The real lessons of Greece:
Greece’s Economy Is a Lesson for Republicans in the U.S., by Paul Krugman, Commentary, NY Times: ...Greece has ... played an outsized role in U.S. political debate, as a symbol of the terrible things that will supposedly happen — any day now — unless we stop helping the less fortunate and printing money to fight unemployment. And Greece does indeed offer important lessons to the rest of us. But they’re not the lessons you think...
To understand the real lessons of Greece, you need to be aware of two crucial points.
The first is that the “We’re Greece!” crowd has a truly remarkable track record when it comes to economic forecasting: They’ve been wrong about everything, year after year, but refuse to learn from their mistakes. ...
The second is that the story you’ve heard about Greece — that it borrowed too much, and its excessive debt led to the current crisis — is seriously incomplete. Greece did indeed run up too much debt (with a lot of help from irresponsible lenders). But its debt, while high, wasn’t that high by historical standards. What turned Greek debt troubles into catastrophe was Greece’s inability, thanks to the euro, to do what countries with large debts usually do: impose fiscal austerity, yes, but offset it with easy money. ...The result was an economic implosion that ended up making the debt problem even worse. Greece’s formula for disaster, in other words, didn’t just involve austerity; it involved the toxic combination of austerity with hard money.
So who wants to impose that kind of toxic policy mix on America? The answer is, most of the Republican Party.
On one side, just about everyone in the G.O.P. demands that we reduce government spending, especially aid to lower-income families. (They also, of course, want to reduce taxes on the rich — but that wouldn’t do much to boost demand for U.S. products.)
On the other side, leading Republicans like Representative Paul Ryan incessantly attack the Federal Reserve for its efforts to boost the economy, delivering solemn lectures on the evils of “debasing” the dollar... Oh, and many Republicans hanker for a return to the gold standard, which would effectively put us into a euro-like straitjacket.
The point is that if you really worry that the U.S. might turn into Greece, you should focus your concern on America’s right. Because if the right gets its way on economic policy — slashing spending while blocking any offsetting monetary easing — it will, in effect, bring the policies behind the Greek disaster to America.