Greece's public debt, at 113 percent of G.D.P., is indeed high, but other countries have dealt with similar levels of debt without crisis. For example, in 1946, the United States, having just emerged from World War II, had federal debt equal to 122 percent of G.D.P. Yet investors were relaxed, and rightly so: Over the next decade the ratio of U.S. debt to G.D.P. was cut nearly in half, easing any concerns people might have had about our ability to pay what we owed.
What Krugman never mentions in his column is the fact that defense spending fell dramatically as a share of GDP in the United States after World War II. In fact, even as late as the 1990's, the fiscal outlook in the United States appeared to be improving because defense spending's share of GDP was falling. As of now, defense spending is already too low relative to GDP for further cuts to make a meaningful difference.
According to the Committee on the Fiscal Future of the United States, by 2030, U.S. debt will be 117.6 percent of GDP, roughly the same as that of Greece today. And that is with total non-interest, non-entitlement spending of only 8.5 percent of GDP. (The report pre-dates the Obama Administration, which has substantially increased the path for both debt and spending.)
I have said this before, but the Left's favorite solution to this, which is bending the health care cost curve between now and 2080, is whistling past the graveyard. We will not get to 2080. Instead, the crisis will come before 2030. If you have not done so already, stare at the table.
Several years ago, I wrote that the future will be a Great Race between technological progress and Medicare--a contest between the technological Singularity and a fiscal Singularity, if you will. Back then, I thought that the technological singularity had a better chance of winning than I do now.
The next time the United States hits a debt-to-GDP ratio of 100 percent or more, we will look much more like Greece in 2010 than the United States in 1945. That is, our government will be in a state of paralysis, the public-sector unions and pensioners will be in a state of hysteria, and defense spending will be only a few percentage points of GDP. Like Greece, we will be devoid of options. At that point, "inflating away the debt" will not be some mild, harmless act--it will require a virulent inflation and/or capital levy that wipes out the savings of everyone except those who have found safe havens overseas.