America worse than Greece already

| March 25 2012
Christopher Cook

It’s not a very neighborly thing to hit somebody with depressing pessimism first thing in the morning. Let ‘em at least shake the sleep out of their eyes and grab some orange juice before you park a storm cloud directly over their heads. Of course, Mark Steyn didn’t afford me that courtesy this morning, and since time to fix our problems is running short, I will follow suit.

We generally assume that while things are bad, debt-wise, in this country, at least we’re not as bad off as Greece yet. But that is only true if you look at some metrics, like national debt- and deficit-to-GDP.

Yet it’s widely agreed that Ryan’s plan is about as far as you can push it while retaining minimal political viability. A second-term Obama would roar full throttle to the cliff edge, while a President Romney would be unlikely to do much more than ease off to third gear. At this point, it’s traditional for pundits to warn that if we don’t change course we’re going to wind up like Greece. Presumably they mean that, right now, our national debt, which crossed the Rubicon of 100 percent of GDP just before Christmas, is not as bad as that of Athens, although it’s worse than Britain, Canada, Australia, Sweden, Denmark, and every other European nation except Portugal, Ireland, and Italy. Or perhaps they mean that America’s current deficit-to-GDP ratio is not quite as bad as Greece’s, although it’s worse than that of Britain, Canada, France, Germany, Italy, Spain, Belgium, and every other European nation except Ireland.

Unfortunately, there’s another kind of debt that most people aren’t talking about much yet:

But these comparisons tend to understate the insolvency of America, failing as they do to take into account state and municipal debts and public pension liabilities. When Morgan Stanley ran those numbers in 2009, the debt-to-revenue ratio in Greece was 312 percent; in the United States it was 358 percent. If Greece has been knocking back the ouzo, we’re face down in the vat. Michael Tanner of the Cato Institute calculates that, if you take into account unfunded liabilities of Social Security and Medicare versus their European equivalents, Greece owes 875 percent of GDP; the United States owes 911 percent — or getting on for twice as much as the second-most-insolvent Continental: France at 549 percent.

State and local debt is so large that the exact number is unknown, or at least differs depending on how it is calculated. Typical figures range from 60-ish trillion to numbers in the low three digits of trillions. All of it could be paid by a combination of drastic reform and robust growth, but neither of those seems politically possible. If you speak out against our dangerous public pension liability, for example, that means you hate teachers, and by logical extension, our precious children. Good luck getting (re)elected on that platform.

Thus slow motion train wreck can be stopped, but we seem to lack the will and we’re running out of time.

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