Give It a Rest, Already -- the U.S. is Not Like Greece

Last Updated May 12, 2010 4:58 PM EDT

Greece is in the news because of deficits and debt, and a rescue package. The U.S. is in the news because of deficits and debt, and an unpopular bailout plan. All an ambitious economics reporter needs to do is connect the dots, right? Sadly, no.

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.
At a very general level, Paul Krugman publishes a nice chart on his blog of deficits as a percentage of GDP in both countries, which is simply visually striking: the bars are higher for Greece, and they don't go in the right direction nearly as quickly as the United States: Do I have any qualifications to add to this? Nope. We should talk about U.S. fiscal consolidation without the Greek frame of reference.

The United States is not Greece.

Image from filkaler via Flickr

  • Carter Dougherty

    Carter Dougherty, a former economic correspondent for the International Herald Tribune and The New York Times, is fascinated by the intersection between policy and business, in the United States and abroad. He shared in a Loeb Award, business journalism's most prestigious, while at the NYT. But he still looks back fondly on his days trudging through central Africa, reporting on Congo, Darfur and other rough spots.