A United States Senator suggested on Wednesday that high levels of sovereign debt should be causing tumult in the US, advancing a highly questionable theory about the ongoing economic crisis in Greece.
Touting a graph showing debt per capita to be higher in the US than it is in Greece, Senate Foreign Relations subcommittee chair Ron Johnson (R-Wis.) asked at a hearing why there hasn’t been unrest and instability at home comparable to that which has gripped the embattled Mediterranean country.
“How we are getting away with this when we’ve got almost double the debt per capita?” he asked. “Why aren’t we seeing riots in the streets.”
John Taylor, a Stanford University economics professor and a Republican witness, replied that US gross domestic product per capita was also larger. But Taylor, also a senior fellow at the staunchly right-wing Hoover Institute, said that “you do hear a lot of complaining about the economy.”
“You do see problems in certain areas of our country,” he said.
“I don’t think it’s unrelated to the uncertainty about how this debt is going to be resolved,” he added.
Sen. Johnson’s focus on sovereign debt, however, doesn’t get to the heart of Athens’ woes, which arose primarily due to intense European structural pressure. Because Greece is a member of the Eurozone and seeking aid from the European Central Bank, it has been forced to pass one austerity budget after the next in order to keep its financial system afloat in the short-term.
The Greek economy, over the past few years severely contracted even worse than it might have otherwise done, as public services were slashed, civil servants were laid off, and unemployment ballooned. The nation’s GDP has not grown since 2007 and last year, roughly one in four Greek labor force participants could not find work.
Unlike their counterparts in countries that are not part of a monetary union, Greek exporters also do not get to benefit from currency devaluation that usually accompanies national economic sluggishness.
The US, on the other hand, has grown modestly in the past seven years, with American officials able to both deficit spend and expand the supply of dollars on domestic and global markets to keep unemployment lower than it would be.
The Federal Reserve, unlike the ECB, has a dual mandate to maximize employment while stabilizing prices. While the former has kept interest rates at historic lows and has heavily intervened in wholesale credit markets since the global economic collapse of 2008, the latter only launched a “quantitative easing” style program in January.
Sen. Johnson also failed to mention that the US did actually experience Greece-style unrest in the fall of 2011 during the rise of the Occupy Wall Street movement, as Americans across the country took to the streets to protest policies fueling economic inequality–like the Republican party’s insistence on flogging profound cuts to government programs like Social Security and Medicare.
Protests in response to high-debt levels did grip the United States shortly after President Obama’s election in the form of the Tea Party Movement. The initiative, however, was significantly backed by wealthy and well-established right-wing political operatives.
