The Barnyard Fable

The farmer broke the bad news.  The farm was running out of money.  The farm could no longer afford to buy the nice grain that the horses liked.  There also was not enough money to fill the pigs trough to overflowing as they had in the past.  There would need to be changes the farmer said.

The horses spoke first and said they were already contributing enough.  Each day the horses worked, the farmer took about 10% of the fees the horses earned pulling heavy wagons to market.  The 10% was suppose to help cover the cost of feed.  Pigs on the other hand did odd jobs around the farm yard and in return were treated to an overflowing trough filled with left over foods of all types.

The pigs had a pretty good deal.  They only needed to work until they were three years old and then they could play around and eat as much as they wanted.  The horses, also, had found a niche.  They would secretly go back out and work without the farmer’s knowledge.  The money the horses made secretly they got to keep for themselves.

So the news that there would not be enough to eat came as a shock and enormous disappointment to both the pigs and the horses.  At first the horses thought the problem was simply that pigs ate too much.  The pigs, of course, knew the horses were not paying all of their taxes, so they were the problem.  Nobody saw things as “our” problem.

The Portuguese, Irish, Greek, and Spanish debt situations fit an eerily similar analogy.  During the Euro-zone good times, these countries expanded their economies (largely on borrowed money), and foolishly granted generous entitlements to workers and looked the other way on increasing (or collecting) taxes.

Today, in each country, there are various states of denial.    The wealthy seek to thwart any new taxes and seek all sorts of methods to avoid existing ones.  The less wealthy seem resolved to cling to current benefits even though they are now being told the government can’t afford them.  Is this a game of bluff?

From afar, the US can look at the differences between say the German economy and the Greek economy.  The US can then say, “well, you Greek workers need to work longer and probably expect a slightly lower retirement pension”.  This is of course seeing the problem with one eye.

Debt and deficit difficulties are almost always a problem with at least two parts.  Revenue and expenditures.  The PIGS solution will require both spending reductions and restraints as well as increased tax revenues.

It is amazing to me that the Barnyard story seems so appropriate for Europe and few people seem to see its fit for the current US situation.

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