The US could end up with the same problems as debt-laden Greece if it does not get its spending under control and deal with its structural deficit, David Walker, president and CEO of the Peter G. Peterson Foundation, told CNBC.
Walker, whose foundation advocates fiscal responsibility, said part of the problem is the US's engagement in “creative accounting practices,” similar to those that helped Greece’s debt crisis erupt.
One example of accounting trickery, according to Walker, is the government not consolidating the Federal Reserve and government-sponsored entities Fannie Mae and Freddie Mac into its financial statement. He also said the US has been engaging in creative accounting for years with regard to the Social Security Trust Fund.
“If you look at total debt to GDP, we’re already over 85 percent, and we’re going to be at 100 percent in two years,” he added. “That may be troubling, but what’s even more troubling is that we have to go to foreign lenders to finance our debt.”
Walker said the US has a couple of years to demonstrate it is going to do something meaningful in regards to dealing with its structural deficit. If not, he warned, we could have a "crisis of confidence with regard to our own finances."
“We need to impose tough budget controls once the economy turns around; reform social security; deal with health care costs first, before coverage; and also restructure our tax system and generate more revenues,” Walker concluded.
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