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Investors.com-Greece, and Us

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While Washington haggles away over the debt ceiling, Greece has just passed a huge austerity package that will make Greeks pay and pay for years. As much for us as for them, that's the price of ignoring runaway spending.

Greece, which has turned government into a vehicle for special interests seeking their own slices of the pie, where voters are unable to quit electing socialists, is a textbook example of a nation that ignored its debt, let it snowball and now is paying a price.

The reckoning came Wednesday, with Greece's parliament passing a $40 billion austerity package to qualify for the last tranche of an International Monetary Fund bailout.The act went against every political instinct any of these free-spending politicians had, but they had no choice. "What stops socialism? Only bankruptcy, I fear," Victor Davis Hanson has observed.

That force -- bankruptcy -- was strong enough to collapse the Soviet empire in 1991, the Spanish empire in 1652, China's Manchu Dynasty in 1839, Chile in 1973, Argentina in 2001, Greece now and, the hard fact is, America, if its politicians remain in denial about spending.

In the U.S., congressional Republicans are trying to force their Democratic counterparts to agree to spending cuts in exchange for lifting the debt ceiling to avoid a default on Aug. 2 -- and the Democrats remain in denial, with President Obama refusing to meet with Senate Republicans, such as Kentucky Sen. Mitch McConnell, who has sought to consult the president.

The sorry situation appears even worse when one looks at the Democratic smear against the one man who's trying to avoid a Greek repeat here: Rep. Paul Ryan, R-Wis., who has been humiliated and lied about as someone intent on stealing grandma's check, when the reality is, he's trying to defeat the same bankruptcy monster that took down Greece.

Greeks have nothing to look forward to in the new austerity regime intended to keep their government afloat.

For starters, they face massive tax hikes in the next two years -- whatever it takes to raise 2.32 billion euros this year, 3.38 billion in 2012 -- and three smaller hikes in the next three years. The self-employed will be taxed with a flat rate, paying whether they earn anything or not, based on the fact they're expected to try to evade taxes.

Social security gets slashed by 1.09 billion euros this year, with more cutbacks over the next four. Means testing will be employed, and the retirement age goes up from 61 to 65. Health spending will be cut by more than 2 billion euros through 2014. Education gets a cut, too.

Public employee union members, the big champions of government spending, will see their salaries cut 15%.

There's far more, and it's a bitter pill. The one thing it shows is that as a situation is allowed to deteriorate, the options diminish for any meaningful reform. Not one Greek change is likely to create economic growth. Instead, austerity is the bill coming due, the piper getting paid, and our fate too if Congress doesn't heed the lesson.


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