Fallout: The Financial Crisis

Europe has spending lesson for Obama

Marketplace Staff Apr 1, 2009
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Fallout: The Financial Crisis

Europe has spending lesson for Obama

Marketplace Staff Apr 1, 2009
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TEXT OF COMMENTARY

Kai Ryssdal: The G-20’s led the economic news the past couple of days. But really, the event itself, that is, the meeting between the leaders of all the various countries tomorrow, is only going to last four hours. That’s not a lot of time to save the global economy. So commentator David Frum thinks it’s handy that the Europeans will be feeling a little bit of deja vu.


DAVID FRUM: Have you seen this movie before?

A brash and self-confident American president has a big, bold, and costly idea. Hesitant Europeans resist. The president’s advisers and supporters murmur doubts about the toughness of “old Europe.”

No, it’s not Iraq this time. This time it’s the Obama administration’s call on European countries to borrow and spend on the same astounding scale as the United States. The United States and Europe will confront these issues face-to-face at this week’s G-20 summit.

Barack Obama plans to double the U.S. debt load over his time as president, reaching levels last seen at the end of World War II.

European governments are less impressed by this brain wave. For 20 years, Europe has attempted to combat unemployment with very high levels of public spending. What they have got out of the experiment is crushing taxation, ominous debts and not much of a bite out of the unemployment problem. It baffles leaders in France and Germany that the United States would volunteer to inflict these policy errors on itself at just the moment when France and Germany are struggling to undo similar errors of their own.

In a crisis, countries must inevitably spend more, tax less and accept higher deficits. That’s one reason why it’s so important to keep a good balance sheet in normal economic times, to leave scope to react to crisis. What the Obama administration is proposing for the United States is not a temporary stimulus but permanently higher spending, taxing and borrowing. Those who have tasted this medicine understand best how dangerous it is. At the G-20, perhaps President Obama should lecture less and listen more.

RYSSDAL: David Frum is a resident fellow at the American Enterprise Institute.

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