US Less Than 3 Years Away From Being Greece: Walker

The US is only a few years away from reaching the same debt levels that pushed Greece to the brink of ruin, former comptroller general and head of the Comeback America Initiative David Walker said.

As the ratio of its debt to gross national product eclipsed 100 percent and surged toward 150 percent, Greece has twice in the last two years nearly defaulted on its debt. Only successive bailout packages from the European Union and International Monetary Fund prevented catastrophe.

When tolling up all the US debts , including huge unfunded liabilities to Social Security and Medicare, the US is on dangerous ground, Walker said in a CNBC interview.

"We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP," he said.

The US is nearing the 100 percent threshold which historically shaves about one percentage point off GDP, which was just 1.3 percent for the second quarter and 0.4 percent for the first quarter.

With the recent increase in the debt ceiling and continued higher budget deficits at the federal level, the US is on course for its own crisis, Walker said.

"We are not exempt from a debt crisis," he said. "We're never going to default, because we can print money. At the same point in time, we have serious interest rate risk, we have serious currency risk, we have serious inflation risk over time. If it happens, it will be sudden and it will be very painful."

He spoke as Congress is putting the final touches on approving an increase in the $14.3 trillion debt ceiling, a move deemed critical to avoiding a default. Standard & Poor's has warned it still may revoke the coveted triple-A rating for US debt, a move that some fear would increase interest rates and further add to the economic slowdown.

While Walker said credit agency downgrades are generally a "lag indicator"—meaning that they look backwards rather than forwards—the Greece situation should stand as a template for where the US could be heading in terms of credit.

Though the US has the lowest average interest rate and lowest duration on its debt of any developed nation, it faces significant rate risk if it continues on the same path.

Greece now pays nearly 15 percent interest on its 10-year notes, while Italy pays 6.13 percent and Spain 6.38 percent. The latter two peripheral euro nations also face serious debt problems though not on a scale with Greece.

"We should recognize that this could be a leading indicator for us," Walker said. "You can see what happens to interest rates if you lose confidence. They can go up very dramatically."