World markets have been worried about the financial disaster threatening Greece. And well they should.
The European Union member country recently revealed that it had been hiding its debt. Greece’s total debt is 113 percent of GDP for 2009, and expected to rise to 125 percent by 2010. E.U. rules require that total debt not be higher than 60 percent of GDP, according E.U. Business.
And so the markets stumbled for several days over the prospect of a Greek failure, until other E.U. countries hinted they might help out.
But looking at the mounting debt facing the U.S., we have to wonder if we’ll be the new Greece.
Veronique de Rugy of the Mercatus Center has just put together a chart highlighting our own challenges. It shows gross U.S. federal debt for 2010 at $11.9 trillion. That’s 94.3 percent of GDP. Not quite Greece yet, but heading that way quickly.
However, her graph shows a $4.3 trillion current debt in intragovernmental accounts. That’s the Medicare and Social Security money supposedly tucked away nice and safe for the future. But, as most people know, the government has actually borrowed that money. So it’s only there on paper. Add in the trillions of dollars in unfunded liabilities for those programs and, well, Greece isn’t looking so bad.
And that’s only federal obligations. The Pew Center on the States has raised the red flag on state finances. In a recent report, the Center estimates that at the end of 2008, states and participating localities had set aside $2.35 trillion to pay for retirees’ benefits. But the real obligation was around $3.35 trillion, leaving a $1 trillion gap.
And Pew argues that’s on the conservative side. Since the end of 2008, government portfolios took a beating. They may have revived some in recent months, but Pew expects not enough.
On the positive side, China, Japan and a few other countries have been willing to be our European Union, buying U.S. debt as fast as it needs it—at least for now.
If Washington and the states keep spending and borrowing, our benefactors may decide they have enough U.S. debt, and then what will we do? Who knows, maybe by then we’ll have to borrow from Greece.