Federal Reserve Chairman Ben Bernanke warned a congressional committee this morning that the federal debt seems to be on an unsustainable path. But, he also said we’re gonna have to spend our way out of this recession. Parts of Europe are in the same budget quandary: Save or spend to kick-start a sputtering economy? Commentator David Frum says that right now, Europe’s got it more figured out than we do.
By David Frum
On Tuesday, Hungary’s prime minister presented a new economic plan. The plan includes sharp cuts in salaries for government workers and a lower corporate tax rate.
The new Hungarian plan follows Monday’s announced budget cuts by Germany: 80 billion euros over four years. Which in turn follows announcements of budget cuts by Spain back in May: 50 billion euros over three years. Ireland has cut public sector pay, ditto Greece (that’s why those rioters were rioting).
Many of my fellow Republicans complain that President Obama wants to transform the United States into a European welfare state. But notice, it is those same European welfare states that are cutting budgets and constraining debt. It is the United States that is spending and borrowing with abandon.
Why are the Europeans so much more concerned about debt than the United States? It’s true that Europe’s more bureaucratic political systems can get away with paying less attention to public opinion than the U.S. Congress. And Europe has been hit less hard by recession than the United States.
Again, Europe also has less choice than the United States: If it does not act on its debt, its currency union could crack up. If California had to either cut its deficit or else be forced off the U.S. dollar, Californians might be acting more decisively, too.
And of course it’s possible that Europe is making a grave mistake — deflating when it should be inflating. On the other hand, with the world’s biggest economy, the United States, inflating like crazy, and China inflating like crazier, perhaps it’s useful to have somebody leaning on the brakes.
Think of that the next time you hear a warning that if we don’t amend our ways, we might end up like the thriftless Europeans or that the U.S. is the next Greece. It’s Greece that is cutting budgets. It’s the U.S. that is plunging toward debt of 100 percent of GDP, and the U.S. where cuts to the largest social programs are deemed taboo by both political parties.
So, if the question is, are we the next Greece, maybe the real answer is: We should be so lucky.
David Frum is the editor of FrumForum.
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