We believe people certainly are feeling better about the direction of our economy in recent months. However, we believe increasing taxes, whether on the “rich” or across the whole population, is only half of the cure. We must convince our leaders to reduce spending. We could argue about increasing the debt limit and whether it could cause the country to default 10 or 15 years down the road, but spending cuts are necessary.
We do not believe the United States will end up like Greece as the U.S. controls its own currency and is therefore able to print more if needed. Of course, inflation is more bothersome in that case. Greece didn’t arrive at its current situation overnight. Years of poor socialistic policies where government spending was fueled by debt have finally come to an end, as Greece is no longer able to borrow from its neighbors.
Here in the United States, our working population will struggle to pay its outsized Social Security obligations in coming years, but it’s not reasonable to compare the United States to Greece. Financial markets show Greek 10-year debt yields 10.84% while the United States 10-year debt is priced to yield 1.95%. This shows Greece with more than five times the risk of the United States. Another major difference is the level of corruption and tax evasion in Greece. A recent report estimates Greece’s total unpaid taxes at $70 billion which is about 25% of Greek GDP.
We do not believe it is too late to correct the problems as the United States remains the global safe haven and the U.S. dollar is the world’s reserve currency. However, we do not believe our current policies are sufficient to sustain global leadership in the long run.