one expect? Especially, from the majority of people that have their taxes deducted making evasion rather difficult who are going to take the brunt anyway.
Your preferred choice isn't an option if the goal is to fix the economy. What other choice is a poorly structured statement considering the absolute lack of option the default position is.
4th law of robotics
(6,801 posts)You claim that shadow economy, that has been a problem for generations, is caused by austerity in 2012.
That kind of mental gymnastics is hard to counter. At that point it's a matter of faith, not reason.
And I never said austerity was the best solution to a broken economy. I said it was their only option left at this point.
Just like it's better to treat an infection with 50 cents worth of antibiotics rather than amputate the limb. BUT . . if you let it persist too long amputation is the only option left.
girl gone mad
(20,634 posts)Last edited Sat Jun 9, 2012, 11:59 PM - Edit history (1)
There Is No Alternative but to force the Greek masses to suffer and starve and live in misery so the financial elite extract every last ounce of profit.
This right wing neoliberal garbage doesn't belong on a progressive forum.
4th law of robotics
(6,801 posts)Given: they cannot raise more revenue via taxation because they refuse to enforce tax laws.
They cannot get more money in loans because no one trusts them to repay those loans.
And they refuse to cut spending.
Challenge: you cannot use magic.
Alright: go!
girl gone mad
(20,634 posts)Nobody can seriously blame tax evasion for this. It has happened because 60,000 small firms and family businesses have gone bankrupt since the summer.
The VAT rate for food and drink rose from 13pc to 23pc in September to comply with EU-IMF Troika demands. The revenue effect has been overwhelmed by the contraction of the economy.
Overall tax receipts fell 7pc year-on-year.
This is a damning indictment of the EU-imposed strategy. Greece is chasing its tail. The budget deficit is stuck near 8pc to 9pc of GDP because the economic base is shrinking so fast.
You are pushing for a solution which has already failed and can only continue to fail. You need to drop the pre-copernican neoliberal economic framework and confront the real world as it exists, not as you imagine it to exist.
The more budgets are cut and the more taxes are increased, the weaker an economy becomes. To survive long term, a government without currency sovereignty must have a positive balance of payments. Austerity leads to poverty and civil disorder. Learn the difference between monetarily sovereign governments and monetarily non-sovereign governments. That is what you need to know to understand why Greece is in crisis and Japan is not, why Ireland is in crisis and the U.S. is not, etc.
pampango
(24,692 posts)said Nikos Lekkas chief of Greek Tax Police Authority. The tax evasion in his country amounts to 12 and 15 percent of annual economic output. "If we could recover even half of them, Greece would have solved its problem."
http://www.faz.net/aktuell/wirtschaft/europas-schuldenkrise/frau-lagarde-hat-recht-steuerfahnder-beklagt-griechische-zahlungsmoral-11777804.html
There are several cases of Tax exemptions under the Greek taxation system::
Proceeds from the sale of shares that are traded on the Athens Stock Exchange.
Income from ships and shipping.
A dividend received from a Greek company.
Capital gain from sale of a business between family members, as defined by law.
http://en.wikipedia.org/wiki/Taxation_in_Greece
Something tells me that the Greek 99% don't benefit much from tax exemptions on stock market profits, income from shipping and dividends paid by Greek companies. While Greeks are right to fight 'austerity' imposed from the outside (it impacts the 99% not the 1% who caused the problem), they need to revamp their domestic tax collection system as well.
AJTheMan
(288 posts)Maybe Greece should borrow like we do. I mean, for the time being.
edhopper
(33,615 posts)it's about Spain but could equally apply to Greece.
Who the PTB are really concerned about. The populace or the Banking elite?
With one hundred billion Euros, you could employ (or just give free money to) half of Spain's unemployed for a year at an annual salary of about 34,000 euros.