Will We End Up Like Greece? The Risks of the Trans-Pacific Partnership

http://www.opednews.com/articles/Will-We-End-Up-Like-Greece-by-Dean-Baker-Debt_Dollar_Loss_Risks-150211-169.html



Will We End Up Like Greece? The Risks of the Trans-Pacific Partnership
By Dean Baker
OpEdNews Op Eds 2/11/2015 at 14:54:14

For years people have been running around Washington yelling that the United States was at risk of becoming Greece. There may actually be a basis for such concerns, but not for the reason usually given.

The standard story of the United States becoming Greece is that government budget deficits will result in a loss of confidence in the ability of the United States to meet its debt obligations. This will lead to skyrocketing interest rates, a financial panic, and rivers flowing upstream.

While this view has many adherents among respectable people in Washington, reality refuses to cooperate. Instead of skyrocketing, the interest rate on U.S. government debt has plummeted. The interest rate on 10-year Treasury bonds is less than 2.0 percent, a sharp contrast from days of budget surpluses in the late 1990s when it hovered in the 5-6 percent range. In short, the deficit hawks have been shown to be completely wrong.

But there is actually another way in which the United States could be like Greece and the Trans-Pacific Partnership is directly connected. While Greece's budget problems have made headlines, its economy is actually more constrained by being trapped in the euro zone than by the restrictions on budget deficits. This has prevented the adjustment in relative prices that is needed to restore the competitiveness of Greece's economy.