Question: How far in the future will the Greek tragedy scenario arrive at U.S. shores??
Paul Solman: A week? A decade? Never? The world of finance is too complex to predict, but here, to bolster collective confidence, are a few reasons for “never”:
—We pay taxes in this country, unlike in Greece. (The NY Times reported estimates of an underground economy that’s 30 percent of GDP in Greece, compared to something like 7 percent in the United States);
—An enormous percentage of Greek workers are employed by the government — I’ve seen estimates as high at 40 percent — compared with something like 15 percent, if I’m calculating correctly — for the United States;
—A few fixes to our Social Security system, as Federal Reserve vice-chairman nominee Peter Diamond of MIT has long argued, like lifting the earnings ceiling and phasing in a later retirement age, would solve one of the great looming entitlement problems.
Reasonable people differ as to the seriousness of the problem. An interview we just did with early doomcasters Nassim “Black Swan” Taleb and Nouriel “housing crash” Roubini had both of them worrying about the United States as another Greece. (It will air soon.) Boston University economist Larry Kotlikoff chided me only yesterday for not acknowledging that financially, the United States is in WORSE long-term shape than the land of Plato and Papandreou.
My own forecast: It all depends on investor trust, and investors are way too fickle to forecast.