Friday, May 14, 2010

The Greek Tragedy and Our Fate

Greece, the ancient birthplace of democracy, is coughing up blood on account of the democratic disease of bribing the people with their own money, or, in its current form, not even their grandchildren's money but money that no one can ever afford to pay. Theodore Dalrymple says the story is a common one among Western nations ("Know Thyself: rather than pointing fingers, Greek citizens should look in the mirror," City Journal, May 7, 2010).

My WORLDmag column yesterday, draws a parallel between the bankruptcy that cities like San Francisco are facing ("Freakish Frisco: where one-third of city workers make $100,000 and Willy Brown is a budget hawk" by Pete Peterson, City Journal, May 4, 2010) and the Greek tragedy that is playing itself out across the sea.

Read "Our Own Greek Tragedy."

Also, consider these debt-to-GDP ratios for 2009 from the CIA World Factbook:
Australia 18.6%
Belgium 99%
Canada 72%
Chile 9%
France 79.7%
Greece 113.4%
Hong Kong 18%
Italy 115%
Japan 192%
Netherlands 62%
Spain 50%

The United States is listed as having a ratio of 40% in 2008 and of 53% the next year. Pretty stable. The CBO director's blog reported last year: "The current recession and policy responses have little effect on long-term projections of noninterest spending and revenues. But CBO estimates that in fiscal years 2009 and 2010, the federal government will record its largest budget deficits as a share of GDP since shortly after World War II. As a result of those deficits, federal debt held by the public will soar from 41 percent of GDP at the end of fiscal year 2008 to 60 percent at the end of fiscal year 2010. This higher debt results in permanently higher spending to pay interest on that debt." In March, the CBO estimated the ratio would reach 90% by 2020.

But those are only partial figures. The CIA World Factbook appends the following illuminating information to the figures they report:

note: data cover only what the United States Treasury denotes as "Debt Held by the Public," which includes all debt instruments issued by the Treasury that are owned by non-US Government entities. The data include Treasury debt held by foreign entities. The data exclude debt issued by individual US states, as well as intra-governmental debt. Intra-governmental debt consists of Treasury borrowings from surpluses in the trusts for Federal Social Security, Federal Employees, Hospital Insurance (Medicare and Medicaid), Disability and Unemployment, and several other smaller trusts. If data for Intra-government debt were added, "Gross Debt" would increase by about 30% of GDP. 

That puts the 2009 debt figure at roughly the 87% of GDP it is reported as being today. Do the rest of the math.

No comments: