Fox News and right-wing blogs have promoted a chart that purports to show the "alarming" fact that national debt per person is higher in the United States than in several crisis-stricken European countries. This comparison is flawed because these countries' economies are fundamentally different -- a fact demonstrated by the substantially higher interest rates that the crisis countries using the euro must pay on their debt, compared to countries that can borrow in their own currency.
Fox, Right-Wing Blogs Promote Chart Comparing U.S. To Eurozone Debt
Weekly Standard Publishes Chart From GOP Sen. Sessions. From The Weekly Standard's blog:
The office of Senator Jeff Sessions, ranking member on the Senate Budget Committee, sends along this chart, showing that 'America's Per Capita Government Debt Worse Than Greece,' as well as Ireland, Italy, France, Portugal, and Spain:
[The Weekly Standard, 2/23/12]
Fox's America Live Uses Sessions' Debt Chart To Argue For Cuts To Medicare, Social Security. From Fox News' America Live:
MEGYN KELLY (host): Matt, how are we ever going to get out of this debt? How have we done it historically, have we paid down our debt, and how are we likely to do it right now, over the next eight years, let's say?
MATT McCALL (president, Penn Financial Group): It's going to be very difficult. If we get out of it in the next eight years, I'm going to be extremely happy.
KELLY: Well, just pay some of it down. We are not going to get out of it. Well, how -- but isn't it going to require massive, massive spending cuts and maybe arguably tax hikes?
McCALL: Yeah. There's two ways to really get out of debt. Say you and I have a high credit card bill. We have to bring in more money; at the same time, stop spending money. So that's going to lead to austerity here in the United States. It's going to lead to entitlement programs, whether it be Medicare and Medicaid, is going to have to be cut, Social Security is going to have to be cut.
We as Americans need to realize that we cannot rely on the government anymore. At the same time, we have to increase revenues, whether that's through raising taxes, which ultimately is going to have to happen, unfortunately, or we get more tax revenue by having our economy get boosted. And how do you boost your economy? And our economy is growing at 1 percent. That's not going to happen.
KELLY: That's one of the major problems we have right now, is that, you know -- one of the things that differentiates us from Greece is our productivity, right? I mean, we're may more productive than they are. We have been raised to be workers, most of us, and that's just part of the American ideal. But if you don't have a job available to you, if you've been looking and looking and looking and you can't find one, there's only so much -- so productive you can be.
McCALL: Yeah. I mean, we have to create goods or services. We need to do something to get our economy going. That then leads to more jobs, which leads to people spending more money and then as more tax revenues coming into the U.S. government. The problem is it's a vicious cycle right now. Because if we want to bring more money in, we go raise taxes. If we raise taxes, what happens? That's probably going to slow our economy down, so it could actually have the exact opposite effect. So, it's going to be raising -- but we have to cut. That's number one. [Fox News, America Live, 2/24/12]
Fox's Kelly And Guest Suggest U.S., Like Greece, Is "Not Really Paying Attention" To Debt. From America Live:
KELLY: All right, if that is so bad, if that that, you know, per-capita debt burden is even worse than what the Greek folks are operating under, where it's less, it's 39 grand, then why are we seeing riots in Greece and not so much in the United States? I mean, what differentiates the two?
McCALL: One major difference is in Greece they went to austerity. They basically said, "We cannot sustain having such a high debt level, so we're going to cut entitlement programs," you know, whether that be their form of Social Security -- it's not Social Security -- but their, you know, retirement-type plan. Here in the United States, what we do is say, "Well, it's not that bad yet." We just keep printing money. We have the ability to continue to print U.S. dollars -
KELLY: They don't have that ability.
McCALL: They do not, because they are part of the EU. And that's why there's talk possibly that Greece would get out of the EU, so they can start going back to their original currency and then print that and then inflate their way out of it. The problem that I see going forward is, we can get out of this by printing money, yes, but the issue is, the value of our dollar, every time we print one more dollar is worth less. Suddenly our U.S. dollar is going to be worth nothing if we keep doing this. Then what it leads to is what's called hyperinflation. Meaning basically, you're going to be paying, you know, $8 for a loaf of bread. So the ramifications longer-term are drastic.
KELLY: They talk about how in Greece, this crisis snuck up, sneaked up on many of the people there, that they didn't realize how bad a shape they were in, how dependent they were on borrowing. And they were not really paying a lot of attention to their debt number. Is that happening right now in this country for many?
McCALL: Well, I think we talk about it more and more, that we actually -- it's coming to light that we do owe a lot of money as a country. It did sneak up on Greece, and I don't want to -- I mean, we're -- it's apples and oranges, because Greece is a little bit different than the United States. However, this number today is the most troubling number that I've ever seen, as far as the debt's concerned. Because we can throw out 15 trillion or 20 trillion. To most people, that means nothing, Megyn. It really doesn't. But the fact that we can break this down and realize that every person in this country would have to write a check for $45,000 to get out of the situation that we're in. [Fox News, America Live, 2/24/12]
Fox & Friends Show Debt Chart And Compares U.S. To Greece, "Where People Are Rioting In the Streets." From Fox & Friends:
GRETCHEN CARLSON (co-host): Time for your news by the numbers now, first 35,000. That's how many postal jobs will be eliminated under a plan to consolidate or close 223 mail processing facilities. Next, $44,215 dollars, that's the U.S. debt per capita, which is even worse than Greece -- are you kidding me? -- where people are rioting in the streets. [Fox News, Fox & Friends, 2/24/12]
The Blaze: "Alarming" Debt Chart "Should Worry You." From The Blaze, in a post headlined "This Chart Of America's Per Capita Debt Should Worry You," which featured the chart:
The Senate Budget Committee Republican staff under Ranking Member Jeff Sessions (R-AL) released this alarming graph Thursday morning:
What does this mean?
Well, as the graph clearly indicates, America's per capita government debt is worse than that of Portugal, Ireland, Italy, Spain, Greece (PIIGS), and France.
Get that? America's per capita debt is worse than the PIIGS! You know, the countries primarily responsible for pulling the eurozone into financial catastrophe? [The Blaze, 2/23/12]
Washington Examiner: U.S. Has Higher Per Capita Debt Than "Riot-Ridden Greece." From Conn Carroll, senior editorial writer at the Washington Examiner:
According to a new analysis by the office of Sen. Jeff Sessions, R-Ala., ranking member on the Senate Budget Committee, the United States has a higher per capita debt burden than any European country, including riot-ridden Greece.
Using the most recent data available from the International Monetary Fund, the Senate Budget Committee found that U.S. federal government debt per capita is nearly $45,000. That is almost 15 percent higher than the per capita debt burden of Greece ($38,937).
The Senate Budget Committee also notes that our debt per capita would rise to $75,000 by 2020 if Presdient [sic] Obama's budget became law. [The Washington Examiner, 2/23/12]
Jim Hoft Displays Debt Chart, Comments "And Barack Obama Still Won't Slow Down His Spending." From the Gateway Pundit:
[Gateway Pundit, 2/23/12]
MichelleMalkin.com's Doug Powers Uses Chart To Argue Against Clean Energy Investments. From MichelleMalkin.com:
In Reality, Problem Facing Greece And The Eurozone Is "Impossible Here"
Bartlett: "The Sort Of Problem Greece Is Experiencing Is Impossible Here." In a June 14, 2010, blog post, former Bush Treasury official and conservative economist Bruce Bartlett noted that "the sort of problem Greece is experiencing is impossible here." From Bartlett's blog post:
The recent financial crisis in Greece has led to a lot of discussion about whether the United States might one day have a public debt so large that default becomes a real possibility. While the sort of problem Greece is experiencing is impossible here, we have another problem that, to my knowledge, no other nation on Earth has: a legal limit on government debt that Congress must raise periodically. This peculiarity of our fiscal system could indeed lead to a default on the debt, with repercussions that advocates of default -- yes, they exist -- have absolutely no clue about.
The main reason the U.S. cannot suffer the sort of debt problems of Greece and other eurozone countries is that all our debt is denominated in dollars, of which we essentially have an unlimited supply. Because its monetary policy is controlled by the European Central Bank, Greece can't just print euros the way we can print dollars. And the Federal Reserve will always ensure the success of a Treasury bond auction. De facto monetization of the debt could be inflationary, but default resulting from a lack of demand for Treasury bonds is not really possible. [Capital Gains And Games, 6/14/10]
Former White House Economist Romer: "At A Most Fundamental Level, The United States Is Clearly Completely Different." From the Christian Science Monitor:
In response to a question about possible lessons for the US from the Greek experience, [Former White House Council of Economic Advisers Chair Christina] Romer pushed back strongly at a Monitor-sponsored breakfast with reporters. "At a most fundamental level, the United States is clearly completely different.... I think the important thing is the United States is the most credit-worthy country in the world," she said.
Romer added, "No, I don't think there is actually a lesson for the United States. I think, for all of us, what we always knew is countries have to get their budget deficits under control, and the United States and the president certainly have a plan to do that." [Christian Science Monitor, 2/12/10]
Time's Curious Capitalist: "The U.S. Is Not Greece. In Many Important Ways, The Situations These Two Countries Face Are Extremely Different." From Michael Schuman, writing at Time magazine's Curious Capitalist blog:
With much of the developed world -- including the U.K., Japan, and yes, the U.S. -- facing heavy state debt burdens, the events taking place in Greece are a glimpse into the future for many of the global economy's most important nations. As politicians in Washington wrangle over the debt ceiling, budget cuts and taxes, we have to ask the question: Is the U.S. heading in the same direction as Greece?
I should state right at the state [sic] that the U.S. is not Greece. In many important ways, the situations these two countries face are extremely different. First, the debt burden of the U.S., relative to the size of its GDP, is not nearly as large -- just under 94% compared to 147% for Greece at the end of 2010, according to the OECD. Secondly, the level of U.S. debt is considered sustainable; Greece's isn't. Generally, there is a widespread belief among those who follow European finance that Greece is unlikely to be able to pay off its current debt load. Those very divergent perceptions are reflected in bond yields, a sign of the risk investors believe they take on by holding the bonds. Ten-year Treasuries are trading at a yield of only 3%; Greece's are at 17%. Third, the U.S. has far more flexibility in how it deals with its debt than Greece. The U.S. can devalue the dollar or inflate its way to a lower debt burden. Those measures have their own consequences, but they make an American default much less likely than a Greek default.
Since joining the euro zone, however, Athens has lost control over its monetary policy -- it can't devalue the euro or control its supply. That means the adjustment for Greece will potentially be much more painful than the one America faces. And lastly, the U.S. still has control over its own fate and can choose the course it takes in tackling its debt and deficits. Greece is at the point of no return. The Greeks have the EU shoving austerity measures down their throats. They don't have options; the Americans do. Whether or not the U.S. ever ends up like Greece depends on what Washington does with those options. [Time, The Curious Capitalist, 6/29/11]
Economist Dean Baker: "It Matters That Countries Have Their Own Central Bank." From a blog post by Center for Economic and Policy Research co-director Dean Baker, headlined "It Matters That Countries Have Their Own Central Bank":
A Washington Post article on the problems of restructuring of Greece's debt discussed factors that affect country's ability to carry debt. It neglected to mention the issue of whether it borrows in currency it issues. If a country is like the United States or Japan, and borrows almost entirely in its own currency, then it would only default on its debt as a political decision (e.g. it refuses to extend a debt ceiling, authorizing the debt to be paid).
Since it issues its own currency, it can always issue the currency needed to finance its debt. There markets seem to understand this point very well. The countries that issue debt in their own currency (e.g. Sweden, Denmark, the UK) consistently enjoy lower interest rates on their debt than countries with comparable debt burdens who do not have their own currency. [CEPR.net, 2/15/12]
Business Insider: "Investors Flocked To The Country That Could Print Its Own Money." From Joe Weisenthal, deputy editor of Business Insider:
A phrase you sometimes hear in financial markets is 'punish the printer.' The idea is that countries that are printing a lot of money will see their currencies dive. But a defining characteristic of 2011 was that markets loved printers. Specifically, countries that were able to print their own money saw their borrowing costs plunge, while countries (even fiscally responsible ones) that didn't have this ability saw their borrowing costs jump.
(Our) favorite example of this is Sweden vs. Finland. The former is outside of the euro zone and can print its own money; the latter uses the Euro and can't. Historically, the two countries have borrowed money at roughly the same rate. Both are considered to be stable and fiscally disciplined.
In this chart, the green line is the yield on the Finnish 10-year bond. The orange is the Swedish 10-year bond. Starting in the Spring, Finland began to pay a penalty, but still, the two roughly moved in the same direction. It was in late November, when the European crisis got to its hairiest point (even Germany had a failed auction) that you really saw the difference. Finnish yields spiked at the same time Swedish yields plunged. Investors flocked to the country that could print its own money. This defining idea of 2011 also resulted in ultra-cheap rates in the UK, Japan, and of course the U.S.
[Business Insider, 12/21/11]
Regardless Of Debt, Countries That Have Their Own Currencies Face Lower Borrowing Costs
Krugman: "Interest Rates Have Dropped Sharply For Every Country That Borrows In Its Own Currency." From economist Paul Krugman's New York Times blog:
Ezra Klein points out, correctly, that the big economic story of 2011 was that the conventional wisdom of Washington about the urgency of deficit reduction was totally contradicted by the bond market. But Ezra makes at least a slight nod in the direction of a new conventional wisdom, which says that it's about the unique safe haven status of the United States:
This is not, to be fair, a bet on America's economic strength. It's a judgment about the rest of the world's economic weakness. U.S. Treasuries are what savvy investors buy when they're in a canned-goods-and-ammunition sort of mood and they think gold is overvalued. But though that makes the demand we're seeing more depressing, it doesn't make it any less real.
What such stories miss is the fact that interest rates have dropped sharply for every country that borrows in its own currency. Here are 10-year bond rates for a sample:
Note to British readers: every time Cameron takes credit for low British rates, he's hoping you don't know that the same thing has been happening in every non-euro advanced country.
What we're looking at is a world of depressed demand, where government securities look like a good buy everywhere except in countries that either don't have their own currency or have large debts in foreign currency, making them vulnerable to self-fulfilling panic. It's a world in which deficit obsession is mad, bad, and dangerous. [New York Times, 12/27/11]
OECD: Eurozone Nations In Sessions' Chart -- Which Cannot Print Their Own Currency -- Face Far Higher Interest Rates On Long-Term Debt. Data for the following chart, which consists of forecasts for countries' debt-to-GDP ratios and their interest rates in 2011, comes from the Organization for Economic Cooperation and Development. The OECD did not provide a forecast for Portugal's long-term interest rate in 2011, and so their reported rate for November of that year is used. Of note in the chart is Spain, which pays far higher interest rates than the United States, despite having a lower debt-to-GDP ratio. Contrast that with Japan, which faces both the highest debt-to-GDP ratio and the lowest interest payments of the selected countries: