As President Obama meets this weekend with the leaders of the G-20 nations in Toronto it is increasingly apparent that the United States and the European countries are headed in diametrically opposite directions.
The Obama administration has been racing to transform the U.S. into a copy of the European social-welfare system while at the same time those countries are being forced to come to grips with the failure of that welfare state. Greece Hungry and Portugal have received the most news media attention as their growing debt has threatened the viability of the euro. But all across the European Union countries are discovering that they can no longer afford the massive cost of providing cradle-to-grave government benefits.
•France: The poster-child for euro-socialism is facing a national debt of 1.49 trillion euro about 77 of its GDP. That doesnt count the unfunded liabilities of the countrys state pension system which may exceed 200 of GDP by themselves. Reforming the French welfare system has long been seen as politically impossible but the fiscal facts have forced the French government to finally propose an increase in the retirement age. The French government is also selling off government-owned land and other property. And the French health care system has gradually been increasing co-payments and other forms of consumer cost-sharing.
•Germany: Every working person in Germany shoulders 43000 euro ($53000) in debt. In response the German government has announced plans to cut more than 80 billion euro in government spending nearly 3 of GDP over the next four years. It has already announced 3 billion euro in cuts in this years budget including a reduction in unemployment benefits. The retirement age will be raised from 65 to 67 by 2029. Government universities previously free have begun charging tuition.
•Great Britain: Englands national debt is a staggering 90000 pounds ($133000) per household. The new government of Conservative Prime Minister David Cameron has already announced more than 6 billion pounds in budget cuts. It plans to raise the retirement age under its Social Security system and abolish payments to parents of newborn children. The government also aims to implement U.S.-style welfare reform including a work requirement for those receiving benefits.
•Italy: Even the notoriously dysfunctional Italian government has been forced to come to terms with a national debt larger than its entire GDP. Prime Minister Silvio Berlusconi has proposed more than 30 billion euro in budget cuts over the next two years including a billion-euro cut to its national health care system and a crackdown on fraudulent disability payments. Berlusconi also called for a three-year pay freeze for all government workers.
•Spain: Facing the countrys worst economic crisis in decades Prime Minister Jose Luis Rodiguez-Zapatero has slashed government spending by 15 million euro. Payments to the parents of newborn children were ended and disability payments cut. The Spanish government also has proposed hiking the retirement age for men from 65 to 67.
These countries are discovering a basic economic truth: eventually you run out of Peters with which to pay Paul.
Meanwhile the U.S. is well down the road toward a European level of government spending and debt. Already the U.S. national debt tops $72000 per household. The Congressional Budget Office projects the debt will equal 90 of our GDP by 2020. That would be higher than any of the countries mentioned above except Italy and we are closing in on that mark quickly.
Last year U.S. federal spending topped 24.7 of gross domestic product nearly a quarter of every dollar earned in this country. As the full force of entitlement programs kicks in the federal government will consume more than 40 of GDP by the middle of the century. And the trajectory of government spending is projected to keep rising beyond 2050 eventually hitting an unfathomable 80 of GDP according to the CBO.
Kicking and screaming Europe is realizing the folly of the welfare state and taking the first small steps to return to fiscal sanity. Alas Congress seems more inclined to repeat Europes mistakes than to learn from them.
Michael D. Tanner is a senior fellow at the Cato Institute.
As President Obama meets this weekend with the leaders of the G-20 nations in Toronto it is increasingly apparent that the United States and the European countries are headed in diametrically opposite directions.
The Obama administration has been racing to transform the U.S. into a copy of the European social-welfare system while at the same time those countries are being forced to come to grips with the failure of that welfare state. Greece Hungry and Portugal have received the most news media attention as their growing debt has threatened the viability of the euro. But all across the European Union countries are discovering that they can no longer afford the massive cost of providing cradle-to-grave government benefits.
•France: The poster-child for euro-socialism is facing a national debt of 1.49 trillion euro about 77 of its GDP. That doesnt count the unfunded liabilities of the countrys state pension system which may exceed 200 of GDP by themselves. Reforming the French welfare system has long been seen as politically impossible but the fiscal facts have forced the French government to finally propose an increase in the retirement age. The French government is also selling off government-owned land and other property. And the French health care system has gradually been increasing co-payments and other forms of consumer cost-sharing.
•Germany: Every working person in Germany shoulders 43000 euro ($53000) in debt. In response the German government has announced plans to cut more than 80 billion euro in government spending nearly 3 of GDP over the next four years. It has already announced 3 billion euro in cuts in this years budget including a reduction in unemployment benefits. The retirement age will be raised from 65 to 67 by 2029. Government universities previously free have begun charging tuition.
•Great Britain: Englands national debt is a staggering 90000 pounds ($133000) per household. The new government of Conservative Prime Minister David Cameron has already announced more than 6 billion pounds in budget cuts. It plans to raise the retirement age under its Social Security system and abolish payments to parents of newborn children. The government also aims to implement U.S.-style welfare reform including a work requirement for those receiving benefits.
•Italy: Even the notoriously dysfunctional Italian government has been forced to come to terms with a national debt larger than its entire GDP. Prime Minister Silvio Berlusconi has proposed more than 30 billion euro in budget cuts over the next two years including a billion-euro cut to its national health care system and a crackdown on fraudulent disability payments. Berlusconi also called for a three-year pay freeze for all government workers.
•Spain: Facing the countrys worst economic crisis in decades Prime Minister Jose Luis Rodiguez-Zapatero has slashed government spending by 15 million euro. Payments to the parents of newborn children were ended and disability payments cut. The Spanish government also has proposed hiking the retirement age for men from 65 to 67.
These countries are discovering a basic economic truth: eventually you run out of Peters with which to pay Paul.
Meanwhile the U.S. is well down the road toward a European level of government spending and debt. Already the U.S. national debt tops $72000 per household. The Congressional Budget Office projects the debt will equal 90 of our GDP by 2020. That would be higher than any of the countries mentioned above except Italy and we are closing in on that mark quickly.
Last year U.S. federal spending topped 24.7 of gross domestic product nearly a quarter of every dollar earned in this country. As the full force of entitlement programs kicks in the federal government will consume more than 40 of GDP by the middle of the century. And the trajectory of government spending is projected to keep rising beyond 2050 eventually hitting an unfathomable 80 of GDP according to the CBO.
Kicking and screaming Europe is realizing the folly of the welfare state and taking the first small steps to return to fiscal sanity. Alas Congress seems more inclined to repeat Europes mistakes than to learn from them.
Michael D. Tanner is a senior fellow at the Cato Institute.
