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Posts Tagged ‘Europe’

I don’t know whether to be impressed or horrified by Paul Krugman.

I’m impressed that he’s always “on message.” No matter what’s happening in America or around the world, he always has some sort of story about why events show the need for bigger government.

But I’m horrified that he’s so sloppy with numbers.

My all-time favorite example of his fact-challenged approach deals with Estonia. In an attempt to condemn market-based fiscal policy, he blamed that nation’s 2008 recession on spending cuts that took place in 2009.

Wow. That’s like saying that a rooster’s crowing causes yesterday’s sunrise. Amazing.

Let’s look at a new example. This is some of what he recently wrote while trying to explain why the U.S. has out-performed Europe.

America has yet to achieve a full recovery from the effects of the 2008 financial crisis. Still, it seems fair to say that we’ve made up much, though by no means all, of the lost ground. But you can’t say the same about the eurozone, where real G.D.P. per capita is still lower than it was in 2007, and 10 percent or more below where it was supposed to be by now. This is worse than Europe’s track record during the 1930s. Why has Europe done so badly?

Krugman answers his own question by saying that the United States has been more loyal to Keynesian economics.

…what stands out from around 2010 onward is the huge divergence in thinking that emerged between the United States and Europe. In America, the White House and the Federal Reserve mainly stayed faithful to standard Keynesian economics. The Obama administration wasted a lot of time and effort pursuing a so-called Grand Bargain on the budget, but it continued to believe in the textbook proposition that deficit spending is actually a good thing in a depressed economy.

I have to confess that alarm bells went off in my head when I read this passage.

If Krugman was talking about the two years between 2008 and 2010, he would be right about “staying faithful to standard Keynesian economics.”

But 2010 was actually the turning point when fiscal policy in America moved very much in an anti-Keynesian direction.

Here’s the remarkable set of charts showing this reversal. First, there was zero spending growth in Washington after 2009.

Second, this modest bit of fiscal restraint meant a big reduction in the burden of government spending relative to economic output.

Wow, if this is Keynesian economics, then I’m changing my name to John Maynard Mitchell!

So is Krugman hallucinating? Why is he claiming that U.S. policy was Keynesian?

Let’s bend over backwards to be fair and try to find some rationale for his assertions. Remember, he is making a point about U.S. performance vs. European performance.

So maybe if we dig through the data and find that European nations were even more fiscally conservative starting in 2010, then there will be some way of defending Krugman’s claim.

Yet I looked at the IMF’s world economic outlook database and I crunched the numbers for government spending in the biggest EU economies (Germany, UK, France, Italy, Spain, Netherlands, Sweden, Belgium, accounting for almost 80 percent of the bloc’s GDP).

And what did I find?

Contrary to Krugman’s claims, total government spending in those nations grew slightly faster than it did in the United States between 2009 and 2014.

So on what basis can Krugman argue that the U.S. had a more Keynesian approach?

Beats the heck out of me. I even looked at the OECD data on deficits to see whether there was some way of justifying his argument, but those numbers show the biggest reduction in red ink (presumably a bad thing according to Keynesian stimulus theory) took place in the United States.

But I will close by acknowledging that Krugman’s column isn’t just focused on fiscal policy. He also argues that the Federal Reserve has been more Keynesian than European central banks. My impression is that both the Fed and the ECB have been keeping interest rates artificially low, so I’m not sure that’s an effective argument (or an effective policy!), but I’ll leave that issue to the folks who specialize in monetary policy.

P.S. If you want additional examples of Krugman’s factual errors, see here, here, here, here, here, here, here,here, here, and here.

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There’s a big fiscal battle happening in Europe. The relatively new Greek government is demanding continued handouts from the rest of Europe, but it wants to renege on at least some of the country’s prior commitments to improve economic performance by reducing the preposterous burden of spending, regulation, and intervention.

That seems like a rather strange negotiating position. Sort of like a bank robber holding a gun to his own head and saying he’ll shoot himself if the teller doesn’t hand over money.

At first glance, it seems the Greeks are bluffing. Or being suicidally self-destructive.

And maybe they are posturing and/or being deluded, but there are two reasons why the Greeks are not totally insane.

1. The rest of Europe does not want a Greek default.

There’s a famous saying, attributed to J. Paul Getty, that applies to the Greek fiscal fight. Simply stated, there are lots of people and institutions that own Greek government bonds and they are afraid that their investments will lose value if Greece decides to fully or partially renege on its debts (which is an implicit part of Greece’s negotiating position).

So while Greece would suffer if it defaulted, there would be collateral damage for the rest of Europe. In other words, the hypothetical bank robber has a grenade rather than a gun. And while the robber won’t fare well if he pulls the pin, lots of other people may get injured by shrapnel.

And to make matters more interesting, previous bailouts of Greece have created a rather novel situation in that taxpayers are now the indirect owners of a lot of Greek government debt. As you can see from the pie chart, European taxpayers have the most exposure, but American taxpayers also are on the hook because the IMF has participated in the bailouts.

The situation is Greece is akin to a bankruptcy negotiation. The folks holding Greek government debt are trying to figure out the best strategy for minimizing their losses, much as the creditors of a faltering business will calculate the best way of extracting their funds. If they press too hard, the business may go bust and they get very little (analogous to a Greek default). But if they are too gentle, they miss out on a chance of getting a greater share of the money they’re owed.

2. Centralization is the secular religion of the European elite and they want Greece in the euro.

The bureaucrats at the European Commission and the leaders of many European nations are emotionally and ideologically invested in the notion of “ever closer union” for Europe. Their ultimate goal is for the European Union to be a single nation, like the United States. In this analogy, the euro currency is akin to the American dollar.

There’s a general perception that a default would force the Greek government to pull out of the euro and re-create its own currency. And for the European elite who are committed to “ever closer union,” this would be perceived as a major setback. As such, they are willing to bend over backwards to accommodate Greece’s new government.

Given the somewhat blurry battle lines between Greece and its creditors, what’s the best outcome for advocates of limited government and individual liberty?

That’s a frustrating question to answer, particularly since the right approach would have been to reject any bailouts back when the crisis first started.

Without access to other people’s money, the Greek government would have been forced to rein in the nation’s bloated public sector. To be sure, the Greek government may also have defaulted, but that would have taught investors a valuable lesson about lending money to profligate governments.

And it would have been better if Greece defaulted five years ago, back when its debt was much smaller than it is today.

But there’s no point in crying about spilt milk. We can’t erase the mistakes of the past, so what’s the best approach today?

Actually, the right answer hasn’t changed.

And just as there are two reasons why the Greek government is being at least somewhat clever in playing hardball, there are two reasons why the rest of the world should tell them no more bailouts.

1. Don’t throw good money after bad.

To follow up on the wisdom of J. Paul Getty, let’s now share a statement commonly attributed to either Will Rogers or Warren Buffett. I don’t know which one (if either) deserves credit, but there’s a lot of wisdom in the advice to stop digging if you find yourself in a hole. And Greece, like many other nations, has spent its way into a deep fiscal hole.

There is a solution for the Greek mess. Politicians need to cut spending over a sustained period of time while also liberalizing the economy to create growth. And, to be fair, some of that has been happening over the past five years. But the pace has been too slow, particularly for pro-growth reforms.

But this also explains why bailouts are so misguided. Politicians generally don’t do the right thing until and unless they’ve exhausted all other options. So if the Greek government thinks it has additional access to money from other nations, that will give the politicians an excuse to postpone and/or weaken necessary reforms.

2. Saying “No” to Greece will send a powerful message to other failing European welfare states.

Now let’s get to the real issue. What happens to Greece will have a big impact on the behavior of other European governments that also are drifting toward bankruptcy.

Here’s a chart showing the European nations with debt burdens in excess of 100 percent of economic output based on OECD data. Because of bad demographics and poor decisions by their politicians, every one of these nations is likely to endure a Greek-style fiscal crisis in the near future.

And keep in mind that these figures understate the magnitude of the problem. If you include unfunded liabilities, the debt levels are far higher.

So the obvious concern is how do you convince the politicians and voters in these nations that they better reform to avoid future fiscal chaos? How do you help them understand, as Mark Steyn sagely observed way back in 2010, that “The 20th-century Bismarckian welfare state has run out of people to stick it to.

Well, if you give additional bailouts to Greece, you send precisely the wrong message to the Italians, French, etc. In effect, you’re telling them that there’s a new group of taxpayers from other nations who will pick up the tab.

That means more debt, bigger government, and a deeper crisis when the house of cards collapses.

P.S. Five years ago, I created a somewhat-tongue-in-cheek 10-step prediction for the Greek crisis and stated at the time that we were at Step 5. Well, it appears my satire is slowly becoming reality. We’re now at Step 7.

P.P.S. Four years ago, I put together a bunch of predictions about Greece. You can judge for yourself, but I think I was quite accurate.

P.P.P.S. A big problem in Greece is the erosion of social capital, as personified by Olga the Moocher. At some point, as I bluntly warned in an interview, the Greeks need to learn there’s no Santa Claus.

P.P.P.P.S. The regulatory burden in Greece is a nightmare, but some examples of red tape are almost beyond belief.

P.P.P.P.P.S. The fiscal burden in Greece is a nightmare, but some examples pf wasteful spending are almost beyond belief.

P.P.P.P.P.P.S. Since we once again have examined a very depressing topic, let’s continue with our tradition of ending with a bit of humor. Click here and here for some very funny (or sad) cartoons about Obama and Greece. And here’s another cartoon about Greece that’s worth sharing. If you like funny videos, click here and here. Last but not least, here’s some very un-PC humor about Greece and the rest of Europe.

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Over and over again, I’ve shared evidence showing that gun ownership deters crime.

As I pointed out in my IQ test for criminals and liberals, even stupid criminals don’t want to get shot, so they are less likely to go after victims who may be armed (if you don’t believe me, check out this feel-good story from Ferguson, Missouri).

But what if the bad guys don’t care if they get shot? What if they’re these crazies who want to shoot up schools or movie theaters, fully expecting to kill themselves or get shot when police eventually arrive?

Even in that case, gun ownership by innocent people presumably has a positive impact. Research on mass shootings reveals that these nut jobs gravitate to “gun-free zones.” That way, they figure there won’t be any immediate resistance and they’ll be able to maximize casualties.

Let’s take our analysis to the next level. What if the bad guys are lunatic Islamofascists who think they get a bunch of virgins in paradise if they butcher so-called infidels?

These evil scum presumably aren’t deterred by the possibility of death, but it’s also logical to assume that they want to maximize the carnage they inflict before that happens.

So if potential victims are armed, that presumably will have a positive impact. After all, terrorists generally don’t try to take on Israeli soldiers. Instead, they go after people with far more limited ability to fight back.

In a humane and just world, lawmakers would agree that these folks should have some ability to defend themselves. But that’s not how the real-world works, at least in European nations that impose severe gun control.

Maybe it’s time to change that misguided policy, which is exactly what some European Jews are proposing.

Here are some excerpts from a story in the U.K.-based Daily Mail.

One of Europe’s largest Jewish associations has written a letter to EU ministers asking for gun laws to be relaxed to allow Jews to arm themselves to protect against terror attacks. Rabbi Menachem Margolin, the head of the European Jewish Association, made the request in the wake of the Paris attacks in which four Jews were killed inside a deli in the French capital. …The letter speaks about the need for protection after Islamist Amedy Coulibaly gunned down four Jewish shoppers in cold blood in a Paris deli last Friday before he was shot by armed police. …Police later found he had maps showing the locations of Jewish schools in Paris. …Nobody from the European Council of Ministers was immediately available for comment on the letter when contacted by Mail Online this afternoon.

Needless to say, I’m not expecting European politicians to give the right answer to this request.

Instead, they’ll offer platitudes and assure people that the government will protect synagogues and Jewish schools.

That better than nothing, of course, but why not let individuals have the right to self defense?

John Hinderaker of Powerline adds his two cents to the issue.

The recent terrorist attacks in Paris shed some light on this question. In the case of the Charlie Hebdo murders, two armed guards were present, but were quickly overwhelmed by the well-trained (and no doubt better armed) terrorists. It is unlikely that civilians armed with pistols would have fared better. The kosher grocery attack was quite different. It was carried out by a single terrorist and, rather than being executed rapidly and with military precision, the terrorist held something like 30 people hostage for a matter of hours. This is a good example of a situation where civilians armed with concealed weapons could likely make a difference. If one of the hostages had a gun (or better yet, two or three hostages had guns) he could well have had an opportunity to get off a clean shot and kill or disable the terrorist.

Very well stated, though I’ll disagree in one respect. It’s quite possible that well-armed terrorists would have prevailed in their attack on Charlie Hebdo even if some of the employees were armed.

But if I worked at that magazine, I would still want the option of self defense. Far better to go down fighting than to cower under a desk.

I suspect John would agree, so we probably don’t have any real disagreement.

In any event, John’s has more good information and analysis in his blog post.

…a critical mass of armed civilians can change criminals’ behavior dramatically. In the United Kingdom, burglars generally look for homes that are occupied so that they can force the occupants to direct them to the family’s valuables–and, in the process, commit a rape or other heinous crime. In the United States, burglars almost always seek out unoccupied homes, because if the homeowner is present there is a possibility the burglar could be shot. The American experience suggests that as the citizenry becomes armed, street crime declines. The causes are hotly debated, but violent crime rates have steadily gone down in tandem with liberalized gun carry laws and broader ownership of handguns. …In parts of Europe, it is common for Jews to be attacked by gangs of young Muslims when they are out in public. Such attacks would decline rapidly if it were known that Jews are arming themselves, and if, in only a few instances, thugs attempting to perpetrate such attacks were shot in self-defense. In my view, deterring street attacks would be the largest potential benefit of wider firearms ownership. …if I were a European Jew would I arm myself to the maximum extent permitted by law, and seek legal changes to make self-defense more effective? Absolutely.

Actually, I’ll disagree with another minor aspect of John’s post.

If I were a European Jew, I would arm myself regardless of the law. My family’s protection would matter more than the foolish/evil laws of politicians.

P.S. Don’t forget that Jews were victimized by the Nazi’s gun control laws, visual depictions of which can be seen here, here, here, and here.

P.P.S. On a less somber note, here are two very amusing Chuck Asay cartoons (here and here) about so-called gun-free zones. And here are some more amusing images on that issue.

P.P.P.S. Sticking with the humor theme, here’s an interview featuring a well-deserved lesson for a left-wing journalist (presumably an urban legend, but still funny). And here a post on the difference between conservatives, liberals, and Texans. Last but not least, I hope these are the virgins waiting in paradise to greet the terrorists.

P.P.P.P.S. To end on a serious note, I will continue my tradition of sharing the very powerful testimony of a true gun expert, as well as the admissions of two leftists (here and here) who admit that gun control is grossly misguided. All three of these links should be widely shared.

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In my younger years, I oftentimes would have arguments with statists who wanted me to believe that countries in Northern Europe like Sweden “proved” that generous welfare states were compatible with economic prosperity.

That doesn’t happen as often today because the Nordic nations in recent decades have not enjoyed rapid growth. Moreover, some of the nations – such as Sweden in the early 1990s and Iceland last decade – suffered from serious financial downturns.

So I stand by my position that free markets and small government are the recipe for prosperity.

That being said, there are still some interesting lessons to be learned from these countries.

As I’ve previously argued, the Nordic countries demonstrate that a big welfare state is “affordable” so long as countries are willing to accept less growth and so long as they are willing to compensate for high taxes and high spending with very pro-market policies in other areas.

And that’s definitely the case. If you examine the Economic Freedom of the World data, you see that Nordic nations get fairly decent scores because they have very laissez-faire policies for regulation, trade, monetary policy, and property rights.

Yes, the fiscal burden of the welfare state slows growth and drags down their rankings, but they still do far better than other European countries that have big governments and a lot of intervention. Just think of France (#58), Italy (#79), and Spain (#51).

With this bit of background, let’s now look at two new and interesting articles about the extent to which the Nordic nations should be role models.

Our first story is from the Washington Post, and it’s authored by a British journalist who lives in Denmark. He starts by noting the inordinate amount of praise these countries receive.

The United States is in the midst of an episode of chronic Scandimania, brought on in part by the habitually high placing of Sweden and its similarly prosperous, egalitarian, collectivist neighbors — Denmark, Norway, Iceland and Finland — in global rankings of everything from happiness to lack of corruption.

But he then points out that these is trouble in the Nordic paradise.

The Washington Post is not immune to Scandinavia’s charms, recently marveling at how Danish branches of McDonald’s manage to pay their employees 2.5 times U.S. McDonald’s workers’ wages (clue: When about 75 percent of earnings disappear as income and consumption taxes, higher wages are more necessity than choice). …and last month the Times assured us that “A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia.” (*Cough* unemployment is 5.6 percent in the United States, vs. 8.1 percent in Sweden, 8.9 percent in Finland and 6.4 percent in Denmark.) …And global and domestic events are conspiring to make life a little more uncertain for these former high achievers. …the Scandinavian model’s structural fissures are coming under increasing stress. …the Norwegians seem to have lost their parsimonious, workaholic, Lutheran mojo. Norwegians treat Friday as a “free day” and take more sick leave than anyone else in Europe, if not the world — a law enshrines their right to claim sick days even while on holiday.

The author continues, pointing out some serious warts.

Sweden’s political establishment was subverting the democratic process. This has distracted from the slowing economy, increasing state and household debt levels, and one of the highest youth unemployment rates in Europe. …Denmark took a bigger hit than its neighbors following the 2008 global economic crisis, which increased pressure on its massive welfare state, funded by the highest taxes in the world. Household debt is the highest in Europe (any connection there, I wonder?). …along with the Norwegians they work among the fewest hours a year of any Europeans. …In Iceland, …ultra-Nordic social cohesion…led to the near-bankruptcy of the entire country.

And here are some more details that also don’t sound so encouraging.

These countries that do so well in life-satisfaction surveys also record the highest consumption of antidepressants in the world, and despite their reputation for gender equality, they have the highest rates of violence against women in Europe. …few Americans would truly embrace a Scandinavian-style society. The tax rates alone would likely be a sufficient deterrent. Though I’m a freelance journalist, I essentially work until Thursday lunchtime for the state. And it’s not as if the money that is left in my pocket goes all that far: These are fearfully expensive countries in which to live.

Here’s the bottom line from a balanced story.

Scandinavia is not the utopia that American liberals or the 11 million Americans of Nordic descent often make it out to be, just as it is not the quasi-commie, statist gulag that those on the right would often have us believe. …I’m not saying the Nordic miracle is over, but it was never a miracle. And it’s over.

Now let’s look at our second story, which was published by the New York Post.

The tone is more negative, but it basically has the same message.

In the American liberal compass, the needle is always pointing to places like Denmark. Everything they most fervently hope for here has already happened there.

But there’s bad news in the land of the Northern Lights.

Here’s what he writes about Denmark.

Visitors say Danes are joyless to be around. Denmark suffers from high rates of alcoholism. In its use of antidepressants it ranks fourth in the world. (Its fellow Nordics the Icelanders are in front by a wide margin.) Some 5 percent of Danish men have had sex with an animal. Denmark’s productivity is in decline, its workers put in only 28 hours a week, and everybody you meet seems to have a government job. …Danes operate on caveman principles — if you find it, share it, or be shunned. Once your date with Daisy the Sheep is over, you’d better make sure your friends get a turn.

Though Daisy is lucky that she’s not on the tax rolls. The tax system in that nation is so oppressive that I’ve joked birthers should accuse Obama of having been born in Denmark.

In addition to paying enormous taxes — the total bill is 58 percent to 72 percent of income — Danes have to pay more for just about everything. Books are a luxury item. Their equivalent of the George Washington Bridge costs $45 to cross. …Health care is free — which means you pay in time instead of money. Services are distributed only after endless stays in waiting rooms. (The author brought his son to an E.R. complaining of a foreign substance that had temporarily blinded him in one eye and was turned away, told he had to make an appointment.) Pharmacies are a state-run monopoly, which means getting an aspirin is like a trip to the DMV.

But the author doesn’t just pick on Denmark.

Iceland’s famous economic boom turned out to be one of history’s most notorious real estate bubbles. …The success of the Norwegians — the Beverly Hillbillies of Europe — can’t be imitated. Previously a peasant nation, the country now has more wealth than it can spend: Colossal offshore oil deposits spawned a sovereign wealth fund that pays for everything. Finland, which tops the charts in many surveys (they’re the least corrupt people on Earth, its per-capita income is the highest in Western Europe and Helsinki often tops polls of the best cities), is also a leader in categories like alcoholism, murder (highest rate in Western Europe), suicide and antidepressant usage. …Booze-related disease is the leading cause of death for Finnish men, and second for women. …“Dark” doesn’t just describe winter in the Arctic suburbs, it applies to the Finnish character.

Sweden gets a lot of attention.

Immigration is associated in the Swedish mind with welfare (housing projects full of people on the dole) and with high crime rates (these newcomers being more than four times as likely to commit murder). Islamist gangs control some of the housing projects. Friction between “ethnic Swedes” and the immigrants is growing. Welfare states work best among a homogeneous people, and the kind of diversity and mistrust we have between groups in America means we could never reach a broad consensus on Nordic levels of social spending. Anyway, Sweden thought better of liberal economics too: When its welfare state became unsustainable (something savvy Danes are just starting to say), it went on a privatization spree and cut government spending from 67 percent of GDP to less than half.

And then there’s this excerpt about the Swedes, which makes me think it might be better to cohabit with a sheep in Copenhagen.

…a poll in which Swedes were asked to describe themselves, the adjectives that led the pack were “envious, stiff, industrious, nature-loving, quiet, honest, dishonest and xenophobic.” In last place were these words: “masculine,” “sexy” and “artistic.”

And here’s his conclusion.

Scandinavia, as a wag in The Economist once put it, is a great place to be born — but only if you are average.  …That’s Scandinavia for you, folks: Bland, wholesome, individual-erasing mush. But, hey, at least we’re all united in being slowly digested by the system.

Indeed, the Nordic focus on equality is so pervasive that it leads to unbelievably stupid policies.

P.S. There are some really creepy examples of failed government-run health care in Sweden.

P.P.S. Though Sweden has wised up in many regards. After the crisis of the early 1990s, the country was a role model of spending restraint. Here’s a video on some of Sweden’s pro-market reforms in recent decades.

P.P.P.S. The single-most compelling piece of evidence about the superiority of the American system is that Swedes in America earn far more than Swedes in Sweden.

P.P.P.P.S. The second-most compelling piece of evidence about the limits of Nordic statism is that these nations became prosperous before big welfare state were imposed. I call this the paradox of Wagner’s Law.

P.P.P.P.P.S. Even Denmark is trying to cut back on the welfare state. Though that will be bad news for Lazy Robert.

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Four years ago, I put together some New Year’s Day Resolutions for the GOP.

Three years ago, I made some policy predictions for the new year.

But since I obviously don’t control Republicans and since I freely admit that economists are lousy forecasters, let’s do something more practical to start 2015.

Let’s simply look at three very important things that may happen this year and what they might mean.

1. Will the Republican Senate support genuine entitlement reform?

One of the best things to happen in recent years is that House Republicans embraced genuine entitlement reform. For the past four years, they have approved budget resolutions that assumed well-designed structural changes to both Medicare and Medicaid.

There were no real changes in policy, of course, because the Senate was controlled by Harry Reid. And I’m not expecting any meaningful reforms in 2015 or 2016 because Obama has a veto pen.

But if the Republican-controlled Senate later this year approves a budget resolution with the right kind of Medicare and Medicaid reform, that would send a very positive signal.

It would mean that they are willing to explicitly embrace the types of policies that are desperately needed to avert long-run fiscal crisis in America.

I don’t even care if the House and Senate have a conference committee and proceed with actual legislation. As I noted above, Obama would use his veto pen to block anything good from becoming law anyhow.

My bottom line is simple. If GOPers in both the House and Senate officially embrace the right kind of entitlement reform, then all that’s needed is a decent President after the 2016 elections (which, of course, presents an entirely different challenge).

2. Will there be another fiscal crisis in Greece (and perhaps elsewhere in Europe)?

The European fiscal crisis has not gone away. Yes, a few governments have actually been forced to cut spending, but they’ve also raised taxes and hindered the ability of the private sector to generate economic recovery.

And the spending cuts in most cases haven’t been sufficient to balance budgets, so debt continues to grow (in some cases, there have been dramatic increases in general government net liabilities).

Sounds like a recipe for further crisis, right? Yes and no.

Yes, there should be more crisis because debt levels today are higher than they were five years ago. But no, there hasn’t been more crisis because direct bailouts (by the IMF) and indirect bailouts (by the ECB) have propped up the fiscal regimes of various European nations.

At some point, though, won’t this house of cards collapse? Perhaps triggered by election victories for anti-establishment parties (such as Syriza in Greece or Podemos in Spain)?

While I’m leery of making predictions, at some point I assume there will be an implosion.

What happens after that will be very interesting. Will it trigger bad policies, such as centralized, European-wide fiscal decision-making? Or departures from the euro, which would enable nations to replace misguided debt-financed government spending with misguided monetary policy-financed government spending?

Or might turmoil lead to good policy, which both politicians and voters sobering up and realizing that there must be limits on the overall burden of government spending?

3. If the Supreme Court rules correctly in King v. Burwell, will federal and state lawmakers react correctly?

The Supreme Court has agreed to decide a very important case about whether Obamacare subsidies are available to people who get policies from a federal exchange.

Since the law explicitly states that subsidies are only available through state exchanges (as one of the law’s designers openly admitted), it seems like this should be a slam-dunk decision.

But given what happened back in 2012, when Chief Justice Roberts put politics above the Constitution, it’s anybody’s guess what will happen with King v Burwell.

Just for the sake of argument, however, let’s assume the Supreme Court decides the case correctly. That would mean a quick end to Obamacare subsidies in the dozens of states that refused to set up exchanges.

Sounds like a victory, right?

I surely hope so, but I’m worried that politicians in Washington might then decide to amend the law to officially extend subsidies to policies purchased through a federal exchange. Or politicians in state capitals may decide to set up exchanges so that their citizens can stay attached to the public teat.

In other words, a proper decision by the Supreme Court would only be a good outcome if national and state lawmakers used it as a springboard to push for repeal of the remaining parts of Obamacare.

If, on the other hand, a good decision leads to bad changes, then there will be zero progress. Indeed, it would be a big psychological defeat since it would represent a triumph of handouts over reform.

I guess I’m vaguely optimistic that good things will happen simply because we’ve already seen lots of states turn down “free” federal money to expand Medicaid.

P.S. Let’s close with some unexpected praise for Thomas Piketty. I’m generally not a fan of Monsieur Piketty since his policies would cripple growth (hurting poor people, along with everyone else).

But let’s now look at what France 24 is reporting.

France’s influential economist Thomas Piketty, author of “Capital in the 21st Century”, on Thursday refused to accept the country’s highest award, the Legion d’honneur… “I refuse this nomination because I do not think it is the government’s role to decide who is honourable,” Piketty told AFP.

It’s quite possible, perhaps even likely, that Piketty is merely posturing. But I heartily applaud his statement about the role of government.

Just as I applauded President Hollande when he did something right, even if it was only for political reasons.

But let’s not lose sight of the fact that Piketty is still a crank. His supposedly path-breaking research is based on a theory that is so nonsensical that it has the support of only about 3 percent of economists.

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The United States is burdened with some very bad policies that hinder growth and undermine competitiveness. But sometimes you can win a race if your rivals have policies that are even more self-destructive.

And that’s a good description of why the U.S. economy is out-performing Europe and why people in the United States enjoy higher living standards than their European counterparts.

In 2010, I shared data showing that Americans had far higher levels of consumption than Europeans.

In 2012, I updated the numbers and showed once again that people in America far ahead of folks in Europe.

And here are the most recent numbers from the Organization for Economic Cooperation and Development, showing “average individual consumption” for various member nations of that international bureaucracy.

The average for all OECD nations is 100, and the average for eurozone nations is 96, so the U.S. score of 147 illustrates how much better off Americans are than citizens of other countries.

The only nations that are even close to the United States have oil (like Norway) or are low-tax international financial centers (such as Luxembourg and Switzerland).

So why is the United States doing better than Europe?

There are two responses.

First, notwithstanding what I’ve just written, it’s a bit misleading to compare the U.S. to Europe. Simply stated, there are vast differences among European nations in terms of policies and living standards, much more than you find between and among American states.

There are nations such as Switzerland and Finland, for instance, that rank above the United States in Economic Freedom of the World. But there are also highly statist and moribund countries such as France, Italy, and Greece, as well as transition economies in Eastern Europe that are still trying to catch up after decades of communist oppression.

So overall America-vs-Europe comparisons should be accompanied by a grain of salt.

Second, now that we’ve ingested some salt, let’s draw some general conclusions about the role of public policy. Most important, nations with bigger governments and more intervention (as is the case for many European countries) generally don’t grow as fast or have the same living standards as nations with smaller governments and more reliance on competitive markets.

The comparisons can get complicated because there are a wide range of policies that impact economic performance (many people focus on fiscal policy, but trade, regulation, monetary policy, and the rule of law are equally important). Comparisons also can get confusing because there are some relatively rich nations with bad policy and some relatively poor nations with good policy, which is why it is important to look at how rich or poor nations are (or were) when there were significant changes in policy.

For instance, many nations in Western Europe became relatively rich in the 1800s and early 1900s when the overall burden of government was very small. Now they’ve adopted welfare states and growth is much slower (or, in some cases, nonexistent), but they’re oftentimes still in better shape than nations (such as Estonia and Chile) that only recently have liberalized their economies.

Now that we’ve gone through all this background, let’s look at a couple of stories that make me pessimistic about Europe’s future because they capture the mentality that seems dominant among continental policy makers.

First, one of the bright spots for the continent is that there’s been vigorous corporate tax competition. In other words, politicians have been under pressure to lower tax burdens on the business community because of concerns that jobs and investment will migrate to nations with better policy.

As you can imagine, this irks the political class (even though lower rates haven’t resulted in less revenue!).

So you won’t be surprised to learn that there’s a new push for tax harmonization in Europe. Here are some of the details from a news report.

France, Germany and Italy have joined forces to outlaw tax competition between EU countries in a letter to the European Commission. …the language and tone in the joint letter to the new Economic and Taxation Commissioner, Pierre Moscovici, is much more aggressive than in the past. …the letter from the finance ministers of the eurozone’s three largest economies says that “the lack of tax harmonisation in the European Union is one of the main causes allowing aggressive tax planning, base erosion and profit-shifting to develop”. …Vanessa Mock, commission spokeswoman said Mr Moscovici “welcomes these significant contributions to the work being carried out by the commission”.

Hmmm…., the Frenchmen who is the Economic and Taxation Commissioner “welcomes” a call from the governments of France, Germany, and Italy to outlaw tax competition. I’m shocked, shocked, by this development.

But as one British politician explained, this approach of higher business taxes will further undermine European economic vitality.

Now let’s shift to our second story, which illustrates the self-serving greed of the political elite at the European Commission.

Here are some passages from a story on the spectacular golden parachutes offered to outgoing senior Eurocrats. And we’ll focus on the former President of the European Council since he’s such a deserving target of ridicule.

Herman Van Rompuy will be entitled to more than £500,000 for doing nothing at the taxpayer’s expense over the next three years, after finishing his term as president of Europe. After standing down on Monday, the former president of the European Council will be paid £133,723 a year, 55 per cent of his basic salary, until December 2017 – to ease him back into life outside the world of Brussels officialdom.

Gee, how kind of European taxpayers to “ease him back” into the real world.

Except, of course, Van Rompuy’s never been in the real world. He’s had his snout in the public trough his entire life.

And he also gets to pay far less tax on this money compared to the poor slobs in the private sector who are footing the bill for this official largesse.

…The “transitional allowance” does not require Mr Van Rompuy to do any work at all and the cash will be paid under reduced rates of EU “community” tax, which are far lower than taxation in his native country of Belgium. …Mr Van Rompuy has not been a stranger to controversy over the perks of EU officialdom since he took the post in December 2009. He was widely criticised four years ago for using his official motorcade of five limousines as a taxi service to take his family on 325-mile round trip to Paris airport en route to a private holiday in the Caribbean. …The cost of Mr Van Rompuy’s retirement is part of a much larger bill for the handover of the administration in EU as former European Commissioners serving in the last Brussels executive pocket “transitional allowances” worth around £30million.

This scam has been in operation for several years, and keep in mind that excessive pay and lavish perks for commissioners are matched by excessive pay and lavish perks for member of the European Parliament (including taxpayer-financed penile implants).

And lavish pay and perks for European Union bureaucrats.

And don’t forget these are the folks who are pushing for bigger government and higher taxes on a pan-European basis. Like many of our politicians in Washington, they think the private sector is some sort of piñata that is capable of producing endless amounts of revenue to finance ever-expanding government.

Even though the evidence from Greece, Italy, Spain, etc, confirms that Margaret Thatcher was right when she warned that the problem with big government is that sooner or later you run out of other people’s money.

P.S. European bureaucrats have decided taxpayer-financed tourism is a human right. And they also use taxpayer money to produce self-aggrandizing comic books.

P.P.S. The European political elite are so bad that even President Obama has felt compelled to oppose some of their tax initiatives.

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Europe is in deep trouble.

That’s an oversimplification, of course, since there are a handful of nations that seem to be moving in the right direction (or at least not moving rapidly in the wrong direction).

But notwithstanding those exceptions, Europe in general is suffering from economic stagnation caused by a bloated public sector. Barring dramatic change, another fiscal crisis is a virtual certainty.

A key problem is that Europe’s politicians suffer from fiscal incontinency. They can’t resist spending other people’s money, regardless of all the evidence that excessive government spending is suffocating the productive sector of the economy.

Yet some of them cling to the discredited Keynesian notion that government spending “stimulates” economic performance. Writing for the Wall Street Journal, Brian Wesbury explains why European politicians are wrong.

We need less government, not more, and yet governments are engaged in deficit spending like they did in the 1970s. It didn’t work then to boost growth, and it isn’t working now. Euro area government spending was 49.8% of GDP in 2013 versus 46.7% in 2006. In other words, euro area governments have co-opted an additional 3.1% of GDP (roughly €300 billion) compared with before the crisis—about the size of the Austrian economy. France spent 57.1% of GDP in 2013 versus 56.7% in 2009, at the peak of the crisis. This is the opposite of austerity—but the French economy hasn’t grown in more than six months. It is no wonder S&P downgraded its debt rating. Italy, at 50.6% of GDP, is spending more than the euro area average but is contracting faster.

Brian isn’t the first person to make this observation.

Constantin Gurdgiev, Fredrik Erixon, and Leonid Bershidsky also have pointed out the ever-increasing burden of government in Europe.

And I can’t count how many times I’ve also explained that Europe’s problem is too much government.

The problem with all this government spending, as Brian points out, is that politicians don’t allocate resources very intelligently. So the net result is that labor and capital are misallocated and we get less economic output.

Every economy can be divided into two parts: private and public sectors. The larger the slice taken by the government, the smaller the slice left over for the private sector, which means fewer jobs and a lower standard of living. If government were more productive than private business this wouldn’t be true, but government is not.

Let’s be thankful, by the way, that the United States isn’t as far down the wrong road as Europe.

And this is why America’s economy is doing better.

The U.S. is growing faster than Europe not because…our government is relatively smaller. Federal, state and local expenditures in the U.S. were 36.5% of GDP in 2013. This is too high, but because it is less than Europe, the U.S. has a larger and more vibrant private sector.

Ironically, even President Obama agrees that the U.S. economy is superior, though he (predictably) is incapable of putting 2 and 2 together and reaching the right conclusion.

My Cato colleague Steve Hanke (using the correct definition of austerity) also has weighed in on the topic of European fiscal policy.

Here’s some of what he wrote for the Huffington Post.

The leading political lights in Europe — Messrs. Hollande, Valls and Macron in France and Mr. Renzi in Italy — are raising a big stink about fiscal austerity. They don’t like it. And now Greece has jumped on the anti-austerity bandwagon. …But, with Greece’s public expenditures at 58.5 percent of GDP, and Italy’s and France’s at 50.6 percent and 57.1 percent of GDP, respectively — one can only wonder where all the austerity is (see the accompanying table). Government expenditures cut to the bone? You must be kidding.

Here’s Professor Hanke’s table. As you can see, the burden of government spending is far above growth-maximizing levels.

That’s a very depressing table, particularly when you realize that government used to be very small in Europe. Indeed, the welfare state basically didn’t exist prior to World War II.

P.S. Shifting to another issue, it’s not exactly a secret that I have little respect for politicians.

But some of our “leaders” are worse than others. Maryland’s outgoing governor is largely known for making his state inhospitable for investors, entrepreneurs, and small business owners.

Notwithstanding his miserable record, he thinks of himself as a potential presidential candidate. And one of his ideas is that wireless access to the Internet is a human right.

I’m not joking. Here’s what Charles Cooke wrote for National Review.

Maryland’s governor Martin O’Malley — a man so lacking in redeeming qualities that a majority in his own state hopes he doesn’t run for president – is attempting to carve out a new constituency: young people with no understanding of political philosophy. …“WiFi is a human right”? Hey, why not? Sure, Anglo-American societies have traditionally regarded “rights” as checks on the power of the state. But if we’re going to invert the most successful philosophy in American history to appease a few terminally stupid millennials in Starbucks, let’s think big

This definitely belongs in my great-moments-in-human-rights collection.

Here are previous winners of that booby prize.

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