Hello Welfare State, Goodbye Greece!

There are any number of areas that could be listed reasons for the collapse of Greece. This graph, from Dan Mitchell, is telling enough that it is probably not necessary to go any further in the autopsy of this country.

From the graph, government employees increased by substantially over 100% during a period when the population of Greece grew about 16%. That represents a shift of workers from the productive sector of the economy to the unproductive, leaving fewer wealth creators and more wealth consumers.  Hello Welfare State, Goodbye Greece!

The US is headed down the same path. Our government employees have also increased disproportionately to population growth. More important, instead of hiring people to do nothing (government jobs), we pay them for doing nothing in the form of food stamps, unemployment benefits, etc. While this outcome might be considered more honest, the result is the same — a welfare state no longer supportable in its current form.

Greece is little different from the US. The primary difference is that the US has a printing press which they have used to cover their deficits. Market forces will eventually nullify that US advantage and we will experience failure similar to Greece.

Reports like the following show just how serious the US government is about correcting the problem:

WASHINGTON (MarketWatch) — The U.S. Treasury expects to borrow $305 billion this quarter and $541 billion in the next three-month period as the government struggles to bring down future budget deficits despite a weak economy.

Treasury on Monday said its new estimate on debt issuance for October through December is higher than an earlier estimate of $285 billion. The increase in borrowing was related to lower government revenues and higher spending.

In January through March, Treasury expects to issue $541 billion in debt, the second-highest borrowing figure for a quarter. It borrowed $286 billion in July through September.

The problem in the US is likely still solveable, although not via the political process. A financial turnaround specialist could make the mathematics of revenues and debt match via primarily ruthless cost cutting. Those actions could likely save the dollar and the economy. Whether society would hold under such circumstances is unlikely.