As my father used to say “There are three reasons we can’t do it. First, we don’t have the money, and it doesn’t make a damn about the other two.” – T. Boone Pickens
So what would it take for the United States to get to levels of debt like Greece? It turns out, not that much. In fact, it could be happening very soon. Most people in the US have been closing our eyes and hoping that if we can’t see the problem it doesn’t exist.
First, let’s take a look at the state of the US Debt. The best way to look at the impact of a debt is to look at the debt level as compared to GDP. Consider it like looking at a person’s debt versus what they make: A debt of $100k may not be alarming for someone pulling in millions of dollars per year, but it would be for someone who makes ten dollars an hour. Comparing debt to GDP gives context versus the size of a country’s economy. For the US, the recent historic data looks like this:
So, if the debt/GDP ratio continues on the same path that it’s been on the last four years (9% increase), we have about five years until we have a debt similar to Greece’s. If things taper back to only an increase of 3% per year we have more like 13 years. Bear in mind that there will be no one to prop the US up like Greece is hoping for. If we get to the point that creditors no longer trust the US government, there will be hard cuts and a great deal of pain.
Now, it is reasonable to assume that the US would not encounter the same issues as Greece with a similar debt/GDP ratio, due to a few factors:
- The US has control of printing their own currency. Of course, to use this solution would be to devalue any savings that the American people have, but that doesn’t change that the option is there.
- The US is still the US. We have a lot of clout and power and trust, so we’d probably get more slack than other countries.
- There will probably still be worse offenders. If you want to look good, find someone ugly to stand next to…
This all is not to say that we should ignore the situation… Remember, similar to the mechanics of household debt, the deeper in you get the harder it is to turn around the flow. The consequences when the debt goes beyond a tenable position will be brutal. Discontinuation of food stamps programs, huge cuts in welfare, a serious economic depression, etc. It isn’t unreasonable that if the US ever hits the point of no return on debt, conditions for the poor will go to those similar to a third world country. For the cost of having a little extra “compassion” right now and giving extra benefits, extra payments, and the like, we could be causing tremendous suffering in the future. It all depends on how soon we open our eyes and address the issue.