Remember all the frenzied warnings that if we didn't drastically slash the budget deficit -- now! -- we'd turn into Greece, where high debt and deficits spurred a fiscal crisis and prolonged economic slump? Railing against President Obama's proposed budget in 2012, Sen. Jeff Sessions of Alabama, the senior Republican on the chamber's budget committee, predicted that within a year, "the United States could be like Greece." Paul Ryan, currently chairman of the House Budget Committee, sounded a similar warning in 2010. "[W]e are on the same path as Greece," Ryan said on Fox News, declaring that only deep cuts in the social safety net could bring the U.S. back from the brink of economic catastrophe.
Well, U.S. borrowing costs remained persistently low, with investors never signaling that they saw the country at risk of becoming Greece. But as Greece stares down another crisis, will policymakers "learn the right lessons"?
That's the question economist Paul Krugman poses in his New York Times column today. Five years after the country embarked on a harsh, internationally-imposed austerity regime, Greece suffers from sky-high unemployment and plummeting wages. Moreover, Krugman notes, the country's debt-to-GDP ratio has actually gotten worse, largely because dramatic cutbacks have sent Greek GDP plunging.
Amid this sorry economic climate, the Greek ruling class could soon face a reckoning. As Krugman writes, polls show the left-wing anti-austerity party Syriza poised to win control in a general election, which the center-right government is desperately trying to avoid.
While Syriza avoids the xenophobia and extremism that define other anti-establishment parties in Europe, Krugman observes that its rise has occurred as extremist parties like France's National Front and Italy's Northern League have seen their political fortunes improve.
"This is what happens when an elite claims the right to rule based on its supposed expertise, its understanding of what must be done — then demonstrates both that it does not, in fact, know what it is doing, and that it is too ideologically rigid to learn from its mistakes," Krugman writes.
Therein lies the real lesson Greece provides.