US Ranked 28th of 34 Countries in Fiscal Responsibility
Is there really any shame in being ranked behind Italy, Slovenia, Brazil or Estonia in The Comeback America Initiative’s ranking of fiscal responsibility? The Initiative is a deficit watchdog group funded by billionaire Pete Peterson. It released its Sovereign Fiscal Responsibility Index last week that ranks the fiscal sustainability of countries around the world (see http://online.wsj.com/public/resources/documents/st_usdebt01_20110323.html.)
The project, done with master’s students from Stanford University, measures how close governments are to a debt meltdown. The news for the U.S. isn’t good. Of the 34 sovereign countries studied, the U.S. ranked 28th. The analysis measured three facets of fiscal sustainability. Sovereign governments were ranked on the current level of debt as a percentage of gross domestic product, the number of years until a nation’s debt level is so high it would trigger a funding crisis and the transparency and enforcement connected with the budget process.
According to the analysis, Australia leads the pack, followed by New Zealand and Estonia. The U.S. hangs in the neighborhood populated by Italy, Hungary and Ireland. Only Hungary, Ireland, Japan, Iceland, Portugal and Greece ranked lower. Three of those countries had to be bailed out by the European Union, with Germany taking the lead role, because their nations were bankrupt. I guess we can take solace in the fact that Hungary is behind us. You have to feel badly for the Japanese who were ranked 31st and that was before the estimated $300 billion cost to rebuild after the recent earthquake and tsunami.
For the U.S., the Initiative calculated the debt level now equals 62.4% of GDP; and given current budget and economic-growth trends, the U.S. will hit a debt ceiling in 16 years. (Unlike Washington’s legislated “debt ceiling,” the analysis defines the debt ceiling as the amount of future debt a country could theoretically issue before it is almost sure to have a crisis in which few investors want to hold the sovereign debt.)
Should we be worried as Americans that we are so fiscally irresponsible and seemingly unable to make the hard decisions to resolve our fiscal crisis? After all, we’ve been down this road before. President Clinton managed to get us out of debt and even create a surplus before he left office. However, that was due mostly to the telecommunications boom of the 1990s -- before the bust of the early 2000s. Add to the mix a massive amount of business and financial fraud and you have a recipe for disaster, and we’ve paid the price for more than four years.
The U.S. government acts like an alcoholic. We are addicted to spending and driving up the debt. We can’t seem to be able to stop, and things will get worse because of unsustainable high levels of unemployment and an increasingly poorly educated citizenry that will not be able to compete globally in the not too distant future. So, what can we do to reverse this depressing trend? Like any alcoholic the first step is to admit to the problem. Unfortunately, too many in Congress and the government believe we’ll snap out of it because we’ve done so before. That’s unrealistic. There’s no logical reason to believe we will continue to be “The greatest nation on God’s green earth,” as radio commentator Michael Medved likes to say, unless we wake up and wise up. Believe me, China is waiting in the wings and they have the kind of work ethic and discipline to surpass us economically within the next 20 years. That's the same work ethic and discipline that built this great nation so long ago.
Blog by Steven Mintz, aka Ethics Sage, March 28, 2011
Cartoon reproduced with permission.