It’s an ill wind that blows nobody good, and the crisis in
Greece is making some people — people who opposed health care
reform and are itching for an excuse to dismantle Social Security —
very, very happy. Everywhere you look there are editorials and
commentaries, some posing as objective reporting, asserting that
Greece today will be America tomorrow unless we abandon all that
nonsense about taking care of those in need.
The truth, however, is that America isn’t Greece — and, in any
case, the message from Greece isn’t what these people would have
you believe.
So, how do America and Greece compare?
Both nations have lately been running large budget deficits,
roughly comparable as a percentage of G.D.P. Markets, however,
treat them very differently: The interest rate on Greek government
bonds is more than twice the rate on U.S. bonds, because investors
see a high risk that Greece will eventually default on its debt,
while seeing virtually no risk that America will do the same.
Why?
One answer is that we have a much lower level of debt — the
amount we already owe, as opposed to new borrowing — relative to
G.D.P. True, our debt should have been even lower. We’d be better
positioned to deal with the current emergency if so much money
hadn’t been squandered on tax cuts for the rich and an unfunded
war. But we still entered the crisis in much better shape than the
Greeks.
Even more important, however, is the fact that we have a clear
path to economic recovery, while Greece doesn’t.
The U.S. economy has been growing since last summer, thanks to
fiscal stimulus and expansionary policies by the Federal Reserve. I
wish that growth were faster; still, it’s finally producing job
gains — and it’s also showing up in revenues. Right now we’re on
track to match Congressional Budget Office projections of a
substantial rise in tax receipts. Put those projections together
with the Obama administration’s policies, and they imply a sharp
fall in the budget deficit over the next few years.
Greece, on the other hand, is caught in a trap. During the good
years, when capital was flooding in, Greek costs and prices got far
out of line with the rest of Europe. If Greece still had its own
currency, it could restore competitiveness through devaluation. But
since it doesn’t, and since leaving the euro is still considered
unthinkable, Greece faces years of grinding deflation and low or
zero economic growth. So the only way to reduce deficits is through
savage budget cuts, and investors are skeptical about whether those
cuts will actually happen.
It’s worth noting, by the way, that Britain — which is in worse
fiscal shape than we are, but which, unlike Greece, hasn’t adopted
the euro — remains able to borrow at fairly low interest rates.
Having your own currency, it seems, makes a big difference.
In short, we’re not Greece. We may currently be running deficits
of comparable size, but our economic position — and, as a result,
our fiscal outlook — is vastly better.
That said, we do have a long-run budget problem. But what’s the
root of that problem? “We demand more than we’re willing to pay
for,” is the usual line. Yet that line is deeply misleading.
First of all, who is this “we” of whom people speak? Bear in
mind that the drive to cut taxes largely benefited a small minority
of Americans: 39 percent of the benefits of making the Bush tax
cuts permanent would go to the richest 1 percent of the
population.
And bear in mind, also, that taxes have lagged behind spending
partly thanks to a deliberate political strategy, that of “starve
the beast”: conservatives have deliberately deprived the government
of revenue in an attempt to force the spending cuts they now insist
are necessary.
Meanwhile, when you look under the hood of those troubling
long-run budget projections, you discover that they’re not driven
by some generalized problem of overspending. Instead, they largely
reflect just one thing: the assumption that health care costs will
rise in the future as they have in the past. This tells us that the
key to our fiscal future is improving the efficiency of our health
care system — which is, you may recall, something the Obama
administration has been trying to do, even as many of the same
people now warning about the evils of deficits cried “Death
panels!”
So here’s the reality: America’s fiscal outlook over the next
few years isn’t bad. We do have a serious long-run budget problem,
which will have to be resolved with a combination of health care
reform and other measures, probably including a moderate rise in
taxes. But we should ignore those who pretend to be concerned with
fiscal responsibility, but whose real goal is to dismantle the
welfare state — and are trying to use crises elsewhere to frighten
us into giving them what they want.