The current iteration of the Greek debt crisis, and the possibility of a “Grexit”, has elicited numerous policy proposals, ranging from the German creditors saying “nein” to any new arrangement, to calls for debt forgiveness, to proposals in between. Yet, the most obvious, equitable, and legal remedy is conspicuously absent from most discussions: fiscal transfer.
I am a Minnesotan, of German heritage, living in Ireland, and as such should be poised to say a few things about debt, credit and fiscal transfer. Minnesota is not well-known abroad, but it is the land of 10,000 lakes, the land of 10,000,000 mosquitos (midges, only worse), the land of Minnesnowta. As shown by The Economist, Minnesota is also one of the biggest net-contributors to the US federal system, transferring nearly 200% of its annual GDP to the federal pot between 1990 and 2009. A state of just over five million people transferred in excess of $500 billion dollars, net, to the federal coffers over 20 years, a sum almost 1.5 times the total Greek debt. Where did Minnesota’s money go? It went to Mississippi and Alabama, two of the largest net recipients of federal transfer over the same period. But this wasn’t cash being handed out in the streets. It wasn’t a credit into some Southern bank. It wasn’t a padding of public salaries. That is not what fiscal transfer means. Fiscal transfer means motorways that meet the same standards in Mississippi as Minnesota. Fiscal transfer means the same baseline of health care for the poor or elderly, despite the state abbreviation on their address. Fiscal transfer means Coast Guard stations that can function effectively on all shores. Fiscal transfer means jobs and spending and stimulus in Mississippi associated with all of the above. Fiscal transfer is a harmonising force across a political union.
Minnesota contributes $5,000 per capita, per year, to the federal budget. Over the 15 years of the Eurozone, Germany would have needed to transfer just $300 per person, per year, to wipe out the Greek debt. Not a crippling amount. Not an unfair amount to ensure infrastructure, social protection and human dignity. The analogy is obvious. Germany is to Minnesota as Greece is to Mississippi. The difference is that Minnesotans recognize the obligations inherent in the social pact of a political and monetary union.