The Impact of Kicking the Fiscal Can Down the Road
Posted by Doug Rice on Tue, Feb 16, 2010 @ 12:42 PM
The EU's top economy official, Olli Rehn, said today that he wanted the Greek government to supply answers by Friday on how it used currency swaps and how that affected debt and deficit figures.
European Union finance ministers also gave Greece a deadline of March 16 to show that it can make big spending cuts to bring its deficit down from the EU's highest, 12.7 percent, to 8.7 percent this year.
In comparison, the US deficit is growing - at an unsustainable rate.
Further the EU finance ministers said that this was essential to "remove the risk of jeopardizing the proper functioning of economic and monetary union."
So what's apparent here is that Greece has been kicking it's fiscal can down the road and now the can has grown so big that it can't be kicked any further. Deadlines are imminent.
Sound familiar?
What we can learn from this
California, along with many other states and local jurisdictions, often kick their fiscal problems into future years. This may work in the short term, but over the long term, the can grows so large that kicking it again will break your foot.
Federally, we are not only kicking the can down the road to our children, the lead weights of Social Security and Medicare are guaranteed to prevent us kicking the can at some point.
And currently we are filing our can with more lead, in terms of deficit borrowing, that makes it harder to kick right now.
The bottom line is that Greece is just an example of what we can expect in our own future if we don't get our fiscal can in order.
You can only kick the can so far until it kicks back.