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On the Road to Greece

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Greece continues to provide a fantastic reality check for the American people. The Greek government continued spending more than it was bringing in with taxes. Rather than slash spending, it borrowed the difference. It kept piling debt on top of debt. Finally, the mountain of government debt got so high that lenders were no longer willing to lend more money. The gig was up. The Greek government lacked the tax revenues to pay its bills and was unable to find sufficient lenders to enable it to continue its profligate ways.

Many statists, both in Greece and here in the United States, look upon government as a Santa Claus, a glorious entity that has an infinite amount of goodies to distribute to the citizenry. Others view the government as just another player in the marketplace—like any private business making money.

That’s just not reality. The government isn’t a Santa Claus and it doesn’t earn money providing goods and services that people are willing to pay for, as private firms do. Instead, the government gets its money from taxation. It seizes people’s money and then uses that money to fund its welfare-state (or warfare-state) programs. And the more it taxes, the more it shrinks the private sector, thereby exacerbating the problem.

This reality is mugging people in the face in Greece. According to an article in today’s New York Times, the Greek government is going after Greek citizens with harsher tax collection methods. Not surprisingly, that’s not going too well. In Archanes, a team of tax collectors swept into the city, “going from restaurant to restaurant demanding tax receipts and financial records. Soon, customers annoyed by the holiday disruption confronted them. Pushing, shoving and angry words followed, and, eventually the frightened inspectors were forced to flee.”

One restaurant owner, Nikolis Geniatakis, expressed his solution to the problem: “What were the tax inspectors doing here? Why aren’t they going after the big fish?”

The great 19th-century thinker Frederic Bastiat summed up this attitude perfectly when he said: “The state is the great fiction by which everyone tries to live at the expense of everyone else.”

In other words, people say: “Give me my welfare, but don’t tax me to get it. Tax everyone else instead.” But with everyone saying that, what is the state to do?

One thing it does is just go out and borrow the money. That way everyone is made to think that he’s getting the dole for free. That’s what the Greek government has done. It’s what the U.S. government has done and continues to do.

The problem is that ultimately the chickens come home to roost. For a while, it’s possible to continue refinancing the debt as it comes due and to continue mounting new debt on top of the old debt. But finally, the amount of debt gets so high that tax revenues are simply insufficient to pay for the government’s expenditures, including interest on the debt. That’s when it’s bankruptcy time. And that’s also when it’s time for the tax collectors to go out and ruthlessly seize whatever they can from whomever they can find.

Notice how similar Greeks are to welfare-statists here in America. They want their welfare state to continue. They want their government to continue paying out the dole. But everyone wants everyone else to pay for it. Better yet, they want German, American, or other foreign taxpayers to pay for it. The last thing they want the government to do is to reduce or eliminate the dole.

Another route governments have historically taken is to simply print the money to pay off its debt and to continue spending more than it’s receiving in tax revenues. That’s what inflation is all about—a process by which the government intentionally inflates the money supply in order to keep the welfare-state (and warfare-state) game going.

The advantage of this approach, from the standpoint of the government, is that many people have no idea of what the government is doing to them. They just see rising prices, which are a reflection of the monetary debasement, and blame the rising prices on rapaciousness and greed within the private sector.  They can’t see that what the government is doing is just imposing a secret, fraudulent tax on the citizenry.

The Greek experience continues to remind Americans of the bad direction that the federal government is taking our nation. Too much debt is a bad thing, a principle reflected by the congressionally imposed debt ceiling. If lots of debt was beneficial, Congress would never have set a ceiling on the amount of debt that the federal government could accumulate.

Obviously, slashing spending isn’t ideal from a libertarian standpoint, given that it leaves welfare-warfare state programs intact, albeit with reduced spending. The libertarian ideal is to dismantle welfare-warfare state programs. But from a fiscal standpoint, the best thing that could happen to Americans is for the federal government to match expenditures to tax receipts. Otherwise, the United States will continue traveling the road to Greece.

This post was written by:

Jacob G. Hornberger is founder and president of The Future of Freedom Foundation. He was born and raised in Laredo, Texas, and received his B.A. in economics from Virginia Military Institute and his law degree from the University of Texas. He was a trial attorney for twelve years in Texas. He also was an adjunct professor at the University of Dallas, where he taught law and economics. In 1987, Mr. Hornberger left the practice of law to become director of programs at the Foundation for Economic Education. He has advanced freedom and free markets on talk-radio stations all across the country as well as on Fox News’ Neil Cavuto and Greta van Susteren shows and he appeared as a regular commentator on Judge Andrew Napolitano’s show Freedom Watch. View these interviews at LewRockwell.com and from Full Context. Send him email.