America's approaching debt disaster

When the Greek economy melted down recently its citizens rioted in the streets. Some have called it "the death-spiral of a welfare state" – too much borrowing for too many social programs for too long. Eventually, the bottom falls out, says the Christian Broadcasting Network.

But if you don't think the economic chaos in Greece can come to America, economists say think again. America is on a fiscal course economists warn is unsustainable – racking up debts we will not be able to repay. This nation, they warn, is already on the path to economic ruin.

Our national debt is out of balance:

Federal debt as a percentage of the Gross Domestic Product (GDP) now stands officially at around 60 per cent.

But with the course the country is on, it will hit 150 per cent in 10 years, and 300 per cent by 2050.

By comparison, Greece began to melt down when its debt reached 115 per cent of GDP.

There are many economic similarities between America and Argentina:

Before World War II, Argentina was one of the most prosperous nations in the world, with a strong industrial base and thriving middle class, it attracted immigrants much like America.

But within 15 years, Argentina went from one of the richest nations to one of the poorest.

Argentine President Juan Peron fomented class warfare and bashed business, banks and the wealthy; he made labour unions his allies and unleashed massive social spending that the nation couldn't afford.

As a result, one of the strongest nations in the world was ruined.

The Committee for a Responsible Federal Budget has laid out six future scenarios for America, and all of them are bad. The best case is long-term economic stagnation. The worst case – default – when the government can no longer pay its bills.

Another possible scenario is runaway inflation. What worries the experts is that Washington, D.C., has heard all the warnings and not only keeps spending, but spends more.

Brian Williams, legislative director for the National Center for Policy Analysis, said lawmakers would rather give their constituents government-financed freebies than a balanced federal budget.

"As long as the American electorate is in a mode of getting free education and free health care and free transportation and everything for free – somebody pays for it," he said.

Source: Dale Hurd, America's Approaching Debt Disaster, CHRISTIAN BROADCASTING NETWORK, May 17, 2010.

For text: http://www.cbn.com/cbnnews/finance/2010/May/Americas-Approaching-Debt-Disaster-/

For more on Government Issues: http://www.ncpa.org/sub/dpd/index.php?Article_Category=33

First published by the National Center for Policy Analysis, Dallas and Washington, USA

FMF Policy Bulletin/ 25 May 2010