We're Next

(Chart courtesy Washington Examiner)

(Chart courtesy Washington Examiner)

Go ahead and laugh at the Greeks — while you still can:

With all the chaos unravelling in Greece, Congress would be wise to do what it takes to avoid reaching Greek debt levels. But it’s not a matter of sticking to the status quo and avoiding bad decisions that would put the budget on a Greek-like path, because the budget is on that path already.

A quarter-century ago, Greek debt levels were roughly 75 percent of Greece’s economy — about equal to what the U.S. has now. As of 2014, Greek debt levels are about 177 percent of national GDP. Now, the country is considering defaulting on its loans and uncertainty is gripping the economy.

In 25 years, U.S. debt levels are projected to reach 156 percent of the economy, which Greece had in 2012. That projection comes from the Congressional Budget Office’s alternative scenario, which is more realistic than its standard fiscal projection about which spending programs Congress will extend into the future.

There, with or without the grace of God, go I.

Slightly less glib, the difference between the US and Greece is that we control our own currency — which also happens to act as the world’s reserve currency. We also act as a worried planet’s mattress of last resort. That is to say, when other countries’ economies go to hell, the stash their money in US banks, securities, real estate, etc. So the good news is, we can probably exceed even Japan’s levels of indebtedness (more than 200% of GDP), before the stuff hits the fan.

The bad news is that the CBO’s “alternative scenario” may prove entirely too optimistic regarding how long it takes us to get there.