Confirmed: U.S. Fiscal Woe Is Worse Than Greece

Interest-Rates / US Debt
Jul 27, 2010 - 03:41 AM

By: Dian_L_Chu

Reading the annual Long Term Budget Outlook by the Congressional Budget Office (CBO) has become an increasingly depressing experience in recent years. This year seems even more so than ever.

The latest projection puts the federal debt rising to 62% of the nation’s Gross Domestic Product (GDP) by the end of the year (from 40% pre-crisis), the highest percentage since just after World War. (See Graph)



Despite the gloomy projections, many economists seem to agree that a Greek style debt crisis is unlikely to take place in the U.S. due to the size of the economy, the single currency structure and dollar prestige.

After all, Greek debt totals 120% of GDP--twice the US figure--plus a comparison of the long-term bond yield, seem to suggest that the U.S. is in much better fiscal shape.

Or do they?

In a Financial Times op-ed http://www.ft.com/cms/s/0/1a695e1a-981c ... ab49a.html dated July 25, Laurence Kotlikoff, economics professor at Boston University, contends due to the “labeling problemâ€