There’s going to be a lot of commentary about Greece this week in the wake of that country’s resounding “No” vote Sunday. And as someone who studies global political economy for a living, I would ordinarily be happy to pile on with plenty of thoughts about what this means for Greece, the euro zone, and the European Union.
But the hard-working staff here at Spoiler Alerts is noting the nascent re-emergence of a Greece-related meme that should have died of shame and embarrassment about four years ago: the notion that the United States is another Greece just waiting to happen.
For exhibit A, see this New York
Daily News Post column by Cato economist Michael Tanner entitled, “Think Greece can’t happen here? You’re wrong.”
[J]ust like Greece, the United States government has been living beyond its means, running up an enormous debt that will eventually need to be repaid.
True, our budget deficit this year will be lower than it has been, just $486 billion compared to $1.4 trillion as recently as 2009. But this is just a temporary respite. Within the next couple of years the deficit will start to rise again. By 2025, we will again face trillion-dollar shortfalls….
And give us time! Like Greece, the driving force behind our debt is the growing cost of entitlement programs for health care and retirement. If one includes future unfunded liabilities for Social Security and Medicare, our real debt exceeds $90 trillion. That’s more than five times our GDP. Greece is still in worse shape — their unfunded liabilities top 875% of GDP — but we’re gaining.
One New York
Daily News Post op-ed does not a trend make. The combined statements of GOP candidates this July 4th in New Hampshire are more worrisome, however. As Politico’s Ben Schreckinger notes, all of these candidates were pretty gloomy about America’s prospects:
“I kind of feel like it’s 1979 again,” said the former Texas governor [Rick Perry], invoking the twilight of Jimmy Carter’s presidency. It was the most uplifting Republican stump speech of the weekend.
For GOP presidential hopefuls, there was no holiday from the nation’s downward spiral. Across the state, as New Hampshirites settled in to enjoy an idyllic New England summer and a 3.8 percent unemployment rate, Independence Day offered the loyal opposition one more opportunity to remind them just how bad life had really gotten….
After an obligatory nod to the holiday and the blessing of living “in the greatest country in the history of the world,” the onslaught [by Bobby Jindal] began: “We’ve got a lot of problems… The hour is late. If we’re not careful we could become just what is happening in Greece, what is happening in Puerto Rico, and here’s the problem, the EU may or may not bail out Greece. There’ll be nobody to bail out America. We are the last hope for the free world.”
This is all giving the staff at Spoiler Alerts an unpleasant sense of déjà vu, because the “America is the next Greece” meme first popped up about five years ago. See, most prominently, op-eds by former Federal Reserve chairman Alan Greenspan in the Wall Street Journal and historian Niall Ferguson in the Financial Times. They — and others — made kindred arguments about exploding levels of U.S. debt that would lead to spectacular increases in debt-to-GDP ratios, interest rates, inflation, and — eventually — a global rejection of the dollar.
I bring this up because, five years later, exactly none of these things have come to pass. Nor, frankly, were they all that likely to happen when the original predictions were made (the United States, unlike Greece, is in control of its own currency). Furthermore, contrary to conventional wisdom, the United States has not increased its level of leverage all that much over past half-decade. In fact, in a relative sense, the U.S. economy is looking in much better shape now compared to every other major economy than it did five years ago. So I hope readers will excuse me for not taking Bobby Jindal’s disastrous economic policy thoughts with anything approaching credibility.
To be clear, concerns about the long-term fiscal health of the United States are not completely misplaced. But most of these forecasts are based on what U.S. finances will look like generations from now, and these forecasts are extremely uncertain and vulnerable to hype. Radical austerity measures now would work about as well as they did in Greece — which is to say, they would fail spectacularly.
[It’s also worth observing, at some point, how GOP candidates can sound super-certain about the future of U.S. economic liabilities in 2075 and yet completely discount projections about climate change. But that’s a topic for another day.]
So if you hear claims that “America is the next Greece” over the next few weeks/months/years, remember that these predictions have been made for the past five years, and they have been consistently and persistently wrong.
The only lesson that the United States should draw from Greece is that the United States is not Greece.