If the United States Was Part of the European Union

The countries which form the European Union have signed the Stability and Growth Pact (SGP) developed by the European Council at the Dublin Summit in December 1996. This agreement outlines the requirements for fiscal budgets. One of the requirements is based on the percentage of national debt versus the country’s gross domestic product (GDP): it must be under a 60% GDP/debt ratio. As shown below, the PIIGS of the EU are not meeting these requirements.

The United States has a GDP/debt ratio of 97.78% as of May 17, 2011. This would put the US right behind Portugal in the EU. Portugal received another bailout today from the European Union to stave off bankruptcy. The policy in the United States is similar: we are bankrupt and the Federal Reserve directs the Treasury to bail us out by printing more money.

The following graph illustrates the debt to GDP ratio in this century. The United States was barely over the EU 60% criterion in 2000. The projected ratio of 133% in 2015 fits the regression line since the current administration took control in 2008.

As clearly shown this week, Congress has little concern for our fiscal stability since the debt ceiling has been breached with no action being discussed until late July according to Paul Ryan.

David DeGerolamo

    
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