Greeks are Angry

Greeks are angry over the costs of reform. See this article in the Guardian.

A growing chorus of voices is urging the Greek government to restructure its debt as fears grow that a €110bn bailout has failed to rescue the country from the financial abyss and is forcing ordinary people into an era of futile austerity.

"It's better to have a restructuring now … since the situation is going nowhere," said Vasso Papandreou, whose views might be easier to discount were she not head of the Greek parliament's economic affairs committee.

Given the scale of protests to minor adjustments it is hard to see how Greece can make the big adjustments necessary to adjust their fiscal situation:

Tomorrow, in a clear sop to the thousands who have signed up to the "can't pay, won't pay" movement, the ruling socialists will announce reductions of up to 50% in road toll fees. As the nation struggles to rein in a debt of €340bn, the logic of appeasing protesters – an estimated 8,000 Greeks a day were refusing to pay tolls – has outweighed antagonising them further. "Our hope is that this will calm things down," the deputy transport minister Spyros Vougias said.

Last week, a man shot a bus inspector hired to crack down on fare dodgers after protesters stormed a police station, snatched hundreds of confiscated number plates and set light to thousands of fines. Days later thugs attacked Antonis Loverdos, the health minister, as he visited a hospital in Athens. In Patras, James Watson, the 83-year-old Nobel Prize-winning geneticist was also attacked as he prepared to give a speech at the city's university.

It is hard to see how Greece can adjust without haircuts from bondholders. Some trade between haircuts and real reforms might make it palatable. But that opens up a complex political economy problem for Europe, since there are other economies, notably Portugal and Ireland with similar, though right now more manageable, problems.

Natural Gas Nonsense

Joe Nocera has an article in today NYTimes arguing in favor of tapping the Marcellus Shale. The main point he makes:

The truth is, every problem associated with drilling for natural gas is solvable. The technology exists to prevent most methane from escaping, for instance. Strong state regulation will help ensure environmentally safe wells. And so on. Somewhat to my surprise, this view was seconded by Abrahm Lustgarten, a reporter for ProPublica who has probably written more stories about the dangers of fracking than anyone. In a comment posted online to my Tuesday column, he wrote that while the environmental issues were real, they “can be readily addressed by the employment of best drilling practices, technological investment, and rigorous regulatory oversight.”

Ironically, the NYTimes also has a front page article today arguing that GOP Pushes to Deregulate Environment at State Level. And this does not even deal with our PA Governor Tom Corbett who has ordered that "the Secretary of Environmental Protection must personally approve all enforcement actions and notices of violation. But only for natural gas drillers." Moreover the Governor will not allow any severance tax to cover any social costs associated with removing the gas.

Nocera argues that all his opponents are NIMBYs. But he ignores any discussion of the high cost of getting the gas out. We are told how abundant the natural gas is, but that any severance tax will lead to a drastic cut in production. Which must mean that most wells are marginal -- that only with very high prices is it profitable to produce the gas.

I am not against drilling but I think one should not ignore the costs. I suppose the problem is that bankers do not drill for natural gas. If they did Joe Nocera would be telling us that we should never take one cubic foot out of the ground -- you cannot trust anything a banker says. But no problem with gas drillers. And environmental regulators, so much better than bank regulators.

Thanks Paul Ryan

Like most Republican initiatives, Paul Ryan's budget proposal is designed for me. Tax cuts for the well-off (which extend to the moderately well off), burden placed on future generations. For example, all the burden of Medicare reforms go to those 54 and younger. I'm 55, so I get off okay. Just like Republican tax policy or environmental policy all the costs are on future generations and I don't have any.

The reason is straightforward as David Leonhart notes in the NYTimes:

Yet there is at least one big way in which the plan isn’t daring at all. It asks for a whole lot of sacrifice from everyone under the age of 55 and little from everyone 55 and over. Representative Paul Ryan, the Wisconsin Republican who wrote the plan, calls the budget deficit an “existential threat” to the United States. Then he absolves more than one-third of all adults from responsibility in dealing with that threat...

The reason is partly political. Older people vote in larger numbers than younger adults. Children, of course, can’t vote at all.

This is the basic issue. All the young Obama voters did not vote in the midterm elections, so the Republicans won. Ryan rewards his constituency. Taxes will be cut. Spending for the poor will be cut. The deficit, well it will be cut if unemployment magically can fall to 2.8%, and if unicorns can fly.

Like all good Republican policies, the benefits go to me and the sacrifice goes to the future -- the young who will be left with the cost of the environmental cleanup and a huge federal debt -- and the poor who live elsewhere. I really don't understand why I should be so lucky.