Flaylo
Handsome Devil
Robert Creamer: Why the United States Is Not Greece or Italy -- and Shouldn't Act Like It
So much for the myth put out by dumb Repugs that socialism caused the financial problems of Greece and Italy.
In the run-up to the Super Committee deadline, the news is filled with headlines about the potential default of Greece and Italy on their government debts.
Some might think that these developments highlight the need for draconian austerity measures in the U.S. to prevent us from suffering a similar fate. The Republican Party claims that "our debt has put us on the same path as Greece." They would be wrong.
To see just how wrong, all you need do is look at the difference in what the U.S. government is paying to borrow money today -- and the rates being charged to Greece and Italy. Last week the financial markets demanded 7% interest rates on 10-year Italian bonds. That ultimately forced the passage of unpopular austerity measures, and the resignation of Prime Minister Berlusconi. Similarly onerous interest rates forced out Greek Prime Minister Papandreou several weeks ago.
Meanwhile, the yield on 10-year bonds has been at near-record lows - around 2% throughout the summer. And 30-year U.S. Treasury bonds yields have hovered around 3%.
What explains the difference?
Is it the "excessive" social benefits offered by Greece and Italy?
As economist Paul Krugman points out, there is no relation whatsoever between the level of social benefits and the interest rates demanded by financial markets.
Of course all European countries offer substantially more generous social benefits to their citizens than does the United States -- including universal health care. But Italy and Greece do not have bigger welfare states than other countries that are doing quite well financially. Before the crisis, social expenditure spending was lower in Greece and Italy than it was in Germany -- and a good deal lower than in Sweden where GDP has been growing throughout the crisis.
Meanwhile, Canada, which has universal health care and much more robust social safety net programs than the United States, did a much better job weathering the financial crisis of 2008 and the years since than did the United States.
No, other factors are at work here.
So much for the myth put out by dumb Repugs that socialism caused the financial problems of Greece and Italy.