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“We stand by the people and the government of Greece as you put your country back on a path to economic stability and prosperity,” Secretary of State Hillary Clinton announced Sunday in Athens. “We have a lot riding on our relationship together.”
Like Charlie Sheen winning a vote of confidence from Lindsay Lohan, the encouraging words of one spending addict for another undermined rather than inspired confidence. The United States, like Greece, has damaged its credibility in the process of jeopardizing its credit. Spending vaults of other people’s money will have that effect on a nation.
Following a week in which Fitch became the third major credit agency to bestow a “C” rating upon Greece, and Standard and Poor’s estimated a greater than fifty percent chance that the United States would lose its “AAA” rating in the next three months, the secretary of state’s trip to Athens was a case of bad timing. Clinton’s appearance in Athens did more to highlight the U.S.’s debt crisis than it did to help Greece get through theirs. Greece could use our money. America could profit from Greece’s example. But neither party is getting much of what they truly need from the other.
Stateside, politicians and pundits contrast the ancient nation betwixt the Ionian and Aegean Seas with the newer power on the North American continent. Columnist Pat Buchanan says that the West’s aging demographic dependent on government pensions makes us “all Greeks now.” Responding to the administration’s contention that GOP spending cuts would be calamitous, South Carolina Senator Lindsey Graham told CNN, “What is calamitous is the path we’re on as a nation. We’re becoming Greece.” Economist Paul Krugman calls Graham’s Greek comparison a “fallacy” and “nonsense.” The former Enron advisor notes that “the U.S. has much less debt than Greece.”
It’s chic to invoke Greece. But is the Hellenization of America real or just rhetoric?
At nearly $14.3 trillion, the U.S. government’s debt is almost the size of this year’s gross domestic product. It would require the product of about a year’s labor from every American to pay off the national debt. At $470 billion, Greece’s debt is much smaller than the U.S.’s debt. But Greece is a much smaller nation (about 11 million people) that has a much smaller economy ($310 billion estimated 2011 GDP) than the United States. The all-important debt-to-GDP ratio is about 143 percent, with the International Monetary Fund predicting it will climb to 172 percent next year. Compounding the problem, Greece’s economy is contracting (whereas the U.S. merely experiences slow growth).
Juxtaposing the more crushing Greek debt with the U.S. debt reveals disturbing trend lines, albeit trend lines apart chronologically. Greek debt just seven years ago stood at 98.6 percent of GDP. That is almost exactly where the U.S. debt-to-GDP ratio stands now. The message? Iceberg ahead! Change course.
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