On our program today, we're going to speak with David Leonhardt, Economic Scene columnist for The New York Times, who wrote a provocative piece in this morning's paper, "In Greek Debt Crisis, Some See Parallels to U.S."
In it, Leonhardt says that "it's easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don't get it." But, he continues, "in the back of your mind comes a nagging question: how different, really, is the United States?"
The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece's debt, by comparison, equals about 115 percent of its G.D.P. today.
The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they're paying for. And politicians, spendthrift as some may be, are not the main source of the problem.
Leonhardt's colleague at The Times, Paul Krugman, disagrees with the argument. In a blog post this morning, he said you can't really compare us to Greece.
Basically, the United States can expect economic recovery to bring the deficit down substantially; Greece, which has a larger structural deficit and also faces a grinding adjustment to overvaluation with the eurozone, can't.
Yes, the United States needs fiscal adjustment — Auerbach and Gale say that we have a long-run fiscal imbalance of 6-plus percent of GDP, although much of that could be closed by reining in health costs. But we really don't look much like Greece.