For journalists and commentators who have nothing better to do, at least to attract readers, some have come up with the notion that the United States is something like Cyprus in several regards. Less than idle speculation, these are just a grab for headlines based on nothing better than a sloppy disregard for the truth.
Bill O’Reilly, whose ratings have always defied gravity, suggested that eventually the U.S. will need to tax the bank accounts of Americans to cover the national debt. Based on any measure from the Congressional Budget Office, economists or the Office of Management and Budget, the American debt will reach a point of catastrophe sometime around 2080. That only leaves six decades to solve the problem, and assumes that U.S. debt will entirely lose its charm. It also assumes that Congress and the White House will not reach important sets of compromises, and that voters will not force them to do so, even at the eventual lowering of entitlement payments.
Another wild idea has its foundation in the deep economic trouble of some of America’s most desperately crippled cities. Detroit is at the top of that list. Detroit is the next Cyprus, or Cyprus is like Detroit. Detroit may be a ward of the State of Michigan, but its citizens will not find their bank accounts tapped to rescue the city. Neither will large companies based there, which include General Motors Co. (NYSE: GM). The bailout of Detroit may be painful. The number of police may be cut. Unions may find their contracts with the city nullified. But the savings of Detroit’s residents are safe, although most Detroit’s residents are so poor that they have not savings at all.
Cyprus may be like Greece, although Greece is probably too large for the European Union, European Central Bank and International Monetary Fund to let go under. The evidence of that is that all these parties could have let Greece go in the last round of bailout negotiations.
Cyprus always will remain a special case, not just because of its size, but because of the number of depositors based outside the country, mostly in Russia. The savings tax is as much on foreign interests as on local ones.
Cyprus stands alone as a model for trying to salvage a country. The United States, Detroit and Greece are safe from the attachments of deposits and the collapses that have caused them.