Common Cents

Are we Greece?

Ralph Murphy

(12/2012) During a recent Capitol Hill protest, a young woman carried a placard asking the question "Are We Greece?" as debate on expanding the national debt raged inside the Halls of Congress. Recent national media coverage of such events leave the impression that there really is nothing wrong with being like Greece. Why not be like Greece?

The Greek economy generates $303 billion dollars in revenue each year. Its national debt in 2011 was 165.3% of total domestic earnings, The European Union, is a 27 nation economic and political confederation of nations that is having difficulty helping the Greeks pay their bills. The Greek debt was 356 billion Euros - or close to $500 billion dollars in 2011. A tidy sum to say the least. But, in comparison - the U.S. currently owes $16 trillion dollars, or 104% of its annual domestic production. Realistically. we will never be able to pay this off in the reader's life time.

If the Greeks default on their national debt, it will hurt the "Euro zone" of 17 nations that share a common currency. If the U.S. defaults on its national debt … it will take the global economy into severe recession. Perhaps even depression. So, we are NOT like Greece. There is a lot more at stake – worldwide - IF the U.S. does not get its national debt under control.

How did we get this way?

I think that the U.S., along with much of the Western world, got accustomed to getting easy loans to fund a plethora of New Deal - type and associated Great Society spending. This, coupled with the cost of massive bank failures in the 1980's stemming from deregulation of our banking industry. It is easy to be careless with other people's money when you know Uncle Sam will pay for your mistakes - in our case through the FDIC

Our national debt has also accumulated because of arguably, worthwhile and noble ventures such as the ouster of Saddam Hussein in Iraq. We did this in just three weeks. Something the Iranians could not do in a decade of war. We then stayed behind to preside over the political reconstruction of Iraq that cost U.S. taxpayers hundreds of billions of dollars - and, ironically - the creation of a Shiite state very similar to that of Iran.

There is also the more recent case of Afghanistan, where the Taliban insurgents were ousted after 9 -11 by an American led invasion. They took to the provinces, and are waiting to return after the U.S. and Allied forces withdraw. Again, Afghanistan has cost us hundreds of billions of dollars - and countless, precious American lives.

Then there is the case of Libya. Libya took 25,000 air strikes to remove Muammar Qaddafi from power. The outcome was viewed as positive because it reflected the will of the Libyan people. Libya was expensive though. The cost of weapons systems and support to allied military operations added to the U.S. debt. On the positive side - the conflict allowed Libya to join Egypt as one of the first democracies in the history of the Arab world. Incidentally, from a cost -benefit viewpoint - I believe that the CIA is better at nation building at a fraction of the cost of armed intervention. And, when the result is a pro -western government - the people can stand back and say "We did it! And we did it ourselves!" Foreign uniforms generate anger no matter how noble the cause

In retrospect, each of these military ventures has been costly and contributed to our ever increasing national debt. Something that many citizens are willing to accept as long as they are receiving a "piece of the action". In such an expensive world, tax revenues never come close to matching the expenditures . This means that our national debt is our legacy to the next generation - or two or three? Of course we can always choose the Weimar Republic solution that would wipe out our savings and creditor investments. A clear path to a severe depression. And worse.

Time to tighten the belt?

What economists like to call an "inflation debt cure" is possible for the West - but not recommended. What really is needed, is to cut back on out -of -control, government spending. Yet, our government seems determined to spend its way through social crises such as health care and unemployment. Solutions that they pay for by raising the national debt ceiling. All this, at a time when they are sorely pressed to come up with the $16 Trillion dollars needed (i.e. the National Debt) to keep current programs up and running. I believe this is a time when we must come to grips with reality. Either we must convince our domestic and overseas creditors that they should invest in the U.S.A. … or, do what any good business would do - cut back on programs until it hurts.

With a population of 312 million Americans and abundant natural resources that most of the world envies, I believe our nation is poised for a period of growth and prosperity. But, only if we work together as a team and work closely with our overseas partners such as Germany, Spain, Japan, China and yes - even Greece. By buying their products we help them survive and flourish. We are all in the same boat now. Imports, exports…. We need a "win-win" worldwide economy.

Whether you are talking about a person, a family, a community or a nation … we must all learn to live within our means. It is tempting to borrow to get what we think we need NOW, but we must learn to live more moderately. And - when we do incur new debt – we should do so with the clear intention of repaying it on time and within budget.

The U.S. and other nations have been ignoring their national budgets. Exceeding them at will. We cannot play this game forever. Eventually we will have to "pay the piper". How long until we are called to "pay up"? I don’t know, but I don’t think we have long to wait. The choices we make today will determine the answer. We must choose wisely. It just makes common sense.

Ralph Murphy is a former member of the CIA Headquarters Staff in Langley, VA.