With seemingly every day bringing more bad news from Europe, many are beginning to ask how much longer the United States has before our welfare state follows the European model into bankruptcy. The bad news is: It may already have.
This year, the fourth straight year that we borrowed more than $1 trillion to support the U.S. government, our budget deficit will top $1.3 trillion, 8.7 percent of our GDP. If you think that sounds bad, it’s because it is. In fact, only two European countries, Greece and Ireland, have larger budget deficits as a percentage of GDP. Things are only slightly better when you look at the size of our national debt, which now exceeds $15.3 trillion, 102 percent of GDP. Just four European countries have larger national debts than we do — Greece and Ireland again, plus Portugal and Italy. That means the U.S. government is actually less fiscally responsible than countries like France, Belgium, or Spain.
And as bad as things are right now, we are on an even worse course for the future. If one adds the unfunded liabilities of Social Security and Medicare to our official national debt, we really owe $72 trillion, by the Obama administration’s projections for future Medicare savings under Obamacare, and as much as $137 trillion if you use more realistic projections. Under the best-case scenario, then, this amounts to more than 480 percent of GDP. And, under more realistic projections, we owe an astounding 911 percent of GDP.
Meanwhile, counting both official debt and unfunded pension and health-care liabilities, the most indebted nation in Europe is Greece, which owes 875 percent of GDP. That’s right, the United States potentially owes more than Greece. France, the second most insolvent nation in Europe, owes just 549 percent of GDP. Even under the most optimistic scenario, we owe more than such fiscal basket cases as Ireland, Italy, Portugal, and Spain.
Michael D. Tanner is a senior fellow at the Cato Institute, heading research into a variety of domestic policies with particular emphasis on health care reform, welfare policy, and Social Security. His most recent white paper, "Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law," provides a detailed examination of the Patient Protection and Affordable Care Act (Obamacare) and what it means to taxpayers, workers, physicians, and patients.