U.S. MUST CHANGE COURSE ON NATIONAL DEBT TO AVOID GREECE'S FATE
May 19, 2010
If the United States does not change course and recognize that we are not exempt from the fundamental laws of prudent finance, we could become like Greece in the not too distant future, says former U.S. comptroller general David M. Walker.
Over the past 40 years, U.S. government spending has grown by almost 300 percent after adjusting for inflation, and our revenues have not kept pace. Our current deficits are the highest as a percentage of our economy since World War II. In that respect, we sure look a lot like Greece, or at least we will in the near future, says Walker.
- As a percentage of our economy, total federal, state and local public debt in the United States already exceeds levels in Spain, and is comparable to Ireland and Great Britain.
- We will reach Portugal's levels within two years and Greece's levels within 10 years on our present course.
To be sure, there are some big differences between the United States and Greece, explains Walker:
- We are by far the largest economy in the world.
- The dollar also represents more than 60 percent of the world's reserve currency.
- That means, unlike the situation in Greece, our foreign creditors will give us the benefit of the doubt for a while.
- Nevertheless, they also see the very grave threat of the escalating deficits we will face in the future based on our current fiscal path.
- These projected structural deficits are driven largely by rising health care costs, known demographic trends and the cost of financing what we will need to borrow to pay for increased spending.
Ultimately, we will need to take a range of steps to recapture fiscal flexibility and stabilize the ratio of our debt to the gross domestic product, says Walker.
Source: David M. Walker,"U.S. must change course on national debt to avoid Greece's fate," Goldwater Institute, May 18, 2010.
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