Despite historically high projected US budget deficits, there are no lessons for the United States in the Greek debt crisis, says Christina Romer, chair of President Obama’s Council of Economic Advisors.
European Union leaders have been scrambling to find a way to prevent a default on Greek government bonds. Greece has consistently violated EU rules holding government budget deficits to 3 percent of gross domestic product. Late last year, the Greek government said its current deficit was 12.7 percent of GDP, which led to a financial market run on Greek government debt.
In its budget for 2011, the Obama administration predicts the federal deficit will be 8.3 percent of GDP and then fall to 5.1 percent the following year. The deficit is expected to hit 10.6 percent in the current budget year.
US is completely different case
In response to a question about possible lessons for the US from the Greek experience, Ms. Romer pushed back strongly at a Monitor-sponsored breakfast with reporters. “At a most fundamental level, the United States is clearly completely different…. I think the important thing is the United States is the most credit-worthy country in the world,” she said.
Romer added, “No, I don’t think there is actually a lesson for the United States. I think, for all of us, what we always knew is countries have to get their budget deficits under control, and the United States and the president certainly have a plan to do that. “
Disaster in ‘walking the walk’ on deficit reduction now
The CEA chair also defended the Obama administration from critics who say the administration talks a good game on controlling deficits but is not walking the walk. “In the very short run … walking the walk would be a disaster for the economy,” she said. With unemployment high, “right now is not the time to be getting the budget deficit down to 3 percent of GDP,” the CEA chair said. “But we need to put in place a plan … going forward that makes people understand we are going to get [the deficit] under control.”