Eric Singer: A Backlash Finally Hits Europe
By: Eric Singer
If you’ve listened to the mainstream media up until now, Europe's been doing everything right.
And we in the United States have been doing everything wrong.
They have universal healthcare; so should we.
They're environmentally conscious, employ green initiatives and have stiff gasoline taxes; why don't we?
They have a VAT (value-added tax); why not us?
Government makes up a bigger part of their economy; shouldn't ours?
Workers there have six weeks of vacation and retire five to 10 years earlier than we do; what about here?
And so on.
Every now and then, though, the results of these policies are cast in a new light by unexpected events. The deadly riots in Greece bring home the depth of the bankruptcy of Europe's failed policies.
Monday, world stock markets rallied as it was announced that the 11 million people of Greece would require only 145 billion euros ($182.21 billion) to be rescued during the next three years. Tuesday, the markets convulsed, as it became clearer that the citizens of Germany might not vote to support such largesse.
Waiting in the wings are the 120 million people of the other PIIGS, namely Portugal, Ireland, Italy and Spain. Crudely extrapolating the numbers, these countries could easily need more than 1 trillion euros to stay afloat.
Now it's true that much of the potentially defaulting debt is held by the Germans, but there are only 40 million German workers. If they have to support 40 percent of that rescue, each German worker could be proffering 10,000 euros directly in support.
That's a lot.
In fact, it's so much in an election year, it may not happen.
What's missing from the assumption that we should do the same as Europe is a true appreciation of the hidden costs of their morbidly obese governments.
The Europeans may look great, and the cities may be very pretty, but they can't afford to have kids. Their populations are shrinking. The price of a VAT for some people will be forgoing children.
Unemployment for the young is horrible in part because of the red tape surrounding firing anyone.
In France, ethnic French under 25 years old have 25 percent unemployment. Immigrant French Muslims under 25 have a jobless rate of 45 percent.
Spain, in part by wasting precious resources with the biggest green-jobs effort in the euro zone, was able to get its unemployment down to 18 percent overall.
These levels of youth unemployment make the world so much more dangerous. There is so much less hope and more anger associated with finding a job through the government than finding a job that the market provides, or keeping one only because the government is protecting you. This is part of why the Greek riots turned deadly.
The fantasy at the core of the crisis is that these governments are providing value for the taxes that are paid. Bus drivers who get 14 months of pay on top of vacation for every 12 months of work seem like racketeers to me. Government radio announcers who can retire on full disability because their microphones have germs are functionally gang members.
No wonder 95 percent of Greeks failed to report their swimming pools to the tax authorities in Athens. The Greeks properly perceive the government gravy train as a scam.
The Asian economies are emerging in part because their economies are becoming relatively freer. The euro zone has submerging economies because their governments are looking everywhere for money to feed a whole new layer of Euro Government.
Against this backdrop, we should understand that the calls in the United States for a value-added tax are essentially calls to give cancer a trial period.
It does not matter that rates will initially be low, or not affect every good cell — or that for a moment we will look like our budget gap is shrinking.
The question is not whether only 174 cancer cells are tolerable. Cancer cells will multiply until they have taken over their host.
The Greeks have done us a favor by opening Pandora's Box for the entire world to see.
The European Leviathans are too big not to fail, and may well have to give up their extra layer of government to survive.
We should take note, and return to the roots of limited government while there's still time to avoid disaster.
Eric Singer is the portfolio manager at Congressional Effect Fund.
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