Prevent WW III: Pay your taxes

Greece's economic woes got Don Pittis thinking about history as he tried to complete his 2009 tax forms.

Between bouts of working on my taxes this week, I've begun thinking about angry Greeks.

Don Pittis has reported on business for Radio Hong Kong, the BBC and the CBC.

They've been threatening strikes, outraged over their government's planned spending cuts. They blamed "the plutocracy" and the IMF. They didn't blame themselves.

Greeks have a great quality of life, great climate, great food, great European-style social safety net. But now it comes out that, all these years, they haven't been paying enough taxes. Instead, the government borrowed from international lenders. It seemed just as easy at the time, I suppose.

As I say, I was doing my taxes.

After filling out one of those amusing little sets of boxes on the tax form, I stopped to think. You know the ones. Where you spend several minutes finding, entering and adding up a lot of little numbers, after which you subtract one huge number and get zero. You always need a little rest after that.

So I began considering the results of not paying enough taxes.

As you likely know, on Tuesday this week, one of the companies that decides such things, Standard & Poor's, declared those Greek loans the government had taken out weren't as sound as people had thought when they lent the money. Instead, said Standard & Poor's (S&P to its closer friends), those loans were the equivalent of junk bonds.

Default risk grows

The Greeks are so addicted to debt that they can't bear to stop cold turkey. Greece's democratic government, in danger of being pitched out by angry voters, may feel forced to keep borrowing and spending. There is a growing belief that Greece might have to default on those loans.

As the man from S&P said, "The downgrade results from our updated assessment of the political, economic and budgetary challenges that the Greek government faces in its efforts to put the public debt burden onto a sustained downward trajectory."

That's a polite and wordy way of saying they might not make it.

The main outcome is that anyone thinking of lending Greece some more money had better think twice. And if they decide to lend, they better ask for a higher rate of interest.

Which only makes Greece's loans more expensive, and its problems worse, you see.

But that's not all the S&P folks did.

They also cut the debt rating of Portugal, another European country that has borrowed to the hilt. There are worries about Spain and Italy as well. Personally, I worry about the United States.

I stopped thinking for a few minutes to fill out another set of boxes on my tax form. You know the ones. Where you add up all your allowable tax credits into one big humongous tax credit, then divide by a very large number, and get a tiny little tax credit.

A history of chaos

That made me think about my current bedside book, War of the World, Niall Ferguson's brick about the political and economic troubles that led to the chaos of the first half of the 20th century.

I didn't pick it up on purpose to read about national debts. It was on sale for 12 bucks and a dear friend knew I couldn't resist such a bargain. But as I read about the time between the two great wars, it surprised me how similar the situation was then.

In the early 1930s, democratic governments struggling with huge debts could find no way to satisfy the electorate and still avoid default. When they tried to solve problems by enacting tough laws and austerity, they were pitched out by voters.

The logical steps went like this: economic chaos created political chaos and ultimately led to the collapse of democracy. In Greece, elected governments fell one after another. After that they tried bringing back the king. Then a general, Ioannis Metaxas, took over as dictator.

The Greek solution was not unique. Hitler took over in Germany.  Mussolini was handed power in Italy to make the trains run on time. Franco triumphed in Spain. But those were only the famous ones. Portugal got Salazar. Austria got Dollfuss. Smaller countries across Europe tossed out democracies and brought in tough-guy dictators to bring order to economic and political chaos.

Maybe it seemed like a good idea at the time. But as the saying goes, "If you break it, you have to pay for it." As we know now, the tough guys started a few smallish wars that grew into one great big horrible war, where a lot of innocent people including members of my family and yours got killed.

My feeling is, let's not start that again.

All this passed through my mind as I was filling out those boxes on the tax form.

It struck me that although paying taxes and keeping your debt low may be annoying, the alternative may be worse. Sure, we and the Greeks know some of our tax money goes to fat cats and boondoggles. We know some of it goes to the undeserving rich and the undeserving poor.

We, and the Greeks, and the Portuguese, and even the Americans, know that countries can handle an awful lot of debt before things go really bad.  And we know that history doesn't really repeat itself. Not exactly, anyhow.

But then again, working through all this made me feel a little better about paying my taxes. I even ticked the little box turning my small refund back to the government to pay down the deficit. A quick back of the envelope calculation showed that getting another $27 to spend was not worth starting WW III.

Which only goes to show that when you are doing your taxes, you shouldn't let your mind wander.