Should We Fret the Debt?

Greece is not alone! 
 
There are a number of developed countries with government debt only a little lower than Greece—and one that’s higher.
 
According to Bloomberg, Greece’s 2014 gross government debt as a percentage of GDP is 174.0. But that number pales in comparison to Japan’s at 248.3. The U.S. has the dubious distinction of coming in sixth, with government debt to GDP ratio of 107.3.
 
But Greece is a fairly small country, with only 11.2 million people. And its economy is small, much smaller than it was, say, five years ago.
 
The same cannot be said for some of the other European Union countries. And that’s what has people really nervous.
 
Italy is sitting on a 133.1 government debt to GDP ratio, and Portugal is at 125.0. And that’s scaring politicians, investors and markets.
 
Indeed, 12 of the top 20 countries on Bloomberg’s highest government debt to GDP list are EU countries. Could the financial fire spread from one country to another?
 
But what about the U.S.?
 
Jason Russell, writing for the Washington Examiner, compares the growth in Greek debt to that of the U.S. He concludes:
 
“In 25 years, U.S. debt levels are projected to reach 156 percent of the economy, which Greece had in 2012. That projection comes from the Congressional Budget Office’s alternative scenario, which is more realistic than its standard fiscal projection about which spending programs Congress will extend into the future.”
 
But wait, while federal debt, currently at $18 trillion, includes money the federal government has borrowed from the Social Security Trust Fund, it does not include the Social Security’s and Medicare’s unfunded liabilities—money the federal government is obligated to pay but will not have the revenue to cover.
 
For example, Boston University economists Larry Kotlikoff and Adam Michel of the Mercatus Center recently published a Mercatus Center paper claiming that the real federal debt is $210 trillion.
 
If that figure were used in calculating the U.S. government debt to GDP ratio, the U.S. would likely make Greece look like the picture of fiscal responsibility.