Tale of Two Countries: The U.S. and Italy
In advance of Thursday’s crucial European summit in Brussels this week, Italy’s new Prime Minister, Mario Monti, unveiled his plan to reduce Italy’s deficit to zero in 2013.
What we see being played out in Italy and the rest of Europe today will be played out in the United States tomorrow.
The global hope is that moves made in Italy and the EU this week will finally achieve a permanent solution to Europe’s long term sovereign debt problem and restore investor confidence in Europe’s economy.
The NYTimes reported on Italy’s move in yesterday’s printed edition:
“Italy’s Leader Unveils Radical Austerity Measures“
-Rachel Donadio, New York Times, 12/5/2011
The Italian Dilemma
Italy’s new welfare minister, Elsa Fornero, wept openly yesterday when she tried to explain that Italy would raise the age of retirement and recalculate pensions to reduce costs.
The NYT reports that Italy is:
too big to fail and too big to bail out should it default on it’s immense debt
Italy is $2.6 trillion (U.S.) in debt and that is far more than even the EU can bail anyone out from under.
Italy has no safety net. It must come up with a plan of its own or risk default.
The new Italian measures are:
meant to slash the cost of government, combat tax evasion and step up economic growth, so the country can eliminate its budget deficit
Prime Minister Monti said:
call these the ‘Save Italy’ measures
Reacting to the new measures the NYT reports that in Italy:
many legislators are reluctant to push through measures that might hinder their chances for re-election… Labor unions are opposed to raising the retirement age, and industrialists say the measures are weighted too heavily toward tax increases that could stifle growth.
Any of this sound familiar? It should.
U.S. Sovereign Debt
On 11/30/2011 the U.S. National Debt stood at $15.11 trillion… up $132 billion in half a month!
$125 billion of that increase is in U.S. sovereign debt, money owed to outside investors.
That is MORE than the entire cost of 2011’s payroll tax cut holiday!
$125 billion growth in sovereign debt in only half a month… yet that is far, FAR more than any current year government spending cut Congress has ever imagined, let alone agreed on.
The United States is steaming full speed ahead toward a European-style sovereign debt meltdown.
Just like Italy, the United States is to big too fail and too big to bail out. We have no safety net.
Yet Congress and the President continue to ignore an estimated $117 TRILLION dollars in unfunded government liabilities at a cost of over $1 million per taxpayer. Instead, they argue like children over pocket change and kick the can down the road past each new election cycle.
Italian welfare minister Elsa Fornero wept over Italy’s woes this week. Everyone in the United States will be weeping soon enough.
The cutbacks in the U.S. Postal Service announced this week are only a harbinger of things to come.