Imagine that you spent 30 years in government service, retired to your hometown and now you live on a modest pension.
Then imagine that the government failed to collect taxes and ran up an insurmountable debt that creditors insist on collecting in full. The creditors are demanding the government cut your pension 30 percent so they can be repaid.
That’s what’s happening in Greece, and Texans should learn from it.
The high stakes drama pitches a newly elected government in Greece against the European establishment. No one doubts previous Greek governments dug the economic hole the country finds itself in. The debate is over how much the rest of Europe should pay for selling Greek leaders the shovels and buckets used to dig it.
The good news is the crisis is unlikely to have much impact on Texas. Greece only has 11 million people and a 2014 GDP of $241 billion. It’s tiny compared with Texas, which has 27 million people and an economy worth $1.6 trillion.
Greece ranks 111th as a buyer of Texas products, only receiving about $36.5 million worth of goods from the ports of Houston and Galveston.
The Greek crisis, though, is also a reminder of the dilemma every democracy faces in balancing tax collection with citizen expectations.
One of the biggest challenges facing the next Houston mayor is paying the city’s pension obligations. State lawmakers this year continued to reject tax increases and that is forcing local governments to increase bond debt to fund roads, government buildings, hospitals and schools.
According to the nonpartisan watchdog group State Budget Solutions, Texas’ total government debt including unfunded pension obligations reached $341 billion last year. That’s about $13,000 per Texan. Texas is third in the nation in total debt.
Make no mistake, Texas is nowhere near bankruptcy like Greece. But Texas bond issuances have grown faster than the national average for the past decade, coinciding with the rise of no-new-taxes politics.
Politicians, whether Greek or Texan, like to talk about cutting taxes but rarely cut popular programs. It’s one thing to tax and spend, but these folks just spend.
We should learn from Greece’s example and limit our debt before we dig our hole any deeper.
Chris Tomlinson is a business columnist for the Houston Chronicle.