Conventional wisdom holds that “you can’t have your cake and eat it too.”
That is unless you live under a socialist government in cahoots with central bankers. Then you can have all the cake you want and eat it to your heart’s content.
Until, of course, you run out of other people’s cake.
The crisis in Greece illustrates this reality perfectly. But despite the warning, it seems like the United States is hell-bent on following a similar path.
Bailouts from the European Union (EU) and International Monetary Fund (IMF) allowed Greeks to continue to reap the benefits of a bloated welfare state. Health care, education, unemployment benefits, housing benefits – the entitlement list goes on and on, all on the government dime. But the money spigot long ago ran dry. Now, with the EU reluctant to pitch in more euros without significant reforms aimed at addressing government spending and debt, Greece has a real problem.
Now that the Greek people have it, they don’t want to give up their stuff. Last weekend, Greeks went to the polls and voted to forgo austerity. In other words, they want to keep right on eating their cake.
The entire situation reveals a couple of important truths.
1. Money isn’t infinite.
2. Governments have no money of their own.
Without taxpayers, government gets nothing. Loans and bailouts become the only revenue sources. Once other people get tired of baking cake, the system begins to collapse.
A structural problem exists in the Greek system. Along with a robust welfare state that discourages work, the pension system in Greece allowed vast numbers of workers to retire from the workforce at a relatively young age. According to the Guardian, “pensions are now the main – and often only – source of income for just under 49% of Greek families, compared to 36% who rely mainly on salaries.”
On top of that, Greeks stopped having kids. According to the World Bank, the Greek birthrate stands at a paltry 1.3. With the population aging, Greece has fewer people working to support the rapidly expanding number of retirees.
