Barron's: Obama's Grecian Formula 'Very Likely' to Lead to 'Depression'

February 16, 2013 - 1:27 PM

"FOLLOW ME, WE CAN BE LIKE GREECE." That terrifying warning graced the cover of the February 16, 2013, issue of the financial publication Barron's, along with a picture of President Obama.

The story detailed the dangerous federal debt the United States faces. "If the U.S. national debt continues ballooning, we can be sure of a deep, long-lasting recession -- very likely a depression -- sometime in the next two to three decades. The unemployment rate could easily surge to 20%," wrote Gene Epstein.

Barron's: Obama's Grecian Formula 'Very Likely' to Lead to 'Depression'
The article explained that merely taxing the rich wouldn't dent what is needed to handle the debt. "Barron's calculates that immediately increasing the marginal tax rate to 50% on the top 1% of the country's earners would bring in $500 billion over the next 10 years. This would barely dent the country's debt load, which would then be $20 trillion, and do little to forestall a financial crisis," Epstein explained.

The solution he proposed is scary. "Getting the national debt under control will require tax increases for everyone, as well as budget cuts," he said. The article cited the Congressional Budget Office's recently published 10-year outlook that said the nation faces "long-term budget pressures," including "the aging of the population, the rising health-care costs, and...Social Security...."

Barron's wasn't the first to make the Greece comparison, but it made a strong case. CNBC CME Group floor reporter Rick Santelli cautioned back in 2010 that Greece's debt future was possible for the United States. "You know, Greece is our Ghost of the Future. It's a future that doesn't have to be -- but if we don't make some changes in the here and now, we will ultimately end up not quite like Greece," he warned.

New York Times columnist and Nobel-prize winning economist Paul Krugman blamed the dangers of Greece-like debt on ... Republicans, of course. On an Oct. 24 broadcast of Huffington Post Live, Krugman warned that a Romney victory in 2012 could cause America to become chaotic like Greece. "It's the Republican policies that are much more likely to make us end up like Greece," he stated.

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