By Bill Crawford
Are you paying attention to Europe’s financial crisis? If your retirement check depends upon investment returns, you should be. Europe’s turmoil has been whacking international stock markets.
It’s all about the pigs.
Well, not exactly. Pigs is the homophone for PIIGS, which stands for Portugal, Italy, Ireland, Greece, and Spain. These are the deficit ridden, debt stricken, poor economic partners in the Eurozone. Their declining credit quality and skyrocketing borrowing costs are undermining the 17-country economic and monetary union and its common currency, the Euro.
Germany and France, the Eurozone’s strong economies, are being called upon to bail-out their weak sisters. Before doing so, though, they want some way to enforce fiscal discipline on the pigs, eh, PIIGS.
“Coercive budget discipline” to the rescue. The pact pushed through by Germany and France forces all 17 Eurozone nations to limit structural budget deficits to no more than .5 percent of GDP and yield budget sovereignty to the European Commission. The commission will be empowered to reject national budgets, send them back for revision, and impose sanctions when any nation’s budget deficit exceeds 3 percent of GDP.
Reckon we could get some “coercive budget discipline” over here?
The good ole USA likes to pig out on deficit spending, just like Europe’s PIIGS. And, there is little evidence our Congress or administration can agree on a budget much less adhere to fiscal discipline.
But who would we give coercive authority to?
Our central bank, the Federal Reserve? Many think it is already too powerful. Federal courts? Talk about gridlock; it takes courts years to act. Some new American Budget Commission?
Hmmm. Some entity needs to become our budget Daddy – able and willing to say “no more.”
Quite frankly, we could use some coercive budget discipline at the state level, too.
While Mississippi, as most states, must balance its budget every year, our state leaders have become adept at sneaking around this requirement. Long-term expenses get funded with one-time money, major costs like Medicaid get under-appropriated, revenue estimates get jacked up, and so on. That’s why there’s nothing but dregs left in the tobacco settlement fund and other “inviolate” reserves. We overspend and grab temporary money from wherever to momentarily balance the budget, winking and nodding as structural imbalances get out of hand.
For several years, Lt. Gov. Phil Bryant has proposed revamping the state’s budget process. He wants every cost reviewed and justified. For Bryant’s budget process to have teeth, though, coercive budget discipline must come from somewhere. After January, it will be interesting to see if then Gov. Bryant, new Lt. Gov. Tate Reeves, and the new Republican majorities in the House and Senate will be willing to institutionalize such discipline.
Just don’t touch my worstenbroodjes (pigs-in-a-blanket).
Bill Crawford (firstname.lastname@example.org) is a syndicated columnist from Meridian.