Americans think the U.S. government cannot go bankrupt.Foreign investors do, too.
The USA has huge commitments: Social Security, Medicare, and defense. So does Greece. The voters will not tolerate cuts here. Neither will Greek voters.
The USA has a bloated government. It’s not as bloated as Greece’s, but its getting there.
The federal government runs a $1.3 trillion deficit every year. Nothing changes.There are no solutions. Everyone knows this. Still, they think that the government cannot go bankrupt.
Of course it can. It will.
What will it look like when it does? Just like Greece.
But the severe austerity measures being demanded have caused such fury in Greece, and the cuts required are so deep, that Wolfgang Schäuble, the German finance minister, does not believe that any government would be able to implement them.
His pessimism has been tipped into despair with a secret European Commission, Central and IMF report that even if Greece made good on its promises, it would not be enough to reach the target of bringing total debt to 120 per cent of GDP by 2020.
“He just thinks the Greeks cannot do what needs to be done. And even if by some miracle they did what has been promised, he – and a growing group – are convinced it will not pull Greece out the hole,” said a eurozone official.
No government can do what must be done when it runs constant fiscal deficits. If it could, it would. Keynesian deficit spending is addictive.
The cuts, including a reduction in the minimum wage, mass redundancies within the public sector, and a slashing of the health and defence budgets, sparked rage on the streets of Athens last week, with buildings set on fire amid angry protests.
But the country’s politicians are resolutely trying to sound upbeat. “The Greek people have done everything they can and we are determined to make good on our commitments,” said Christos Papoutsis, public order minister.
Is he lying? Of course. Will Greece pay back the loans? Of course not.
Will the United States government pay off $15 trillion in official debt? No. Will it get out of the $100 trillion to $200 trillion in unfunded Medicare and Social Security obligations? Yes. That’s what bankruptcy means. Getting out of obligations that the government cannot afford to meet.
With Greek morale at rock bottom, the national mood darkened yet further after armed thieves looted a museum on Friday in Olympia, birthplace of the Olympic Games, and stole bronze and pottery artefacts – just weeks after the country’s National Gallery was burgled.
One Greek newspaper suggested the state could no longer properly look after the nation’s immense cultural heritage. “The Greek state has gone bankrupt, let’s face it,” the conservative daily Kathimerini said in an editorial.
Will European governments lend more money to people who can get away with this? This time, probably. Eventually, no.
Can this endless funding of a bankrupt government be reversed? Yes. But the other governments will play kick the can as long as they can politically.
So will Congress.
Everyone kicks the can. Everyone defers the hard decisions. The debt builds up, month after month.
We are seeing in Greece what will come here. Americans do not care. They will not read articles about it. “That’s over there. It has nothing to do with us.”
Be prepared. It’s coming to the USA.