The fiscal collapse of Greece has rattled international markets and renewed questions about the feasibility of maintaining a single currency across Europe. But it should also provide a warning to Americans about how quickly things can unravel for a country when it refuses to confront the realities of its mounting debt.
Though significantly smaller than the U.S., some of the same problems that Greece faces are issues here: over-dependence on a consumer-based economy, a money-sucking old age pension system, reliance on other nations to finance its deficits, and a swelling debt toll that has surpassed its annual gross domestic product.
If it’s hard to imagine the same sort of meltdown happening here, consider this: in Greece, debt is currently at 112. 6 percent of GDP. According to the Congressional Budget Office’s fiscal projections, we’re on course to reach roughly that level (with debt at 111.5 percent of GDP) in 2025. That’s just 15 years from now.
In the decades that follow 2025, the debt/GDP ratio continues to soar, according to the CBO — surging to 205.8 percent by 2038, 509 percent by 2066, and 766.9 percent by 2083. To put that number in the context of today’s GDP, that would be like if our debt in 2009 were about $100 trillion (of course things would collapse before reaching that point).
People are unmoved by dire predictions of what may happen decades from now. But the reality is that investors do look at the long term, and if the U.S. government doesn’t begin taking actions to rein in our debt, the actual crisis could occur much sooner. All that would have to happen is that foreign investors could decide they don’t want U.S debt anymore or aren’t so keen on the dollar, which would trigger inflation and drive up our interest payments just as we’re facing a cash crunch.
There’s still some time right now to address the debt problem in a thoughtful manner so that it will cause as little disruption to our lives as possible. But the longer we wait, the more difficult things become. And if we simply wait until the crisis hits, we’ll have to confront the problem with ad hoc tax hikes and benefit cuts that are likely to cripple our economy and cause social upheaval.
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