U.S. Could Face France-Style Debt Crisis as Economist Sounds Alarm Over Growing Financial Risks

The United States is in better shape than France when it comes to national debt, but its current economic strength should not create a false sense of security.

France is facing a debt and economic crisis that has caused protests in the European country.

As per Fortune, unemployment was 8.3 percent in Q2, real GDP growth was weak at 0.4 percent and wage growth was 1.7 percent at the national level.

Public debt at around 116 percent of GDP has also contributed to people taking to the streets over living costs, job prospects and inequality.

In the U.S. debt is around 100 percent of GDP, compared with France’s 120 percent. The U.S. is also growing at just over 2 percent, versus roughly 0.5 percent in France, giving it more opportunity to manage its debt.

Heather Long, chief economist at Navy Federal Credit Union, told a Bipartisan Policy Center (BPC) event last week: “There’s a reason that the U.S. has pulled back a little bit in the last few weeks [and] why France has not.

“It’s a couple of key indicators that differentiate us from France and suggest … that we still have a little bit of room to have these debates now, in the context of a K-shaped economy.

“We’re at about 100 percent debt-to-GDP; they’re at 120 percent debt-to-GDP. They are further along that crisis curve, and they are growing at about 0.5 percent. We’re growing at just over 2 percent. That’s a pretty big difference. ”

Long also believes France has exhausted much of its capacity to raise revenue through taxes, something the U.S. has not done.

Long added: “It’s certainly not easy to raise taxation in the U.S., but from a financial world perspective and the bond market perspective, there’s a lot more room to experiment and to grow in the United States than there is in France.

“To me, the biggest warning sign from France is really not just the K-shaped economy effect, but the generational effect that’s going on and to see young people really driving this latest protest … from the disparities that they’re seeing generationally, and that seems like a pretty big foreshadowing [of] what we could see here as we creep towards 120 percent debt to GDP.”

The longer policymakers delay addressing national debt, the greater the risk that future generations in the U.S. will pay a price and face a heavier financial burden, slower economic growth and increasing social unrest.