The UNglu Match Behind American Debt

Despite the US economy's wallowing debt problem, we probably shouldn’t count America out just yet. A new report from Citigroup says that North America has the potential to become the next "Middle East". We're assuming that's in terms of oil and energy production...and not in terms of social instability and revolution, although either is possible at this point. If America can lower its national energy costs, it will also lower its national security costs. This might not please the military industrial complex. But it could be good news for everyone else.

Let's not be too naive though. WE borrowed the "After America" name from Brisbane-based John Birmingham, who wrote a book of the same name a few years ago. It turns out it's a popular theme. Current affairs commentator Mark Steyn has an After America book out as well. And in a recent article, he shows the ugly math behind America's debt problem:

A second-term Obama would roar full throttle to the cliff edge, while a President Romney would be unlikely to do much more than ease off to third gear. At this point, it's traditional for pundits to warn that if we don't change course we're going to wind up like Greece. Presumably they mean that, right now, our national debt, which crossed the Rubicon of 100 percent of GDP just before Christmas, is not as bad as that of Athens, although it's worse than Britain, Canada, Australia, Sweden, Denmark, and every other European nation except Portugal, Ireland, and Italy. Or perhaps they mean that America's current deficit-to-GDP ratio is not quite as bad as Greece's, although it's worse than that of Britain, Canada, France, Germany, Italy, Spain, Belgium, and every other European nation except Ireland.

But these comparisons tend to understate the insolvency of America, failing as they do to take into account state and municipal debts and public pension liabilities. When Morgan Stanley ran those numbers in 2009, the debt-to-revenue ratio in Greece was 312 percent; in the United States it was 358 percent. Read More