More Greek than the Greeks

The United States Has Horrendous Debt. How Will It Get Out?

The federal government is indebted with almost 100 percent of annual economic output. For the third successive year, the government is spending so much that its current deficit alone totals around 10 percent. In spite of this, the economy is growing only hesitantly and, at the end of the day, is barely creating jobs.

What so depressingly sounds like Greece is the core data of the United States of America for the year 2011. The small country of Greece held the financial world in suspense, although the large country 6,000 kilometers to the west could also collapse under its debt. At any rate, there is no longer a lack of warning signs. The rating agency Standard & Poor’s warns that if a reversal of the debt is not achieved soon, its raters will have to downgrade the leading country in the world. The major investment house PIMCO has separated itself from government bonds; according to their investment guru, they are too risky. And the historical economic conscience of America, Washington economist Carmen Reinhart, can imagine a scenario “in which the United States will find itself forced to newly negotiate with its creditors.”*

These are sharp words, yet their impact is missing. The world that is ready for a commotion at every opportunity refuses to be frightened by this case. It is still loaning the United States the necessary billions — and more — at historically low interest rates. China alone holds far more than a trillion dollars of the American debt. Even though the United States has doubled its debt to over $14 trillion over the last eight years, the trust of the vast majority of its creditors has not been lost.

It’s trust in a nation that has freed itself from every financial squeeze in the past 100 years, whose demise seemed to be sealed on multiple occasions, and which emerged from the crises even stronger — out of the Depression of the ‘30s and the debt disaster in the ‘80s, along with the 1987 market crash or the collapse of the New Economy no more than 10 years ago. America has constantly pushed itself back to health, in the end thanks to pragmatic politicians and ingenious innovators — and because the world also pays when America inflates away its debt.

So, What Should Be Different This Time?

The answer: an awful lot! The biggest weakness has developed in American society over the last twenty years: It’s missing the middle. The rich and the poor have diverged from one another so rapidly that the top one percent of citizens pull in almost a fourth of the income — twice as much as they did 25 years ago. Most recently, America has grown almost exclusively for its rich; the middle and lower classes have on average lost their purchasing power — and, in addition, jobs.

After three years of the economic stimulus, the United States is still lamenting an unemployment rate of nine percent. Almost half of the job seekers have already gone over six months without earning a living, real evidence of poverty for the most flexible industrial country in the world. And another figure belongs here: Around a quarter of men between 25 to 54 years old without a college degree live jobless. A feature of America for a long time was that the lower class worked no matter what happened. Now the government must confess that it can’t afford that.

America is split into rich and poor, into cosmopolitan coastal residents and conservative interior residents, alternative left and religious right voters and friends and enemies of the state. Every dimension only strengthens the inter-American hostility, which makes every austerity program in the divided Congress so difficult.

If the Greek politicians were to hesitate like the Americans, then the world would have abandoned them long ago. The Washington political tacticians pitch into one another with such one-sided and dispirited fiscal plans that there’s no time to take a breath. Almost robot-like, they refuse a grand coalition, which was always America’s strength in decisive moments. So it remains absent, the great liberating pact — which would combine the end of all fiscal giveaways for the wealthy with cuts in military, retirement and social programs; which would free the tax rates from all of the exemptions fought for by thousands of lobby groups; which would provide for a debt limit that would force America to save in the coming years. Such a pact won’t work this time. China won’t let its billions of dollars just melt away, and at some point, creditors from other parts of the world will have had enough.

Defeat and victory overlap one another. While America is failing in its financial policy, the nation is rejoicing over the end of its worst enemy, Osama bin Laden. Nobody says it, but Obama’s problem is also Osama’s late revenge. And not only because the wars in Iraq and Afghanistan cost billions of dollars. Only in the charged atmosphere following the attacks of Sept. 11, 2001, could President George W. Bush present the rich with more tax cuts and the financial sector with further deregulation. In America, it was about something greater than economic rationality. The resulting exorbitance strengthened the crisis to come, under which the United Staes still heavily suffers.

Osama is dead, but America is still in a state of emergency. Beleaguered. More Greek than the Greeks, as it’s sarcastically called on Wall Street. Of course, the United States has the economic strength to heal itself. The inventors in Silicon Valley, who nowadays not only create Google and Facebook but also electric cars and the control of intelligent power grids; the immigrants, who absolutely want to succeed as entrepreneurs; the culture of venture capital, which finances innovation and not just speculation — all this and much more would be enough to shake off the immense debt of $45,000 per American. Along with that could come the historic luck that China and company, with their growth dynamics, will give the United States time to recover. The West will not go under if America takes a short timeout to be rational.

The turning point for America must come soon. The crucial factor is not the economy of the United States but its society. If it doesn’t come together, then America will break apart.

*Editor’s note: This quote, while accurately translated, could not be verified.