In a worldwide recession, everyone feels the pain. But as the term “bailout” becomes increasingly ubiquitous, who should take responsibility for reckless government spending is also becoming a topic of serious discussion.
Last weekend Germany was the first European Union member to bite the bullet and approve its share of the $1 trillion in bailout funding to help with Greece’s economic meltdown. With all of their economies tied together through the EU, each member state has an interest in ensuring other states’ economic stability. While most of Europe faces hard times due to the recession, Germany is among the stronger states, and therefore must bear a greater share of the bailout burden. Unsurprisingly, Germans are chafing at the idea of bailing out a fellow EU government for its irresponsible actions.
Americans are also on the hook for the Greek bailout because of our commitment to the International Monetary Fund (IMF). As the largest contributor to the IMF, America will be sharing in the IMF’s $145 billion Greek bailout plan. That means United States taxpayers will be paying for the spendthrift decisions of politicians across the Atlantic.
This begs the question, why should one country bail out another country for its irresponsible decisions? That’s exactly what Germany and a host of other nations are beginning to realize. Unfortunately, it’s a lesson learned the hard way after they have already staked their financial future on a currency union with other governments. Closer to home, a similar analysis could be applied to the United States.
Earlier this week California Governor Arnold Schwarzenegger announced that the state will have to make “terrible cuts” to the state budget since California faces a $20 billion deficit—which will likely grow since tax revenue last month wasn’t at anticipated levels. California is the eighth largest economy in the world. That means its economy and budget woes place it at the forefront of the oncoming flood of government bankruptcies. In fact, media pundits have been uttering the name California in the same breath as Greece and other teetering nations.
As talk of the federal government bailing out California has increased, other Americans are posing the same question as Germany: why should we bail out our irresponsible neighbors? Why should Texans pay for the reckless spending decisions of Sacramento legislators?