EJ Dionne is an ardent left-winger whose columns appear regularly in the Albuquerque Journal. I tend not to agree with much of what he writes, but found his recent column which attempts to separate the US future from Greece’s present to be particularly troubling.
He trots out the usual leftist arguments about the stimulus needing to be bigger and argues that Greece would be better off if it had a strong central government to aggressively stimulate its economy; then he rhapsodizes about the bank bailouts and the fact that the federal government was also not aggressive enough in pursing those; Lastly, he praises the Federal Reserve and its power to keep a united banking system in line as opposed to Europe’s fragmented system.
This all misses the forest for the trees. Greece is a small nation. It is more like an individual US state. If Greece were allowed to fail and were forced to abandon the Euro, the rest of Europe would be just fine. True, the European Union is mis-designed in the sense that it calls for a single currency while giving individual nations the ability to set their own banking and spending policies and this is a problem that the US Constitution avoided, but Dionne does nothing to contradict the point that if America continues to over-spend, we’ll have a fiscal crisis and riots in the streets. The difference is that there will be no one (except possibly the Chinese) to bail us out.
Greece will only be saved by a combination of labor market/regulatory/fiscal reforms that increase productivity and reduce government spending. The United States will only be saved by a combination of these same reforms with the same result. Clearly, we are a bigger, more powerful, perhaps even “too big to fail” nation on Greece’s trajectory. And lest you think that hope is lost, look no further than Canada which relied on a variety of free market reforms to pull itself out of an economic nosedive.