The further to the left or the right you move, the more your lens on life distorts.

Tuesday, August 09, 2011


President Obama often suggests that our anemic economy, our stratospheric unemployment numbers, and our on-going debt crisis are the fault of tea party obstructionists and/or external events beyond his control. He often cites the financial stress in Europe as a drag on our economy.

Robert Samuelson discusses the European connections:
Europe may no longer be able to save itself. Too many countries have too much debt. Its economic growth -- which helps countries service their debts -- is too feeble. And nervous financial markets seem increasingly prone to dump the bonds of vulnerable countries. This is the real risk to the global and U.S. economic recoveries, far overshadowing Standard & Poor's downgrade of U.S. Treasury debt and Monday's sharp stock market decline.

Europe represents about one-fifth of the world economy and buys about a quarter of American exports. While Europe's debt crisis was confined to a few small countries, they could be rescued; other European countries supplied loans to substitute for the credit denied by private lending markets. In 2010, Greek, Irish and Portuguese government debt totaled about 640 billion euros (about $910 billion), less than 7 percent of the 9.8 trillion euros of debt of all members of the European Union.

With Spain, Italy and possibly France now under financial assault, the situation changes dramatically. There are more debtor nations and more debt at risk.

So the President is correct. Europe represents a major headwind for our recovery. But it fascinates me that the President and his political and media supporters never seem to ask and answer a key question—why? As in: “Why is Europe in such severe financial trouble?”

The reason the question is almost never asked and never answered by he President and his supporters is that the answer is obvious and irrefutable, and worse, it’s an answer that they don’t want to hear.

Over the past 60 years, Europe has become an experiment in big government. European social democracies have provided generous social welfare for all citizens, universal health care, government mandated vacations, government supported early retirement, and thousands of other entitlements. They accomplished this through confiscatory taxation, and as a consequence, suffered very low growth.

It actually worked for decades and became a model for the utopian big government dream of many on the American Left. The problem is that it couldn’t last forever. Stated simply, the money ran out. Growth came to a standstill, and taxes couldn't be raised any further. The result is what we see now in Greece, Spain, Italy, Portugal, Ireland, and soon, in France.

Young engineers are taught to understand the problem before they craft a solution. If the problem isn’t understood or is mischaracterized, there’s no hope of crafting a viable solution.

Barack Obama and many in his party appear to be uniquely uninterested in understanding the problem. Because they don’t ask “why?” and reject the answer when it is provided to them, we may soon add the USA to the list of countries on the critical list. Sad.