Right-Wing Media Falsely Compare U.S. With Greece To Support Spending Cuts
Research ››› ››› ALBERT KLEINE
In an effort to push for federal spending cuts, right-wing media figures have repeatedly claimed that the U.S. is on the path to becoming Greece, which is facing a severe debt crisis. However, the comparison between the two countries is wholly misleading, and sharp spending cuts in Greece have exacerbated the country's economic contraction.
Right-Wing Media Claim U.S. Is Emulating Greece
WSJ's Stephen Moore: Greek Situation "Has A Lot Of Relevance To Where We Are In The United States." On the May 6, 2010 edition of Fox News' On the Record with Greta Van Susteren, Wall Street Journal editorial board member Stephen Moore argued that the debt crisis in Greece and the ensuing riots are relevant to the United States economy.
VAN SUSTEREN: Unbelievable. Today, protests still going on, and who knows, there may be protests in a couple hours as the sun comes up in -- in Greece. But what has happened to Greece's economy? I mean, like, why has it imploded? And why are these people taking to the streets?
MOORE: Well, it's an important story because it has a lot of relevance to where we are in the United States. What happened in Greece is that the government promised all sorts of lavish benefits for government workers, and so on. The government spending got out of control. They went from a debt of 50 percent of GDP to over 100 percent of GDP, and there was essentially a crisis among the bond holders. They -- there was a run on the Greek debt. [Fox News, On the Record With Greta Van Susteren, 5/6/2010, via Nexis]
O'Reilly: U.S., Like Greece, Has Bankrupted Itself. In an effort to argue for spending cuts and deficit reduction, Fox News' Bill O'Reilly compared the situation in the U.S. with that of Greece. From the March 3, 2011 edition of The O'Reilly Factor:
O'REILLY: At this point confusion helps the committed left battling over deficit or a debt is hard for people to grasp. It's just numbers on people.
But like Greece, Ireland, Spain, and many other countries, the USA has bankrupted itself through a series of entitlement programs that are well- intentioned but poorly constructed. Things have to change.
Now, I don't want to scare anybody, but if we continue down this road, the American dollar will collapse and so will our entire economy. [Fox News, The O'Reilly Factor, 3/3/2011, via Nexis]
Gutfeld: "The Bigger Problem ... Is That We're Heading Towards Greece." On the December 28, 2012 edition of Fox News' The Five, co-host Greg Gutfeld argued that because of perceived failure to address government spending, the U.S. economy will soon become like that of Greece. From The Five:
GUTFELD: Right -- exactly. Not to psychoanalyze the President but he's seemed so obsessed with the two percent that he's disengaged himself from the bigger problem which is that we're heading towards Greece. We're not thinking about spending. [Fox News, The Five, 12/28/2012, via Nexis]
Doocy: Does Obama "Want Us To Become Greece?" In an interview with Senator Richard Shelby (R-AL), Fox & Friends co-host Steve Doocy asked whether Obama, by not addressing the "spending problem," wanted the U.S. to become Greece. From Fox & Friends:
DOOCY: The President, last night, after the deal was done was talking about how we need to address entitlement reform. This was his chance. And I know a lot of people in the Senate like yourself were hoping for the grand bargain, but what's his motivation for not dealing with the spending problem. Does he want us to become Greece? [Fox News, Fox & Friends, 1/2/2013]
But The U.S. - Greece Comparison Is Misleading
The Huffington Post: Debt In U.S. Far Lower Than In Greece. In a Huffington Post article, Robert Creamer noted that the level of U.S. public debt is "qualitatively lower" than that in some European countries, including Greece. Because of this fact, Creamer argues that United States debt is not facing imminent default. From the article:
Finally, the Congressional Budget Office's baseline estimate is that public debt in the United States will rise to and level off at no more than 74% of GDP. The CIA world fact book estimates that last year the public debt hit 142% of GDP in Greece and 119% of GDP in Italy.
The level of public debt in the United States is qualitatively lower than it is in Greece or Italy.
As a result of all of these factors, the United States is not facing imminent default or exploding interest rates on government debt. [The Huffington Post, 11/15/2011]
Center For Economics And Policy Research: Interest Rates On Debt - Not Total Debt - Are What Matter. In an editorial piece on budget negotiations, Mark Weisbrot, co-director of the Center for Economics and Policy Research, claimed that unlike Greece, the U.S. does not have a pending debt crisis due to historically low borrowing costs. From the piece:
And contrary to popular nonsense about America "ending up like Greece," the U.S. doesn't even have a public debt problem. Net interest on the federal debt is currently less than 1 percent of our national income, the lowest it has been in more than 60 years. And it's the interest burden that matters, not the big numbers like $16 trillion that are thrown around in scare stories. [Center for Economics and Policy Research, 11/15/2012]
Krugman: Unlike Greece, U.S. Has "Almost No Risk" Of Default On Debt. In a New York Times op-ed, Nobel Prize winning economist Paul Krugman explained that because the U.S. - unlike Greece - has its own central bank, the two countries cannot be accurately compared with regard to debt payments. Furthermore, Krugman noted that the risk of inflation as a result of debt monetization is low. From the piece:
For we have our own currency -- and almost all of our debt, both private and public, is denominated in dollars. So our government, unlike the Greek government, literally can't run out of money. After all, it can print the stuff. So there's almost no risk that America will default on its debt -- I'd say no risk at all if it weren't for the possibility that Republicans would once again try to hold the nation hostage over the debt ceiling.
But if the U.S. government prints money to pay its bills, won't that lead to inflation? No, not if the economy is still depressed. [The New York Times, 11/25/2012]
Austerity Cutbacks In European Countries Led To Depressed Growth
Mother Jones: IMF Study Shows Austerity Programs Hurt Growth. In an article responding to the latest IMF World Economic Outlook, Mother Jones noted that the International Monetary Fund found austerity "makes things even worse than you thought they'd be." From the article:
It turns out that their forecasts were more wrong for countries that implemented severe austerity programs. And they were wrong by a lot:
We find the coefficient on planned fiscal consolidation to be large, negative, and significant....Overall, depending on the forecast source and the specification, our estimation results for the unexpected output loss associated with a 1 percent of GDP fiscal consolidation are in the range of 0.4 to 1.2 percentage points.
So forecasters, knowing that, say, Greece was in trouble, predicted a slowdown in growth. But the austerity program forced on the Greeks slowed them down even more. [Mother Jones, 10/11/12]
The Huffington Post: Austerity Cuts Are A "Losing Proposition". In an article outlining implemented austerity cuts in the United States, The Huffington Post noted how these policies disproportionately hurt middle- and low-income families while benefiting the wealthy. Furthermore, the inequitable austerity measures have not produced any significantly positive effects on economic output. From the article:
As many economists predicted, however, the austerity policies implemented after the financial crisis have proved to be a losing proposition for the global economy. The strong economic growth that austerity advocates predicted has not materialized, with the United States showing only anemic improvements, and European countries sliding back into devastating recessions. [The Huffington Post, 7/23/12]
Despite Spending Cuts, Greek Debt Has Increased
The New York Times: Despite European Austerity, Debt As A Percentage Of Economy Has Risen. A New York Times article noted that despite a push for spending cuts to close budget gaps, Greek debt as a percentage of GDP has actually increased due to economic contraction. From the article:
As Greece and its international lenders continue tense talks on reducing the Greek budget deficit, new data from the European Union on Monday underscored the potentially Sisyphean nature of such efforts.
Some of the countries that have made the most progress in closing their budget gaps -- Greece, in particular -- have also had their overall debt loads actually get bigger as a percentage of the economy, according to data released by Eurostat, the European Union's data agency.
The economies of all four countries have contracted sharply under the austerity measures -- Greece's by one-fourth since 2009. But the size of the debts relative to economic output has soared. That raises serious questions about their ability to repay those obligations over time. [The New York Times, 10/22/2012]
Fiscal Stimulus And Central Banking Policies Have Kept The U.S. From Becoming Like Greece
The New York Times: U.S. Better Off Than Europe Because Of Government Policies. In an article responding to the right-wing "are you better off than you were four years ago" mantra, The New York Times explained that America's relative economic success when compared to Europe can be attributed to an active Federal Reserve and swiftly enacted government stimulus. From the article:
Federal Reserve officials today concede they were too slow to respond to the crisis. The Fed was nonetheless far more aggressive than the European Central Bank, quicker to drop interest rates to zero and pump money into the economy, buying government debt and other bonds. Fiscal stimulus -- an initial $800 billion package in 2009 followed by about $600 billion in payroll tax cuts and other efforts -- was bigger and more sustained than in other advanced countries. Banks in the United States were forced to raise billions in new capital, which allowed them to cope with the turbulent financial markets better than their European peers.
Today, most economists say they believe that these policies provided vital support to the economy. In its most recent World Economic Outlook, published this month, the I.M.F. acknowledged that the fiscal stimulus was probably much more effective at bolstering growth than it had previously allowed. [The New York Times, 10/16/12]
Krugman: U.S. Outperforming Countries That Implemented Austerity Measures. In a New York Times op-ed outlining the research of economists Moritz Schularick and Alan Taylor, Krugman noted that given the financial crisis, the U.S. is outperforming its projected growth rates, while the UK, which had adopted austerity measures, is doing much worse. Krugman included the following graph:
[The New York Times, 10/24/2012]