We are NOT Greece

OK, so many of you have probably heard about the fiscal crisis in Greece. You can find a timeline of the way the crisis unfolded here. The upshot of the situation is that the conservative party that governed Greece for most of the last 10 years flat out lied about the size of the country's debt and deficit in relation to their GDP. Last year, the new center left government revealed the true numbers and all hell broke loose.

Now, as this crisis unfolds you hear a lot of talk from the most populist talking heads on CNN, FOX etc arguing that the current deficit spending in the US is leading us to some sort of inevitable Greek like catastrophy here. But I contend that this simply alarmist jingoism and these people are pushing it for partisan political reasons. In this post I will list a number of reasons that WE ARE NOT GREECE.

1) Size matters. Greece is a relatively small, poor country with shaky economic foundations. According to the CIA world factbook, about 15% of the Greek economy comes from tourism. Another 3.3% of it comes from direct aid from the EU in the form of ag subsidies and structural development funds. In contrast, the US economy is dependent on neither source but is instead a large and diversified economy with sizable service sector and industrial sectors. Basically, the Greek economy looks more like Hawaii's or Alaska's (minus the oil) than like the rest of the USA.

2) Americans are better citizens! One of the problems Greece has is a very low rate of compliance with tax laws. That is, Greeks simply cheat on their taxes on a massive scale. The result is the Greek state's capacity to raise public revenue is seriously hindered. That is not the case in the US. As much as people like to joke about fudging their returns, Americans are a law abiding bunch. Part of that is because our government is better at enforcing the tax laws.

3) Checks and balances mean honest government. One of the reasons the previous Greek government was able to flat out falsify their national books is because Greece has a unicameral parliamentary system combined with an electoral system that tends to produce single party majority governments. Combine that with relatively disciplined parties (unlike American parties) and you get a government with virtually no one watching over their shoulders. In contrast, the United States has numerous conflicting partisan and institutional actors watching and reporting on spending and budget issues. It is politically impossible to imagine a situation in which some President or small group of Congressional leaders could falsify the books and get away with it. The national accounts are required by law to be revealed to too many people who have a vested interest in exposing such misdeads by their political opponents.

4) We don't spend or borrow nearly as much! The current Greek debt is about 113.4% of their GDP (from CIA world factbook). The popular reaction to the deficit reduction strategy in Greece has been violent and deadly. The US debt is about 52.9% of our GDP and it is provoking a vigorous political debate about how (not whether) to reduce it (from CIA world factbook). In any given year about 50% of Greece's GDP is taken up in government expeditures. In the US less than 20% of the GDP is taken up with government expenditure. What's more, there are some indications that US economy is beginning to recover from its part of the global recession. That is not the case in Greece. In Greece, the indications are that the economy will continue to shrink.

For all these reasons, I believe talk about the US going the way of Greece is little more than partisan hyperbole.