Last Updated May 12, 2010 4:58 PM EDT
David Leonhardt, the lucid, conscientious NYT economics writer who is always worth reading, got the Greece-United States comparison onto A1 today, and promptly ended up at the bottom of a pile of high-profile economics bloggers. Paul Krugman zinged him, as did Brad DeLong. It's the blogosphere equivalent of a Greek riot -- good stuff.
To be fair, the NYT's objective journalism standard makes this a hard story to write. Either a story says "Yes, the U.S. is like Greece, but ..." -- a species of article that presents a premise only to knock it down. Or you end up writing "No, the U.S. is not like Greece because...." Either way, you have to wonder why anyone wrote the piece in the first place. It's a bit like writing about a 747 that landed without incident a week after another one crashed.
And you have to cringe when you read the words high up in the NYT story, that grant so much wiggle room in the news columns:
The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same.Even if the basic problem is the same -- itself a debatable point -- then the differences make the scenario absurd for several reasons:
- Scary debt-number comparisons are problematic. In 20 years, the United States could have a debt level approaching 140 percent of GDP, the NYT writes. Well, yes, based on some very long-term projections. But Greece is in that neighborhood now, even with its IMF program in place.
- Markets don't buy the US=Greece scenario, so we shouldn't either. As Brad DeLong points out, the "astonishly high valuations" of U.S. Treasury securities do not suggest any waning faith in U.S. creditworthiness, even at the 30-year maturities that overlap with the 20-year timeline the NYT gives us at the top of its story.
- The U.S. cannot really default. This is one reason why the "basic problem" in Greece is not the same as the one in the United States. The United States could print dollars to get out of its fiscal problems, but, once again, markets seem to think it can avoid that step and make good on its obligations -- hence low borrowing rates. But part of the ability to print one's own currency is a flexible exchange rate, which helps an indebted economy adjust. Greece, using the euro and not its old drachma, does not have that.
The United States is not Greece.
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