I have often wondered about the sequence of events that will unfold when our generation's debt comes due. Who will pay it? The answer is the owners of any productive capacity within the jurisdiction required to pay the taxes to service the debt. And if those taxes are high, as they are on a path to be, we can expect to see attempts at avoidance (and evasion), as the most mobile assets and factors of production try to get out of that jurisdiction. We'll know it's really bad when U.S. citizens start removing themselves to other countries to try to avoid such tax burdens.
While that particular development is a long way off (I hope), we can see the precursors in other areas. <!--break-->There is a lot of public rhetoric devoted to the problem of companies "shipping jobs overseas." That is in part due to labor costs and in part due to corporate tax differences. And we can see the effects on labor within jurisdictions that have high mobility -- like across states in the U.S. It may surprise some of you (though not after reading the title of the post) to learn that the states with the highest median age are in the Northeast -- with Maine leading the way at 42.0 years, followed by Vermont at 41.2 years, based on the American Community Survey in 2008. Yes, Florida is fourth at 40.2 years, but that's only tied with New Hampshire. Population aging is driven as much or more by the slow growth or decline in young populations as by the growth of older populations.
Where did these young people go? Some may not have been born, as fertility rates can differ geographically. But others simply decided that opportunities were better elsewhere. That's principally a story about wages or non-economic factors, but some of those factors may have been abetted by the tax system on corporations and even labor. Even when taxes are not the driving force, they are one of the principal levers that governments may pull to try to stem these flows. And this is the story that may play out in Greece -- a "mass exodusof young Greeks" according to one headline. That story links to a New York Times story that reports:
[A]n increasing number of young college graduates are leaving Greece as a deepening recession chokes a job market already crippled by an entrenched culture of cronyism. And the outlook for a turnaround is not good. The national debt, estimated at 300 billion euros (nearly $400 billion), is larger than Greece’s gross domestic product, suggesting that years of austerity budgets lie ahead. On top of that, a string of political corruption scandals has left many young Greeks disillusioned about the future.
According to a survey published last month, 7 out of 10 Greek college graduates want to work abroad. Four in 10 are actively seeking jobs abroad or are pursuing further education to gain a foothold in the foreign job market.
Again, the fiscal burden is one of several factors that will lead young people -- or anyone with choice, for that matter -- to choose some place other than their birthplace in which to work. And as young people leave, the fiscal burden on those who might remain gets even worse. This is a battle that happens in many places at many times. Greece is the new front.