Greece Hasn't Really Implemented Spending Austerity And Are Now Saying They Won't Ever Implement It

I know that a lot of people, especially fans of big government spending, are blaming much of Greece's problems on "austerity".  Somehow cutting government spending caused by government spending is wrong and just makes things worse.  Well let's just take a look at Greek austerity measures and what they have actually meant for spending.  If you look at the Greek Ministry of Finance's State Budget Execution Report for January-May, austerity is so light that government expenditures actually went up compared to a similar period int he previous year.  In the January-May time period in 2011, the government spent 29.45 billion Euros.  In the same time period in 2012, they spent 30.5 billion Euros, an increase of 3.7%.  That doesn't seem very draconian.  Of course, that's not to say that they haven't made some cuts, they did cut spending on public employee wages by 8.6% and hospital employee wages by 11.1% (why do socialists always hate doctors the most?) but on the whole, spending still went up.

And now, the head of PASOK, a key coalition partner is saying that more spending cuts (what spending cuts?) are almost impossible.  So after watching the Greek budget increase despite "cuts" the Greek government is already trying to give up on further "cuts".   They are like the alcoholic who cuts back by increasing their intake of alcohol and then says they can't do anymore.  Germany should just cut them off already.

One more thing, this time on taxes.  I think looking at the Greek budget would be a good lesson for Obama so he would understand the difference between tax rates and actual taxes collected.  As part of the original austerity package, taxes were supposed to go up rather substantially.  Here is a summary:

• Taxes will increase by 2.32bn euros this year, with additional taxes of 3.38bn euros in 2012, 152m euros in 2013 and 699m euros in 2014.
• A solidarity levy of between 1% and 5% of income will be levied on households to raise 1.38bn euros.
• The tax-free threshold for income tax will be lowered from 12,000 to 8,000 euros.
• There will be higher property taxes
• VAT rates are to rise: the 19% rate will increase to 23%, 11% becomes 13%, and 5.5% will increase to 6.5%.
• The VAT rate for restaurants and bars will rise to 23% from 13%.
• Luxury levies will be introduced on yachts, pools and cars.
• Some tax exemptions will be scrapped
• Excise taxes on fuel, cigarettes and alcohol will rise by one third.
• Special levies on profitable firms, high-value properties and people with high incomes will be introduced.

But what happened was not what was expected.  Total taxes collected fell by 1% compared to the previous year with VAT taxes, which were supposed to go up the most, actually fell by 12.1%.  Yes, it is possible for tax rates to go up but taxes collected to fall.  Maybe Obama should keep that in mind before talking about people paying their "fair share" again.