US debt levels are actually higher than Greece or Portugal. So why aren’t we in similar trouble?
Simple, says Gluskin-Sheff’s Davied Rosenberg, the US has a lot of room to raise taxes.
Greece here, Portugal there. Did you know that the structural deficit-to-GDP
ratio is actually higher in the U.S. (7.8%) and the U.K. (7.6%) than it is in Greece
(6.1%) and Spain (5.8%)? Of course, what makes the U.S. different is that it has
a revenue-to-GDP ratio of only 30%, which is at the very low end of the OECD
rates which hover close to 40% or above. So America certainly has much more
taxing capacity than anyone else does (and undoubtedly will have to use it
because cutting back on health care is going to be a tough task ahead looking at
the future demographic trends). It is with this taxing power in mind perhaps that
Congress is now busy preparing for another $100+ billion budget bill (Jim
Bunning finally relented) that will revive popular tax goodies and extend jobless
benefits through to year-end (when undoubtedly they will get extended again).
Canada seems pristine with just a 2.5% structural budget deficit and a debt ratio
that is also below the U.S. However, when you tack on Ontario’s dilapidated
fiscal situation, we still look OK comparatively speaking but it’s still somewhat
of a dire budgetary landscape.
If you are looking for countries with low primary deficits and low government
debt ratios then what fits that bill are Australia, New Zealand, Switzerland,
Korea, Norway, the Netherlands and Sweden.