July 3rd, 2011
02:04 PM ET

Could America go the way of Greece?

By Fareed Zakaria, CNN

Watching the return of the Greek crisis, many people in America are wondering, are we next?

Will America face the same financial disaster that the Greek government faces, with a soaring deficit and debt, markets that have lost faith in it and a downward spiral of budget cuts that then further depress the economy?

It might, but let us understand something really important: America stands in a fundamentally different place than does Greece.

Greece has two problems. First, it has a big budget deficit and markets have lost faith that it can ever repay its loans.

Second, it is an unproductive economy and cannot generate enough economic growth over the next few decades. In economics-speak, Greece has a liquidity problem but also a solvency problem.

The United States, by contrast, does not have a solvency problem. The American economy remains one of the world's most competitive, with many of the fastest-growing companies in most of the advanced industries. It houses the best capital markets in the world, the greatest universities and the most dynamic society.

America is demographically vibrant, thanks to immigration. It will be the only rich country that will see its population grow over the next 25 years.

America could face a liquidity problem - that is, it could have difficulty financing its debts and deficits if markets lose faith in it. But, again, let's be clear: This has not happened yet. In fact, right now the world is lending to America more cheaply than ever before.

The most important difference between Greece and America is this: America has many paths to solve its deficit problem. Were it to implement the Simpson-Bowles Deficit Reduction Plan, for example, it would instantly give America among the strongest public finances of any rich country.

Would Congress simply allow the Bush tax cuts to expire - returning rates to where they were under Bill Clinton's presidency when America created almost 25 million jobs - that one action would provide the federal government with $3.9 trillion in revenues over the next decade and basically solve the deficit problem. We would still face the long-term problem of entitlements, especially health care costs, like every other rich country, but the short and medium-term crisis would be over.

Greece, Portugal and Ireland have no such economic answer to their problems. Europe is choosing between only terrible and dangerous options in resolving the Greek dilemma - massive, unending bailouts or a default that could turn into a Lehman Brother collapse type of event.

Now, America's economic problems might have a simple solution, but our political system seems utterly unable to get us to this solution. One party refuses to even think about tax increases, the other will not take seriously the problem of entitlement reform. The result is paralysis.

If we do end up losing the trust of markets, and it can happen, it will not be because they lost faith in America, in our economy and our society, but because they despaired at the country's selfish and self-defeating politicians.

On July Fourth weekend, that's a pretty depressing thought.

For more on this, you can read my column at TIME.com.

soundoff (758 Responses)
  1. detectives privados lebrija

    detectives privados fuenlabrada


    December 10, 2020 at 3:09 am |
  2. Detectives privados san Sebastián de los reyes

    detectives privados extremadura


    December 10, 2020 at 3:35 pm |
  3. zortilonrel

    The very heart of your writing while sounding reasonable in the beginning, did not sit well with me after some time. Someplace within the sentences you actually were able to make me a believer but just for a short while. I nevertheless have a problem with your leaps in assumptions and you would do well to help fill in those breaks. In the event you can accomplish that, I could surely be amazed.


    December 15, 2020 at 5:01 pm |
  4. Phuong Dane

    Hi just wanted to give you a brief heads up and let you know a few of the pictures aren't loading properly. I'm not sure why but I think its a linking issue. I've tried it in two different browsers and both show the same outcome.


    December 15, 2020 at 6:45 pm |
  5. bitcoin to paypal

    Transfer from bitcoin to paypal very fast and low cost.


    December 15, 2020 at 8:12 pm |
  6. zortilo nrel

    so much good info on here, : D.


    December 16, 2020 at 10:06 pm |
  7. zortilo nrel

    Enjoyed reading this, very good stuff, thanks.


    December 17, 2020 at 2:15 am |
  8. zortilonrel

    It’s hard to find knowledgeable people on this topic, but you sound like you know what you’re talking about! Thanks


    December 17, 2020 at 2:47 am |
  9. zortilonrel

    Excellent website. A lot of useful information here. I am sending it to a few buddies ans additionally sharing in delicious. And of course, thank you on your effort!


    December 17, 2020 at 12:31 pm |
  10. zortilonrel

    Dead composed written content, Really enjoyed examining.


    December 18, 2020 at 6:12 pm |
  11. zortilo nrel

    I?¦ve been exploring for a little bit for any high quality articles or weblog posts on this kind of space . Exploring in Yahoo I finally stumbled upon this site. Reading this information So i am satisfied to show that I have a very good uncanny feeling I found out just what I needed. I such a lot indisputably will make sure to don?¦t fail to remember this web site and provides it a look regularly.


    December 19, 2020 at 7:06 pm |
  12. zortilo nrel

    Some really fantastic posts on this internet site, appreciate it for contribution. "Be absolutely determined to enjoy what you do." by Sarah Knowles Bolton.


    December 20, 2020 at 8:12 pm |
  13. zortilo nrel

    Have you ever considered publishing an e-book or guest authoring on other websites? I have a blog based upon on the same subjects you discuss and would love to have you share some stories/information. I know my visitors would value your work. If you are even remotely interested, feel free to shoot me an email.


    December 21, 2020 at 12:02 am |
  14. zortilo nrel

    Valuable info. Lucky me I found your web site by accident, and I'm shocked why this accident did not happened earlier! I bookmarked it.


    December 21, 2020 at 1:07 am |
  15. zortilonrel

    An interesting discussion is worth comment. I think that you should write more on this topic, it might not be a taboo subject but generally people are not enough to speak on such topics. To the next. Cheers


    December 21, 2020 at 11:55 am |
  16. zortilonrel

    Hi, Neat post. There is a problem with your web site in internet explorer, would check this… IE still is the market leader and a large portion of people will miss your fantastic writing due to this problem.


    December 21, 2020 at 8:42 pm |
  17. zortilo nrel

    You made some respectable factors there. I looked on the web for the difficulty and found most people will associate with with your website.


    December 23, 2020 at 3:10 pm |
  18. zortilo nrel

    Definitely believe that which you stated. Your favorite justification seemed to be on the web the easiest thing to be aware of. I say to you, I certainly get annoyed while people think about worries that they plainly don't know about. You managed to hit the nail upon the top and defined out the whole thing without having side-effects , people can take a signal. Will likely be back to get more. Thanks


    December 24, 2020 at 10:58 am |
  19. Rafael Kinzer

    I just tried to watch a National Geographic video on YouTube to find a message saying that the copyright holder had blocked me from viewing it because I'm not in the USA.. . Similar to HULU, and Comedy Central.. . Why?.


    December 31, 2020 at 8:33 pm |
  20. Eunice Destephano

    How do I get blog stats widget on my new wp blog?


    January 1, 2021 at 9:51 am |
  21. Carole

    Quality content may be the important to attract the people to visit the website, that's what this website is providing.

    My web-site: ToyaMGaeth

    January 3, 2021 at 7:53 pm |
  22. Mitchel

    Thank you for every other fantastic post. The place else could
    anybody get that kind of information in such an ideal means of
    writing? I have a presentation next week, and I'm at the look for such info.

    my web blog Dubai Profit Now Login

    January 8, 2021 at 4:02 am |
  23. Kandy

    I found myself suggested this blog by my cousin. I'm no more certain whether this create is written through him
    as nobody else realize such exact approximately my trouble.
    You're amazing! Thanks!

    Here is my web site – JameQHulme

    January 10, 2021 at 7:10 am |
1 2 3 4 5 6 7 8 9 10 11 12 13 14

Post a comment

You must be logged in to post a comment.