Follow-up on Comments -- Fiscal Responsibility

It's great to receive comments to these postings.  Many have shown up and they deserve attention.  For the moment, let's start with the newest.

Two reader's comments appear at the end of the most recent post from February 8.  If I am understanding them, the message from both comments seems to be summed up in the closing statement in the first one.  In that statement, the writer is advocating for a governmental fiscal policy "that is tied to well defined objectives of balance and growth."

Makes sense to me.

We can accomplish this here in America if we choose to make electoral decisions that support "balance and growth" as the writer concluded in the comment.

Current events in Greece and Europe are showing us what can happen to any country that does not plan for appropriate balance and growth.  Greece is much different from the United States, but what is learned at that country's expense can be applied here and help us to do better without experiencing the pain and suffering that the Greeks are sustaining now.

The Greek government has just accepted the austerity measures demanded by its lenders of last resort:  Germany, the European Central Bank, the International Monetary Fund and others.  Apparently, Greece will now receive funding that its government needs to continue running the country and to avoid a "disorderly default" on its sovereign debt.

So far, so good, but only for the short run.

The only long-term solution for Greece is lots of growth, and it should be growth that begins sooner rather than later.  The growth must be accompanied by good governance and compliance with balanced tax laws on the part of its people and its businesses.  They got themselves into a lot of debt in the past, and now they either have to pay it off or default on it in some way.  Those are the only choices, and both will cost them dearly for many years yet to come.

The long-term solution is a pretty basic formula, but we don't hear much about the growth part of that equation in all the debt relief drama that's been going on over in Europe.

Without growth the situation for Greece just gets worse, no matter how much fiscal austerity is imposed on the country.  In fact, additional austerity is likely to exacerbate the problem.

Buried deep within today's Los Angeles Times story on Greece is a prophetic comment by the German Finance Minister.  Here's the excerpt from the story:  "Last week, German Finance Minister Wolfgang Schaeuble told lawmakers in Berlin that the bailout plan would leave Greece's debt as high as 136% of gross domestic product by 2020. That's even more unbearable than the 120% foreseen in the deal being negotiated."  (The emphasis is mine; it's not in the newspaper.)  You can read the entire article by clicking here.

It comes down to this:  Without some kind of planning and stimulus for growth, the sovereign debt problems in Greece will become worse over time, even with the so-called bailout plan.  Fiscal austerity by itself creates a sucking bog for those who are forced to become austere, especially if there is no end in sight to the regime of austerity.  This is irresponsible fiscal and governing policy on the part of the European governments.

Here's what this means to me:  Beware of politicians bearing only austerity gifts, because that is just half of the fiscal equation.