The bill comes due for a life of fairness at the expense of growth.
One of the constant criticisms of Barack Obama’s first year is that he’s making us “more like Europe.” But that’s hard to define and lacks broad political appeal. Until now.
Any U.S. politician purporting to run the presidency of the United States should be asked why the economic policies he or she is proposing won’t take us where Europe arrived this week.
In an astounding moment, to avoid the failure of little, indulgent, profligate Greece, the European Union this week pledged nearly $1 trillion to inject green blood into Europe’s economic vampires.
For Americans, this has been a two-week cram course in what not to be if you hope to have a vibrant future. What was once an unfocused criticism of Mr. Obama and the Democrats, that they are nudging America toward a European-style social-market economy, came to awful life in the panicked, stricken faces of Europe’s leadership: Merkel, Sarkozy, Brown, Papandreou. They look like that because Europe has just seen the bond-market devil.
The bond market is a good bargain—if you live more or less within your means. The Europeans, however, pushed a good bargain into a Faustian bargain, which the world calls a sovereign debt crisis.
In the German legend, Faust was a scholar who sold his soul to the devil many years hence in return for a life now of intellectual brilliance and physical comfort. In our version of the legend, Europe’s governments told the devil that, more than anything, they wanted a life of social protection and income fairness no matter the cost. Life was good. A fortnight ago, the bond devil arrived and asked for his money.
In the U.S., the Obama White House and the Democrats have decided to wage politics into November by positioning the Republicans as the party of obstruction, which won’t vote for things the nation “needs,” such as ObamaCare. Some Republicans voting against these proposals seem to understand, as do their most ardent supporters, that they are opposing such ideas and policies because the Democrats have pushed far beyond the traditional centrist comfort zone of most Americans. A Democratic Party whose current budget takes U.S. spending from a recent average of about 21% of GDP up to 25% is outside that comfort zone. It’s headed toward the euro zone.
After Europe’s abject humiliation, the chance is at hand for the Republicans to do some useful self-definition. They should make clear to the American people that the GOP is “The We’re Not Europe Party.” Their Democratic opposition could not attempt such a claim because they do not wish to.
British Prime Minister Gordon Brown
The state of Europe can be summed up in one word: stagnation. Jean-Claude Trichet, the European Central Bank president who just agreed to monetize the debt that Europeans can’t or won’t pay, noted in a 2006 speech that “over the period from 1996 to 2005, euro area output grew on average 1.3 percentage points less than in the U.S., and the gap appears to be persistent.”
Angus Maddison, the eminent European historian of world economic development who died days before Europe’s debt crisis, wrote in 2001: “The most disturbing aspect of West European performance since 1973 has been the staggering rise in unemployment. In 1994-8 the average level was nearly 11% of the labor force. This is higher than the depressed years of the 1930s.”
Stagnation isn’t death. Economies don’t die. Greece proves that. They slow down. Europe’s low growth rates allow its populations to pretend that real, productive work is being done somewhere by someone. But new jobs are created slowly, if at all. Younger workers lose heart.
Economic stagnation is a kind of purgatory. Once there, it’s not clear how you get out. The economist Douglass North, in his 1993 Nobel Prize acceptance speech, said that one of the vexing problems of his discipline is, “Why do economies once on a path of growth or stagnation tend to persist?” Japan also seems unable to free itself from stagnation.
The antidote to stagnation is economic growth. Not just growth, but strong growth. A 4% growth rate, which Europe will never see again, pays social dividends innumerably greater than 2.5% growth. Which path are we on?
Barack Obama would never say it is his intention to make the U.S. go stagnant by suppressing wealth creation in return for a Faustian deal on social equity. But his health system required an astonishing array of new taxes on growth industries. He is raising taxes on incomes, dividends, capital gains and interest. His energy reform requires massive taxes. His government revels in “keeping a boot on the neck” of a struggling private firm. Wall Street’s business is being criminalized.
Economic stagnation arrives like a slow poison. Look at the floundering United Kingdom, whose failed prime minister, Gordon Brown, said on leaving, “I tried to make the country fairer.” Maybe there’s a more important goal.
A We’re-Not-Europe Party would promise the American people to avoid and oppose any policy that makes us more like them and less like us.
Daniel Henninger, Wall Street Journal
Full article and photo: http://online.wsj.com/article/SB10001424052748703339304575240591350076252.html