Our view on the world economy:
Greek debt crisis offers preview of what awaits U.S.
Updated 13h 59m ago
For many years, U.S. lawmakers have been able to
see the coming train wreck of excessive federal
borrowing and have chosen to do nothing. Now the
sovereign debt crises sweeping through Europe are
sounding alarms loud enough that even Congress
should be able to hear them. If not, the ugly scenes
in Europe could, as the saying goes, be coming to a
theater near you.
OTHER VIEWS: 'Tip of the iceberg'
The situation is particularly acute in Greece, where
massive debts have forced the government to
propose widely unpopular cuts in salaries, bonuses
and pensions coupled with significant tax hikes.
Interest rates have soared, and deadly riots have
broken out in Athens.
To be sure, there are huge differences between
Greece and the United States. Here, the federal
government represents about 20% of the U.S.
economy, whereas the Greek government is about
40% of its economy. Washington's big spending is
on benefit programs such as Medicare and Social
Security, rather than on compensation for a massive
and militant cadre of public employees. And,
perhaps most important, the USA doesn't share a
currency with other countries, giving the nation
more flexibility to print money if needed.
Before Americans get too smug, however, they
should note the obvious: Debt is debt. If too much
Greek borrowing can send world financial markets
into turmoil like that of the past couple of days,
imagine the damage a U.S. debt crisis would inflict.
Washington's public debt is nearly $8.5 trillion,
which comes to about 58% of the U.S. economy,
compared with ratios exceeding 100% in places like
Greece. But the U.S. debt is rising fast, and its true
size is masked by the surplus run by the Social
Security trust fund. Factoring that in, the total
national debt is about $13 trillion, or 90% of the
economy. Including unfunded liabilities for such
programs as Social Security, Medicare and Medicaid,
the federal government is looking at a long-term
shortfall of about $62 trillion, or about $200,000
for every American, according to thePeter G.
Peterson Foundation, a group devoted to promoting
awareness about public borrowing.
These numbers should come as a shock. But in
Washington, there appear to be two acceptable
responses — denial and finger-pointing.
Nothing illustrates this more than Congress' failure
in January to create a bipartisan commission just to
propose ways of reducing the debt, forcing
President Obama to create such a commission with
an executive order.
Many Democrats cling to the fatuous and deceitful
argument that commission members should keep
their hands off Medicare and Social Security, which
is tantamount to saying they should do nothing.
Those two programs alone consume one-third of
federal spending and constitute the vast bulk of the
long-term debt problem.
At the same time, many Republicans— including
Senate Minority Leader Mitch McConnell of
Kentucky, who had previously championed the
commission approach— voted against the panel
Advertisement because they fear it will propose tax increases as a
necessary piece of any solution.
Unless this type of petty behavior ends soon, and
there are few indications that it will, the economic
tragedy in Athens will simply be an out-of-town
tryout for the show headed for Washington.
