Greece is bankrupt. And although Greece's bankruptcy is headline news this week—Greece's weak finances threaten the stability of the euro, the common European currency—the truth is that Greece has been bankrupt for years. Its budget deficit in 2009 was 12.7 percent of GDP. Overall debt was 113.4 percent of GDP. Those are not figures that can be achieved overnight.
Consider that the EU has pegged the Eurozone countries as responsible for keeping their budget deficit under 3%. At 12.7%, Greece has quadrupled and then some the deficit guidelines. And Ms. Applebaum notes that among the Euro countries, Greece is not alone:
The political class is aware of the country's economic problems, but it denies them. Last month, the European Commission issued a report accusing Greece's finance ministry and statistical service of "severe irregularities" stemming from "the submission of incorrect data." In eurospeak, that means the commissioners think the Greeks have been lying: That 12.7 percent budget deficit was originally forecast to be 3.7 percent, and plenty of other figures coming out of Greece seem to have been way off. No country makes accounting errors like that by accident.
Greece shares its financial weaknesses with several other European countries (nowadays referred to—really!—as the PIGS: Portugal, Italy—or sometimes Ireland—Greece, and Spain). But in a different sense, Greece's weaknesses are also shared by the United States. Though we do not have precisely the same problems, we do have a similar level of political paralysis and a similar level of partisanship. It is not possible to reform U.S. Social Security: President Bush tried halfheartedly and gave up before he started. It may not be possible to reform health care, either: Hillary Clinton failed, and President Obama, despite throwing in expensive sweeteners, may well fail. The influence of lobbyists cannot be reduced. The power of interest groups to influence legislation cannot be tamed.
We recently had a houseguest from Athens in Boca for a few days and she railed against "the crooks in politics." I once had dinner in DC one-on-one with the brother of the current Prime Minister, who explained to me patiently how the institutionalized corruption in Greece penetrates to every level in Greek society and can be found in every nook and cranny. The system, whose Greek name I've forgotten [it begins with an "r"] demands almost universal participation in avoiding taxes to the government and other ingenious ways to keep the capitalist roots of Greece hale and hardy out in the boondocks.
But in its own far more widespread way, the United States is on the road to the same fate as the PIIGS [although Ireland is showing signs of belt-tightening and serious reforms] and the massive tome Kenneth Rogoff and Carmen Reinhart assembled,This Time is Different, Eight Centuries of Financial Folly, identifies pre-crisis patterns that recur with eerie consistency in 66 "country cases" over eight centuries. The single best road to financial collapse is deficit spending, and we know how much little o wants to follow that path. Anne is harsh about the USA's future going out a decade or two:
...aside from our very large budget deficit—at the moment, 9.9 percent of GDP and climbing—we also have liabilities that are rarely acknowledged. The costs of Medicare and Medicaid are going up, as is the cost of veterans care. Markets assume that the vast debts of Fannie Mae and Freddie Mac are underwritten by the government, and someday the government might be called upon to pay them. No one is lying about these things, but no one is talking about them very much, either.
The good news is that the American government's bankruptcy is not on the front pages, and it won't be for many years: Our sheer size, our entrepreneurship, and our relatively open business culture will keep us going for a long time. But the Greek crisis shows that the combination of debt and political deadlock can be deadly. The catharsis we feel as we watch it unfold—that Aristotelian combination of pity and fear—should shock us far more than it has so far.
And inevitably, as Greek tragedies show us, the worst part of the catharsis is anagnorisis, the moment we find out that we are our own worst enemy and the cause of our own downfall.