Most Americans look with a measure of disdain at the catastrophic financial condition of Greece.
Yes, there has been plenty of robust debate over how to fix it. One side argues that “austerity” measures are killing any hope of recovery, the other that the only route to recovery and financial stability is to start living within your means and pay off your debt.
But the overall attitude in the United States is that this sort of pathetic financial carnival — three bailouts in five years, about 240 billion euros in rescue money and a debt burden at 170 percent of its gross domestic product — would never happen here.
Well, maybe not. But it might be prudent to tone down the smug superiority.
I’m not sure that average Americans are aware of how deeply in hock we are ourselves. I’ve seen multiple social media posts by President Obama’s worshipers that praise him for “cutting the deficit,” as if that is the only measure of our financial health.
Yes, the deficit has declined. From a high of $800 billion, it is projected to be “only” $412 billion this year. But the deficit is a relative pittance compared to the nation’s debt, which is now more than $18.5 trillion.
Focusing only on the deficit is like a family celebrating that they’ve cut the amount they are overspending each year in half, from $20,000 to only $10,000, while neglecting to mention that they are $1 million in debt, and that they just added another $10,000 to that debt.
Greece’s $260 billion bailout — a euro is worth about $1.11 — is less than 1.5 percent of America’s national debt.
Yes, yes, America is a vastly bigger and (allegedly) wealthier country than Greece. But its debt-to-GDP ratio is now 104.5 percent, according to the International Monetary Fund. This is the first time that ratio has topped 100 percent.
And some financial experts argue that things are actually significantly worse, since a more accurate comparison is the ratio of debt to “income” — how much the nation collects in taxes.
University of Georgia economics professor and Forbes columnist Jeffrey Dorfman has noted that ratio is 408 percent, which puts the United States in third place, behind only Japan and Greece, and in what he calls the “red zone” for national debt-to-income.
And that doesn’t even count what the nation has “promised” to pay out in Social Security benefits, right at the time that 76 million Boomers are retiring.
Nor does it count the debts that governments at all levels — federal, state, county and municipal — are facing due to swelling, unfunded public pension liabilities.
It would be humorous were it not so serious — scary, even — to hear politicians pontificate about how no private financial institutions should be “too big to fail.”
They’re right about that. But they are failing to look in the mirror. Particularly at the federal level, they are the custodians of an organization that is vastly bigger than any private company, and that is too big to fail.
A recent report on state-run retirement systems by the Pew Charitable Trust found collectively a “$968 billion shortfall in 2013 between pension benefits governments have promised to their workers and the funding available to meet those obligations — a $54 billion increase from the previous year.”
Among the worst is Illinois, home state of President Obama, where only about 40 percent of the state’s $165 billion pension liability is funded. Its credit rating has dropped to junk status, and tens of thousands of state employees and retirees are probably wondering about the credibility of all the gold-plated promises made to them. The $100 billion-plus that the system needs is not going to be funded by “asking the wealthy to pay a little bit more.”
Pew takes pains to note that its figures reflect the investment losses of the 2008 recession and do not reflect “recent strong investment returns.” But it says even those better returns and some pension reforms enacted since 2008 will not improve things much; the collective state pension liabilities will remain between $800 billion and $900 billion, and will be more than $1 trillion when combined with local pension shortfalls.
All of which points us in the same direction as Greece.
Elected officials, in exchange for public employee unions funding their re-election campaigns and turning out “volunteer” workers to keep them in office, have promised retirement packages that are vastly more generous than anything available to those doing similar jobs in the private sector. You get retirement by your mid-50s, if not your 40s, with more than half of your salary guaranteed for life; essentially free medical care for the rest of your life; and outrageously easy access to “disability” retirement. Miscreants are allowed to retire rather than get fired, so they can collect their pensions, etc.
They figure, when the bill actually comes due, they will be retired themselves.
It is that kind of mentality that got Greece in trouble — trouble that their leaders thought wouldn’t arrive until they were long gone from the scene.
And maybe most of those who caused the trouble are indeed off the scene. But the bill did come due. And it isn’t pretty.
Given the scale of the U.S. government, it will be much less pretty when it happens here.
Taylor Armerding of Ipswich is an independent columnist. Contact him at firstname.lastname@example.org.