The Greecing of America, Simplified
Greece is living out a fiscal nightmare. Violent, deadly riots in protest of the Greek government have erupted in the streets of Athens. How did things get so bad? And could it possibly happen in the US?
We answer these critical questions in our new short video “The Greecing of America, Simplified” – which shows how the Greek crisis came to be and how the U.S.’s spending and debt problems compare.
Runtime: 2 minutes and 25 seconds
As is illustrated in the video, the problem in Greece is that its government has created a society heavily dependent on government spending. The Greek government spends a lot of its taxpayers’ Euros on retired workers. But Greece’s population is aging, meaning less workers to pay for more retirees, so there’s no way the government can pay for its spending promises to the retirees.
Rather than learning from the failed efforts in Greece and other European countries, the United States is doing the exact same thing. Like Greece, the US is promising money that it does not have to an aging population.
As a result, total U.S. government spending as a percent of the economy has risen to 41.5%. That’s not far below the levels of Greece (51.3%) and the European Union (50.7%). And it’s far above the recommended level of 25% or less.
In 10 years, this overspending will lead to a debt that’s 90% of the size of the US economy. A broader measure from the International Monetary Fund forecasts a more pessimistic debt level of over 100% within just five years. Either way, that’s not far below Greece’s level today (115%). It’s more than the European Union (79%). And it’s far above the recommended level of 60% or less.
It’s too late for Greece. It’s not too late for us…but it will be soon. We must cut spending to avoid a fiscal nightmare like Greece is now experiencing. If you enjoy our video, please pass it along to others.
And, if you haven’t already, subscribe to receive our emails so you get polished infographics on the Greek crisis and other critical economic policy news.
For more of Bankrupting America’s work on the situation in Greece and the lessons to be learned here in the United States, check out the following:
http://dailycaller.com/2010/05/06/will-u-s-follow-greeces-course/
http://www.bankruptingamerica.org/tag/greece/
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List of sources for the facts featured in the video:
“Greece is a lesson for us…we shouldn’t be so arrogant to think that that couldn’t happen to us or others.” Fed Reserve Bank of Kansas City, President
Source: O’Grady, Mary A. The Fed’s Monetary Dissident. The Wall Street Journal. 15 May 2010.
Because Greece’s population is aging.
Source: The Country Statistical Profiles 2009: Greece report from the Organization for Economic Co-operation and Development says Greece’s population over 65 will rise from 18 percent to 25 percent in 20 years.
As a result, Greece is drowning in a debt that’s 115% the size of its entire economy.
Source: Samuelson, Robert. The Welfare State’s Death Spiral. Real Clear Politics. 10 May 2010.
That’s two times the level most experts recommend.
Source: Based on recommendations in the Choosing the Nation’s Fiscal Future report from the Committee on the Fiscal Future of the United States and the European Union’s Stability and Growth Pact. The first report suggests that the appropriate U.S. federal debt level as a percentage of GDP is 60 percent. The EU’s Stability and Growth Pact said member states must keep their GDP to debt ratio to under 60 percent.
Like Greece, the US is spending money – that it does not have – on an aging population (total unfunded liabilites.)
Source: $106.4 trillion represents the net present value of the federal government’s unfunded liabilities as calculated in Forbes by former Treasury Department economist Bruce Bartlett based on actuarial tables from the Social Security Administration and data from the Medicare Trustees Report.
In the U.S., total government spending as a percent of the economy has risen to over 41 percent.
Source: Based on the General Government total outlays Table 25 from the Organization for Economic Co-operation and Development.
That’s not far below the levels of Greece and the European Union. (Greece – 51.3; EU – 50.7)
Source: Based on the General Government total outlays Table 25 from the Organization for Economic Co-operation and Development.
And it’s far above the recommended level of 25% or less
Source: A study Optimum Size of Government from the Institute of Market Economics finds that the government sector should be no larger than 25% to maximize GDP growth.
In 10 years, this overspending will lead to a debt that’s 90 percent of the size of the US economy.
Source: Under the President’s budget, debt held by the public would grow to 20.3 trillion (90 percent of GDP) at the end of 2020, according to the CBO’s Estimate of the President’s Budget report.
A broader measure from the International Monetary Fund forecasts a more pessimistic debt level over 100 percent within just 5 years.
Source: McGuire, Frank. IMF: US Debt Nearing 100 Percent of GDP. Money News. 17 May 2010.
It’s more than the European Union.
Source: The Eurozone government debt to GDP ratio is 79 percent, according to Eurostat.
Good video, although it simply espouses the many deadly innocent frauds of modern economic policy. We no longer live on a gold standard, so the government can spend as much as it wants, although if it does spend too much, the currency will devalue and inflation could result. The government can never go insolvent, unless the government decides to default. It can always print the money. Also, the government does not need to tax in order to spend. The only reason why sovereigns tax is to give value to the paper. It is the only thing that the government lets you pay your taxes with. Read the piece by Warren Mosler, below, and then also consider the excellent “Modern Money” blogs by Randy Wray and Bill Mitchell.
“7 Deadly Innocent Frauds”
Good video, although it simply espouses the many deadly innocent frauds of modern economic policy. We no longer live on a gold standard, so the government can spend as much as it wants, although if it does spend too much, the currency will devalue and inflation could result. The government can never go insolvent, unless the government decides to default. It can always print the money. Also, the government does not need to tax in order to spend. The only reason why sovereigns tax is to give value to the paper. It is the only thing that the government lets you pay your taxes with. Read the piece by Warren Mosler, below, and then also consider the excellent “Modern Money” blogs by Randy Wray and Bill Mitchell.
“7 Deadly Innocent Frauds”
See my websites www.moslereconomics.com and www.moslerforsenate.com
Yes, but the difference is Greece is like a US State that can indeed become insolvent.
For the US Govt. (and the European Central Bank) spending is not operationally constrained by revenues.
That makes this article incorrect and unfortunately ‘part of the problem’
See my websites www.moslereconomics.com and www.moslerforsenate.com
Yes, but the difference is Greece is like a US State that can indeed become insolvent.
For the US Govt. (and the European Central Bank) spending is not operationally constrained by revenues.
That makes this article incorrect and unfortunately ‘part of the problem’
The analogy on this video is in error. It is not Social Security, per se, that is going to bankrupt this country. It is the entitlements, i.e. SSI, which are nothing more than a very broad welfare program that pays people of all ages who complain of various and sundry ailments and have never worked to contribute to the pool from which Social Security payments are made. People like myself who have worked from their early teens and are still working in their 70s will never live long enough to collect the money we have contributed.
The analogy on this video is in error. It is not Social Security, per se, that is going to bankrupt this country. It is the entitlements, i.e. SSI, which are nothing more than a very broad welfare program that pays people of all ages who complain of various and sundry ailments and have never worked to contribute to the pool from which Social Security payments are made. People like myself who have worked from their early teens and are still working in their 70s will never live long enough to collect the money we have contributed.
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