Judd Gregg: Greece, Puerto Rico, Illinois and bankruptcy

Judd Gregg: Greece, Puerto Rico, Illinois and bankruptcy
© Getty Images

Greece, Puerto Rico, Illinois: they are starkly similar, fiscally dire political entities.

Since one is a nation, the second a commonwealth and the third a state, one would not think they would have the same problems when it comes to the management of their respective cultures and people. But they do.


The common thread is that for years voters in all three places have been electing people to govern them who have promised a great deal and borrowed to pay for those promises.

In each case, the root of the fiscal imbalance is that the governments are dedicated to the power of patronage. At their heart is the belief that you can retain power so long as you promise to fund gains for your supporters by taking from someone else.

The most egregious example of this approach in all three jurisdictions is the pension system. Those who have governed for years in each of these cultures have promised those who work for them — and elect them — that they will be rewarded in a manner that is disproportionally expensive when compared to those who work in the private sector. 

This is true in the actual remuneration given out as pension payments. But equally important is the length — or, rather, the brevity — of service it takes to qualify for these pensions.

In addition, each of these states has a serious problem with its taxation structure. They all have created a tax burden built on the philosophy that the most productive in the society should pay disproportionately for the least productive.

In all three states, the actual collection of revenues has dropped as the productive have either stopped complying due their frustration with the inequity of the system (Greece) or moved to another place where the tax burden is less onerous (Illinois). 

Revenues are on a downward spiral as a result. This makes the chances of correcting the economic tailspin through growth very slim. In fact, just the opposite is happening and will continue to happen: the economic growth will continue to contract, leading to tougher and tougher times.

It would be nice if the leadership of these three states would admit that their policies have failed and they are taking a new direction that actually encourages growth through higher productivity. 

This, however, is not the solution any of these devastatingly demagogic governments have chosen. Rather, their course is to claim they are the victims of numerous nefarious forces — mostly big business, banks and other states — and demand tribute from their lenders.

One cannot be very sympatric toward those lenders. Many of them are late entries trying to make a quick euro or dollar in the expectation that these failed states will somehow find an exit hatch from their economic death spiral, thus allowing the lenders to cash in handsomely on their investments or bets.

On the other hand, it does not seem right that states that have been borrowing profligately in order to fund the day-to-day operation of staying in power should be able to walk away from those debts by laying the unfunded costs off on someone else.

Is there a solution? In the context of the way these states are presently being governed, the answer is “no” — or at least no good solution.  

The inevitable result of their present path will be very painful for each, with most of the pain falling on the people who bought into the language of the elected with their votes. 

In Greece, the standard of living and economic activity will not recover whether they stay in the euro or leave — unless Europe wants to turn them into a ward of the continent. 

In Puerto Rico, even if the law were changed so the commonwealth could file for some form of bankruptcy, the economic damage will not be corrected for years, if ever. 

Jobs and opportunities will become even more scarce and a state that has already exported many of its most productive citizens will see even more try to vote with their oars and come to the United States.

In Illinois, the state line is far too close. Whether it is Indiana or even Texas, departing the political disaster is relatively easy.  

Those left behind will be those who cannot move. They will find that their school systems (especially their state college system) and their healthcare systems will be pitted against their public pensioners in dividing the diminishing revenue pie. The quality of all services will be hit.

There is also a solution that would work. 

Stop listening to the demagogues. 

Acknowledge that the concept that you can live off others, either through taxation or borrowing, inevitably comes to a bad end, with a dramatic drop in the standard of living. 

Invest in leadership that does not pander, but rather acknowledges the need to encourage productivity and affordable government services. 

This, of course, is unlikely in these cultures that have spent so long being led by the hollow language of victimhood and redistribution politics. 

But, as the former British prime minister Margaret Thatcher so aptly pointed out decades ago, “The only thing wrong with socialism is that at some point you run out of other people’s money.”

Greece, Puerto Rico and Illinois have run out. Their people are going to pay a dire price for having been so misled for so long.

Judd Gregg (R) is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee, and as ranking member of the Senate Appropriations Foreign Operations subcommittee.