Few Greeks work producing products or services which outsiders want to buy, other than the Greek ruins. Therefore there is little income and profits that can be saved and reinvested for future growth.

Even fewer Greeks pay taxes to generate government revenue with which to pay entitlements. Without tax revenue, borrowing is the only source of funds.

So, the Greek socialist government issued sovereign debt in the form of Euro bonds at low Euro interest rates and used the borrowed money to pay the entitlements.

European banks, mainly the French and German banks, bought the bonds and treated them as rock solid assets on their balance sheets. After all, those bonds were “sovereign debt” with the full faith and credit of the national government.

Comes the recession which followed the worldwide financial crisis and with it hard times for all of Europe.

Now when it comes time to repay the Greek debt, Greece has no money, no tax revenue, so it borrows more money form the ECB, EU and the IMF. (NB: U.S. taxpayers contribute to IMF loans!)

This doesn’t sit well with the German workers whose taxes are going to subsidize Greek welfare benefits freely given to socialist Greek freeloaders.

So this time the lenders want assurances that Greece will eventually be able to repay the new loans, thus the ECB, EU and IMF impose conditions to the loans, mainly that the socialists entitlements be cut back, this so the government won’t need so much money in the future.

Well cutting entitlements doesn’t sit well with Socialists freeloaders, so the Greek citizens protest, clash with police, and riot.

Conclusion:

1. Greek freeloaders are protesting because hard-working Germans won’t continue to support Greek slothful lifestyles.
2. The EU continues to bail out Greece because if Greece defaults, the European banks collapse because their balance sheets are under water with all the bad Greek paper.
3. If the European banks fail, there will be another worldwide financial crisis and a run on the Euro with a potential disintegration of the European Union.
4. Finally, Greece as one of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) is only the first bubble to pop. It doesn’t look good for Europe.

Now that you’ve endured, Greece For Dummies, I submit a more intelligent level of discourse is in order. For that please enjoy Daniel Mitchell’s Cato post, Should American Taxpayers Finance Another Big Fat Greek Bailout?

“Chaos,” “a headache,” “turmoil,” “craziness,” “confused,” “wild,” “uncontrolled” are just a few of the words the Washington press corps has used to describe the ensuing late-night debates. There’s a far better word for what happened: democracy. It has been eons since the nation’s elected representatives have had to study harder, debate with such earnestness, or commit themselves so publicly. Yes, it is messy. Yes, it is unpredictable. But as this Presidents Day approaches, it’s a fabulous thing to behold.”

Exercising their foremost and ancient power, descended from England, the power of the purse our elected representatives did their jobs. “There were amendments to prohibit funds for the mortgage-modification program (Darrell Issa, R., Calif.), for wasteful broadband grants (Jim Matheson, D., Utah), for further TSA full-body scanning machines (Rush Holt, D., N.J.), for the salaries of State Department envoys tasked with shutting Guantanamo Bay (Tim Huelskamp, R., Kan.). And amendments designed to cut off funding for IRS agents enforcing ObamaCare.”

Contrast this with the Pelosi-Reid-Obama RAILROAD. Bills drafted in back rooms by power brokers, put to a vote without reading or debate. Democrats offered amendments last night, something Republicans could not do under Pelosi. One such Democrat amendment was to continue funding road signs bragging about the stimulus. Republicans disagreed with one another, unheard of among Democrats in Pelosi’s House. Boehner even lost a major defense project for his own district, the second engine for the F-35 Joint Strike Fighter. Again, unheard of under Pelosi.

I received an email this afternoon announcing the results of a heated two hour part of that debate on an issue of concern to me, my taxpayer dollars going to fund abortions indirectly by grants to Planned Parenthood. “And today, the U.S. House of Representatives — by an
overwhelming majority vote of 240 to 185 — voted to DEFUND PLANNED PARENTHOOD!” Not exactly what you think of when you list the proper functions of government!

One might have asked long ago, why do our hard earned dollars pay for a lot of non-governmental functions. Things like NPR, ACORN and the National Endowment for the Arts. The point is that now, at least, our representatives are asking and as Kim Strassel concludes, “Long may that last.”

Aha, the ethanol monster raises its ugly head! This blog has discussed the horrible economic and environmental impact of ethanol several times. See for instance: Flushing Your Money Down the Drain and Gore Took His Profits…Can Congress Take Its Losses?. Congress of course did not take its losses but continued on the path of subsidy, mandates and restraint of trade that is the foundation of ethanol.

The impenetrable roadblock to economic rationality here is the union between the big farm lobby and the environmental lobby. Corporate farmers dominate. They are rent-seekers pure and simple. They take your hard earned dollars all the was to the bank as compensation for producing a useless product that absent government mandates no one would buy. The environmentalists are emotional tree huggers grasping at pseudo science to satisfy the need to feel good. These two are often on different sides of an issue, but here they are in bed together.

What is sad to me is to see intelligent politicians like Newt Gingrich support and are paid by the farm lobby. I guess everyone has his price. And no political party is immune to the trade!

Think of it, without government policies to promote home ownership among people who can’t afford to own a home, we would not have had the recent financial crisis, the effects of which we are still suffering.

Peter Wallinson’s WSJ op-ed today, What’s So Special About the 30-Year Mortgage? challenges the policy. Wallinson was a dissenting member of the President’s Financial Crisis Inquiry Commission, a commission in which dissent didn’t much matter as the President didn’t follow its recommendations. Wallinson focuses on the 30-year mortgage asking if it is only available with government support and is the government support good policy? He answers both in the negative and argues that letting taxpayers stand the losses attendant to the policy is simply wrong.

A quick comparison of mortgage payments will illustrate: The difference in payments between a 30 and a 15 year mortgage of $100,000 at 6% is $244.31 per month with the 15 year mortgage costing that much more. But with the 30 year mortgage the debtor is required to pay a full $107,919 over the final 15 years of the 30 year term, this because principal amortizes more slowly over the 30 year term.

In short the government policy creates an unnecessary risk for the U.S. taxpayers. It makes no since to subsidize people who buy homes, particularly homes they cannot afford to buy. So the mortgage interest tax deduction should be eliminated. Freddie and Fannie should be eliminated on a orderly basis. And government should quit misallocating capital in the process.

His darling objects of “investments” are silly misallocations of capital. Bullet trains are not feasible, uneconomic, and if implemented would run into slower moving freight trains. Now freight trains are feasible and economic. There is a demand for freight trains, a private demand. This unlike the lack of demand for passenger trains, witness Amtrack, kept on life support by the taxpayers.

Photovoltaic shingles are another silly boondoggle. These like their wind farm cousins are darlings of the environmental liberals. They are economically unsustainable. They require taxpayer and ratepayer subsidies and mandates and they still don’t make economic sense. In short they are the green energy equivalent of ethanol and you are paying for them.

Underlying the president’s thinking is the simple belief that government can allocate capital better than the private market. There are many of us who think that is foolish, who realize that the government generally speaking wastes money. But knowing that the government will waste almost everything it touches presents an opportunity to clever business people.

One such, is Jeff Immelt, CEO of GE, now the head of the president’s jobs council. Economists have a term for businesses that seek to gain competitive advantage by subsidies, restrictions, and protective tariffs. They are called “rent seekers.” GE has been and continues to be expert at rent seeking. Whether in wind turbines, rail, healthcare, or finance GE is well represented in Washington.

Yesterday’s WSJ opinion piece, The Great Misallocators, sets our the common bond between Obama’s big government and Immelt’s big business. “Less laudable is Mr. Immelt’s habit of inviting government to be his business partner and promoter. In his 2008 letter to shareholders, the CEO declared that the financial crisis and election of Mr. Obama meant that the U.S. economy had been fundamentally “reset.”

“His key line: “The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”

So instead of allowing you to decide what to invest in, the president will tax you now and your children and grandchildren later to pay for the enormous government debt. He will run that tax money through a federal bureaucracy which has grown dramatically during his term. And he will “invest” what little remains in bullet trains and green shingles and such. These that would not be seriously considered on an economic, stand alone basis.

And while the rent seekers may temporarily profit, in the long run they will lose whatever competitive culture they had and replace it with slothful government dependency. Sadly though, in the end America will be the loser.

“Milton Friedman correctly argued in 1999 that the “real cost of government—the total tax burden—equals what government spends plus the cost to the public of complying with government mandates and regulations and of calculating, paying, and taking measures to avoid taxes.” He added, “Anything that reduces that real cost—lower government spending, elimination of costly regulations on individuals or businesses, simplification of explicit taxes—is a tax reform.”

Just think of that simple observation and put it alongside with the runaway regulatory environment wrought by Obama. The EPA plans to regulate the breath you exhale from one end or the other! The FCC likewise with your freedom of email and web based speech. HHS with Obamacare favors and penalties for both unions and states, not to mention individuals. Financial services regulators do overburdened with Dodd-Frank that they can’t get new rules out quickly enough.

Top these administrative dictates off with Obamacare, Financial Regulation,  Cap and Trade proposals, and the ongoing Fannie-Freddie mess and its aftermath, and you have the perfect storm for explosive government costs. Obama’s feint at regulatory restraint a couple of days ago, was just that, nice sounding words with little substance when it comes to the important issues restraining growth.

So Friedman’s maxim bears analysis. Think of the man hours, expensive man hours, spent, no wasted, in compliance, or workarounds to obviate compliance. How much better could the time be spent. How much better could the dollars thus spent be invested in potentially productive endeavors! The same is true for paying or not paying taxes under our complex tax structure. What a needless waste of time and money, both of which could be put to better use.

The article goes on to suggest candidates for elimination and they are numerous: The discretionary spending binge since 2007. Obamacare. Fannie/Freddie subsidies. Farm subsidies like Ethanol. And eventually, no soon, a serious reform of Medicare, Medicaid, and Social Security. All of these are a cancer some slowly, some rapidly bankrupting the nation.

The call is to wake up; time is rapidly running out.

For example, “In Seattle, prosecutors and supervisors at the city’s electric utility both have formed collective bargaining units in the past year, while in central Minnesota, managers at a regional library system have created its first union of any kind. In Sacramento County, Calif., a group that includes management engineers and lawyers nine months ago voted to become a collective bargaining unit for the first time.”

Let’s see if we can imagine how the bargaining will take place with union member negotiating with union member. Monty Python’s “Life of Brian” comes to mind:

The only redeeming news is that union membership has dropped both in the private and public sectors. As you would expect, though, while the private sector membership in the last decade has dropped by 2% the public sector has dropped by only 1/2%. “The 7.6 million government workers in unions made up more than half of the 14.7 million workers in the U.S. who belonged to a union last year, with the state and local government sectors among the most heavily unionized in the economy.”

Do you think it’s time for the taxpayers to form a union and call a strike!

I speak of an op-ed in today’s edition of that bastion of elite journalism, the Reno Gazette Journal, by Tom Harris and Elliott Parker. Harris is a professor of “resource economics” and more frighteningly “director of the University Center for Economic Development.” Parker is a professor and chairman of economics at UNR’s College of Business.

The article, What is the effect of taxes on state economies? compares Nevada’s GDP growth to the “share” of GDP “provided by state and local governments” during the past 45 years and concludes that Nevada’s small government did not cause it to be the fastest growing state! No correlation here. Yeah, how about that?

Being economists, however, they struggle and find a strong correlation between real GDP growth and and “lagged growth rate of its state and local government!” Whew! I was worried about that.

Perhaps our good professors don’t realize that Nevada’s state and local government spending has grown more than the population growth plus inflation with little to show for it save deficits and unfunded liabilities. Or perhaps they aren’t aware of the slight deficit problem here caused to a great extent by public employee unions at the local level. Or perhaps they don’t read the Wall Street Journal which published the following chart in discussing spendthrift Illinois and the great migrations away from the tax, borrow and spend fools in state governments.

Anyway, back to the article, our authors continue searching for a reason for the non correlation in one case and strong correlation in the other. “One way to look at it is that state and local governments provide essential public goods that cannot be adequately provided by the private sector, such as roads and education. While higher taxes might create some disincentives for private investment and growth, many of these public goods are necessary investments for the private sector to function.”

I love that “essential public goods that cannot be adequately provided by the private sector.” And they use education as an example, later stating that “without good public education, the private sector lacks the educated work force it needs.” Nevada public education is at the bottom of the barrel and the more money we throw at it the worse it gets. Oh, but our professors are in the education business, a business whose prices dramatically outpace inflation and in truth outpace value delivered.

But what’s the point of the article, well it’s an exposition of the Keynesian multiplier. You know the one Obama rolled out for his stimulus billions. Government spends a dollar which creates $1.50 in GDP. It’s as if that dollar comes out of thin air. In truth that dollar is taxed currently or borrowed and repaid with later taxes (grandchildren look out!). In either case there has been a misallocation of what could have been productive capital.

Ah, but our good professors use the Keynes multiplier in reverse, a dollar reduced in state or local government spending will diminish GDP by $1.62! “Firing a school teacher means less money is spent by that teacher on rent, food and other goods!” They fail to mention that the teacher might be deadwood kept on in tenure by the infamous teachers union which accounts for a significant portion of the current deficit and unfunded liabilities. But the real sin is that the dollar saved by firing that non productive teacher might have been invested and produced $10 dollars in GDP.

Finally they elevate the sin to the level of a crime in discussing the multiplier effect. “Economists teach this to every first-year student in macroeconomics, and estimates from real data consistently find it to be true.” This of course is not true, not even a half truth as Obama has demonstrated.

Besides, if this were true we should all go to work for the government, since there is no “essential public good” it doesn’t seem to have its hand in.