No, We Won't End Up Like Greece: 5 Reasons Conservative Fear-Mongering Is Totally Wrong
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There is a small group of Americans who would like to be rid of Social Security, Medicare and much of the rest of our social safety net on ideological grounds.
They have two problems: the first is that these programs are very popular. The second is that while they are, like every other item in the federal budget, not fully “paid for” over the next 75 years, they are pretty darn close. Forget what you read every day in the Washington Post or the New York Times : the 75-year “gap” for Social Security works out to six-tenths of one percent of our economic output over that period (according to the 2010 Trustees' report [ PDF]). Even with the sky-high costs of American health care, Medicare's 75-year “gap” equals just four-tenths of one percent.
To put that last number in perspective: it amounts to about a quarter of what we'll spend on Iraq and Afghanistan as a share of our economic productivity. Or put it another way: right now we fork over 3.2 percentage points of our earnings less in taxes than we did under Ronald Reagan, and the long-term “shortfall” for both programs represents about a third of that difference. If we could afford to pay Ronald Reagan's tax rates, and fight the wars in Iraq and Afghanistan, then it goes without saying that we can afford to take care of our seniors after they finish busting their asses in the workforce for much of their lives.
Because of their popularity – or, if you prefer, because Americans don't want to see their elderly parents struggling to scratch out a poverty-level existence – deficit hawks can't simply say they oppose these programs outright. So, they've invented a deficit crisis and are pitching their preferred policies as some brave effort to rescue the Republic from ruin.
Above all, they don't want you to know that these two signature New Deal programs combined are “underfunded” by just one percent of our economic output over the next 75 years. So, we are treated to a barrage of arguments, some quite mendacious, and all designed to distract.
The latest in the genre are comparisons between the United States -- with a budget outlook that, while in a temporary slump, is fundamentally sound – and Greece, a basketcase on the brink of default. Calling for steep cuts on Fox News, Senator Tom Coburn, R-Oklahoma, said, “What most of America doesn't understand is if we don't put our house in order, we are going to look like Greece.” The conservative-leaning Boston Herald put it thusly : “If we follow the Democrats’ non-plan of increasing the debt ceiling, our nation will end up like Greece.” And a front-page story in the Washington Post this week quoted Peter Morici, an economist at the University of Maryland, arguing that if Congress raises the debt ceiling without a long-term plan for reducing the federal deficit, "They'll never solve the problem, and we'll end up like Greece."
I asked economist Dean Baker, who's written about 1,000 posts calling out reporters and pundits for drawing this parallel, what he thought about this, and his response was: “Greece's experience has as much to do with the U.S. as a corner lemonade stand does with Google.”
Why is this argument among the dumbest talking-points out there? Here are five reasons, all of which add up to this: the U.S. and Greece aren't apples and oranges, they're apples and armadillos.
1. Greece Has a Small Economy Loaded with Debt
The United States has the biggest national economy in the world. As of the end of 2010, the U.S. public debt equaled 61 percent of our annual economic output. (This figure doesn't include public debt held by the government itself, in public pension funds, for example.) That is far from the historic highs we hit during World War II and through the mid-1950s.