Americans gape with fascination at the slow-motion implosion of the Eurozone. But it’s a fabulous opportunity to learn from others, if we will, and avoid at least some of the misery enveloping Europe.
Europe’s problem is that they have grown governments too large for their private sectors to support. Their much-vaunted Eurosocialism gave them a sense of superiority over the mean-spirited capitalists across the Atlantic. But the result over time was chronic overspending, an existential debt crisis and a popular mind-set that makes the resolution all but impossible.
We’ve seen rioters fill the streets in Greece (and elsewhere). The French (and others) elect leaders who assure them that they have a secret sauce that will allow the funds to keep flowing. The rioters and voters can’t comprehend that the money for their beloved government benefits simply isn’t there and there’s no way to get more.
It’s even worse than they realize. You know those austerity measures that have sent moochers all across Europe over the edge? They never happened.
The numbers don’t lie. Even though the average EU country spends over 50 percent of its GDP on government, not one has come close to enacting spending cuts that would produce a balanced budget.
In the UK, for example, where the government has suffered election losses because of unwelcome “austerity” measures, total spending actually rose by 59.2 billion pounds from 2009 to 2011. They did hike the personal income tax rate to 50 percent for those earning more than 150 thousand pounds per year, to the delight of the “soak the rich” crowd. Unfortunately, the result was a drop of 509 million pounds in income tax revenues.
France, too, has pursued policies familiar to Americans: raise taxes now and promise spending reductions in the future. They imposed a surtax on the wealthy, raised the top income tax rates, raised corporate income taxes, capital gains tax, the VAT and excise taxes on tobacco and alcohol.
Surprise, surprise! Economic growth has stalled out. But the French also agreed to raise the retirement age from 60 to 62 — in 2017 — while a cap on health-care spending was also agreed upon but deferred to the future.
Politically incapable of cutting spending, Europeans are thrashing around for other solutions to their dilemma. Raising taxes is not only unpopular but tends to stall economic growth. Reforming labor markets could theoretically help. But even marginal changes to the 30-hour work week or lavish unemployment and retirement benefits are met with outraged resistance. Politicians are booted from office for insulting workers with such shabby treatment.
EU countries now have an average debt load of 96 percent of GDP. Creditors are understandably starting to shy away. It has been obvious for some time that Greece, almost certainly Spain and Portugal, and possibly others are in a death spiral. Their debt load is too large to ever be paid off, especially with rising interest rates and costs of debt service.
Greece would have been better off if it had been allowed to go into default. Government spending falling to the level of revenue would have been painful but necessary. At least healing and recovery could have proceeded and the collateral damage to other countries limited.
Instead, a series of well-intentioned bailouts have prolonged the agony. The bailouts never result in a turnaround. Instead, debt levels continue to climb (now up to 160 percent of GDP in Greece) while dissolute governments use the time to defer the spending reductions that are ultimately the only path to solvency.
There is a semi-humorous side note to this. President Obama recently announced that the EU is in “a difficult state, partly because they didn’t take some of the decisive steps that we took early on in this recession.” Are you kidding me? This guy is clueless.
The truth is that we’re in a “difficult state” too because in the first three years on his watch, Keynesian spending schemes “stimulated” our debt load by $4.9 trillion to $15 trillion, about 100 percent of our GDP. Like the Euros, we tried spending our way out of trouble with the same disastrous results. Our leader is in deep denial.
East Valley resident Tom Patterson (pattersontomc@cox.net) is a retired physician and former state senator.
Accuracy posted at 9:33 am on Sat, May 19, 2012.
What’s in Euro-wallet?
Greece may be forced to drop the euro currency if it refuses to make spending cuts. And the London Telegraph reports a former Greek minister says his country could descend into "civil war" if there's a chaotic euro exit.
A Greece departure from the euro could rock economies from the European Union, all the way to the United States.
“Americans can watch and learn from Eurozone”
Surprisingly, Congress has unanimously rejected President Obama’s 2013 budget. Obama's $3.8 trillion budget request went down in the U.S. Senate 99-0, after failing in the House of Representatives in March, 414-0. With the federal debt approaching the $16 trillion ceiling, no Democrat in Congress voted for Obama's horrific budget.
mnjcpa posted at 3:08 pm on Sat, May 19, 2012.
Great article - couldn't have done it better. If everyone in this column would actually study what Patterson is saying rather than attacking him personally, what you would find is scary real. The last two paragraphs are dead-on where we're at so read and learn.
Rich posted at 7:21 pm on Sat, May 19, 2012.
What's happening has taken somewhere about four thousand years to happen. We aren't good at working together, every nutball changes us from the first guy to throw a rock to Steve Jobs, Might be a good time to settle down and understand who we are, and stop 'following'.
samkat posted at 7:33 pm on Sat, May 19, 2012.
Tom is just like the rest of the tea party republicans who carry the mantle of smaller government. Government should function just as a large corporation would and right size for the job. The problem is that both parties adhere to the principle anymore of having the best government that special interest money can buy.
openureyes posted at 9:42 pm on Sun, May 20, 2012.
This column just feels misleading, and it ignores a lot of common sense causes in order to frame caricatures of european issues as some sort of morality tale for the U.S.
Come on, "They did hike the personal income tax rate to 50 percent for those earning more than 150 thousand pounds per year, to the delight of the “soak the rich” crowd. Unfortunately, the result was a drop of 509 million pounds in income tax revenues?" So the income reported among those in the UK earning more than $150K dropped sufficiently in 2 years to cost the gov't 509M pounds just in the taxes on that money - and that's the whole story? Tax rate went up, tax revenue went down, bada bing, bada boom, Obama's a clown? I know a snow job when I read one.
If you really wanted to take a lesson from the european financial situation it should be that we experienced a global recession, and with an economy that is globalized like no other time. Yet, we're listening to all these talkers/columnists/politicians/generally angry people harping on the U.S. economic outlook and acting like a) we've been here before, b) we'll never be prosperous enough again to fulfill our commitments (odd, considering all the faith these folks tend to profess for Americans'... Americanness), and/or c) our economy is an island - one that should be ruled by anyone but Obama.
No, it's not that the world's economy's kind of in the dumps, it's Keynesian schemes and scary debt numbers, and our former Ivy League professor President babbling and nodding off whenever someone tries to explain the severity of the situation.
mnjcpa posted at 8:03 am on Mon, May 21, 2012.
Not sure where you are going in the first few paragraphs openureyes but your last paragraph sums our economic conditions up perfectly.
Everyone should read and understand Keynesian (the Obama way) vs. Austrian economics. Now we have the torturous debt ceiling talks AGAIN and the hilarity (or sadness) of the situation is we've got a sitting President that can't get even his own political party to approve his budget. We are at a financial cliff that even a tiny bump in interest rates will hurl us over.
The correction isn't pretty but it's absolutely necessary. I hope Romney's got what it takes to do what's necessary to correct. My bet is on a business man, not someone that's never run a lemonade stand.
Accuracy posted at 10:15 am on Mon, May 21, 2012.
The record of President Obama’s first three years in office is in, and American people believe that the U.S. economy is worse than when Obama was inaugurated.
The past three years the employment situation in this country has gotten a lot worse. Today, there are 25 million Americans that are either unemployed or underemployed, and the U.S. economy is not producing enough jobs.
Obama has brought us to the brink of economic disaster . . . Yet, he is now trying to convince middle-class voters that his re-election poses the best chance for economic recovery.
While, Democrats contend that Republicans are trying to stall the economic recovery to hurt the president's re-election bid.
openureyes posted at 11:43 am on Mon, May 21, 2012.
mnjcpa - Where I'm going with the first few paragraphs is that there are likely more common sense causes for the myriad issues this columnist presents. Causes that non-CPA's without having read and understood Keynesian vs. Austrian economics might understand. For instance, it seems to me that the columnist suggests with his 2-year 509M pound decrease in UK tax revenue tidbit that raising taxes doesn't work because "the rich" simply won't pay more. It's either an astounding or asinine revelation.
The average American doesn't need to know the minutiae of the U.S. economy, but those in charge of it need to know both where to get the right info and how it affects the plight of the average American. I'll take the former community organizer/former ivy league professor with global connections over the slick businessman.
VofReason posted at 1:09 pm on Mon, May 21, 2012.
Yes the common man could never understand something like if taxes go up, you are less likely to eat out, make a large purchase or expand your business. No no, you need a CPA to understand something like that. If open your eyes thinks that 4 more years like the last 3.5 is a good idea, he is in the minority. Take a peak at polls, the non CPAs of the country don't like what they see for obvious reasons and feel think the economy gets worse with Obama, better with Romney. The latter may be a leap of faith and only for the fact they lived through the last 3.5. It is your right to be wrong......
mnjcpa posted at 8:01 am on Tue, May 22, 2012.
Shout it VofReason! Those in charge should know openureyes - but anyone with a semester in economics couldn't possibly be for Obama given his performance. I just love the way the left paints Romney as some slick business man, but the most radical, left wing politician in recent history gets a free pass. He wants us to be like Europe. Maybe invoke your moniker?
CSalafia posted at 8:52 am on Tue, May 22, 2012.
That's a great story....but that's all it is, a fictional story. Blaming the crisis on "Eurosocialism" shows Tom has no interest in these silly little things called facts, but only in promoting a false narrative.
Many of the Eurozone banks began selling the high-risk derivatives (developed by US banks, btw) to offer fixed-income investors higher yields on their investments. This created massive bubbles in a number of economic sectors, which eventually burst.
Add to that, the Eurozone is a single fixed-currency system (gold standard, anyone?) which doesn't allow single countries to independently respond to financial crises through monetary policy.
The Eurozone crisis is a complex one with multiple factors. Patterson and others lack the intellectual gravitas to see things such as this in terms other than 3rd grade, black and white absolutes.
mnjcpa posted at 10:13 am on Tue, May 22, 2012.
Seriously CSalafia - you don't understand the metaphor Patterson sets up in his piece? Patterson is demonstrating that America is following the same path as Europe. There's nothing fictional about it - it's playing out before our eyes daily.
Whether he’s been in business or government or running the Olympics - Romney knows how to turn things around. And does he ever have a job to do with the mess the Obama administration has left. We are well into the fourth year of Obama’s presidency. The country has little to show for all the promises of “hope” and “change” that he made on the campaign trail.
What we do have is unemployment over 8 percent for 39 months, the longest stretch since the Great Depression. What we do have are proposals to raise taxes further, to borrow more money, to spend more money, and to make the federal government grow even larger than it already is.
President Reagan once said that “the more plans fail, the more the planners plan.” Nothing captures the behavior of the Obama administration better.
Still fiction?
openureyes posted at 10:44 am on Tue, May 22, 2012.
VofR - I do see how if taxes go up you're less likely to eat out, make a large purchase, or expand your business, although I think the degree to which that could be a factor in overall tax revenue deliberations gets blown out of proportion. However, we're talking about income tax revenue - which the author stated went down when the tax rate on "the rich" went up. So what people did with their net income is irrelevant. In this common man's assessment, anyway.
What would taking a peak at the polls show other than people are dissatisfied with a still-struggling economy? I never said I was happy about it. I said it's a much bigger deal than people are giving it credit for being. Polls are the news industry's way of creating stories where there are none. You may fall for it, but please miss me with that bunk.
mnjcpa - Mitt Romney is a slick businessman. That's not "painting" him, which was your subtle attempt at claiming I smeared him somehow. He's filthy rich and got it all legally, as far as I know, with big business deals. The kind that require a slick businessman. Good on him. I just don't know that he's as in touch with the average American as, say, someone who's gotten in the trenches and worked with those who might have been down on their luck or for whatever reason didn't have the same voice in our democracy that a slick businessman on the rise does.
mnjcpa posted at 11:51 am on Tue, May 22, 2012.
I prefer to call someone that has a record of success - just that - successful. I believe he knows how to turn this economy around and it won't be pretty for sure. He's actually got lots of experience doing just that. That's what successful leaders do - turn around struggling companies and what they "look" like has no bearing on the results. The LAST person I would put in charge of doing that AGAIN is Obama whose abysmal record speaks for itself.
CSalafia posted at 1:01 pm on Tue, May 22, 2012.
Now, I know facts are rejected by the Tea Party brain like an virus is rejected by antibodies, but they still exist.
Europe is in trouble BECAUSE of the US. They used the financial gimmicks Wall St. created (derivatives) and blew the bottom out of their economy. Then, when they asked for help, what did the World Bank say? Oh, we'll give you the loan, but you have to take MORE of these US garbage derivatives to get it.
Austerity doesn't work. If all you focus on is spending cuts, the economy will fall into a tailspin.... as we're seeing now in the Eurozone. Any small economic benefits of the Austerity measures (Greece, Ireland, Germany, etc.) have now been wiped out.
Oh, and Romney? Don't make me laugh. He "saved" the Olympics with....wait for it... government money. $1.5 billion to be exact. He hired at least 3 lobbying firms to lobby Congress for money.
I'm sure you knew, but ignored, that Romney's budget plan would add $10 trillion to the debt, right? Oh, and his "turnarounds", you mean where Bain came in, cannibalized companies, made boatloads of cash, cost people jobs? Of course, if I had to run against 26 consecutive months of job growth with 4.25 million private sector jobs created, I might try lying about reality, too.
Btw.. taxes, spending, and the size of gov't are all SMALLER than when Obama took office. Those are the facts.
Accuracy posted at 4:46 pm on Tue, May 22, 2012.
CSalafia posted: “Btw.. taxes, spending, and the size of gov't are all SMALLER than when Obama took office. Those are the facts.”
According to the U.S. Treasury Department, the “spending facts” are:
President George W. Bush ran up debt just under $4.9 trillion during his entire eight (8) years. And President Obama has added $5 trillion to the U.S. Government debt crisis in just three (3) years.
That does not include President Obama’s $3.8 trillion budget proposal for fiscal year 2013 . . . which Congress unanimously rejected this year.
mnjcpa posted at 6:05 pm on Tue, May 22, 2012.
Following along Accuracy's comment on taxes- CSalafia you're so far off of what's correct about Europe or the monetary system that I'm not sure where to begin.
The reason the Eurozone is in a tailspin is due to the massive amount of entitlements those countries put in place over time (sound familiar?). The US always follows Europe in world economic cycles so wrong again. I'm convinced no one can stop the US Bankruptcy freight train now because America's debt is following suit with Europe. Romney's not a magician but he sure knows how to turn things around regardless of the snarky comments.
You could do yourself a real favor if you studied some of this information rather than trying to be a comic act inside a news rag column.
k33j88 posted at 7:00 am on Wed, May 23, 2012.
Are we better off today than we were 3.5 years ago? Most level-headed, reasonable men/women know the answer. In the realm of the socialist mind, paying one's fair share is equitable and reasonable. It is their version of having "skin in the game". The problems arise when those with the resources take a capital flight to "safe havens", and in the process taking "livable wage" jobs with them. Question: What happens when you run out of "other peoples money"?
CSalafia posted at 9:48 am on Wed, May 23, 2012.
Like I said... like a virus is rejected by antibodies.
openureyes posted at 11:23 am on Wed, May 23, 2012.
CSalafia's right. From http://en.wikipedia.org/wiki/Late-2000s_financial_crisis:
"The bursting of the U.S. housing bubble, which peaked in 2007, caused the values of securities tied to U.S. real estate pricing to plummet, damaging financial institutions globally. The financial crisis was triggered by a complex interplay of valuation and liquidity problems in the United States banking system in 2008."
But go ahead and keep thinking this has all been done before, we're right behind Europe in the cycle, and Willard's the guy to turn the whole (worldwide) thing around. Like VofR said, it's your right to be wrong.
mnjcpa posted at 5:32 pm on Wed, May 23, 2012.
Yes that standard of fact and reference - Wikipedia - you can rely on that just like NBC, ABC, and CBS to actually deliver the truth. Did you realize that anyone can submit information to that medium without checking for substance and fact?
Keep up the insults - that's standard fare for a liberal. Or better yet, pick up your research standards so you can actually quote from a reliable source. Romney's not a magician - and I don't debate anyone who believes they have nothing to learn.
openureyes posted at 8:45 am on Thu, May 24, 2012.
Ah, the ol' "Mainstream Media" dodge. Sprinkle in some 'liberal'-as-pejorative and - voila! you can ignore the substance of anyone's post! Well played, sir.
What insults are you talking about? I've insulted no one. Does being wrong just make you overly sensitive, maybe?
mnjcpa posted at 9:25 am on Thu, May 24, 2012.
Apologies - I was referring to CSalifia who can't get through a debate without insults. Sensitive - hardly. Your factual reference is flawed - you know not what you think.
No one can understand world economic conditions on a one-off article off of Wikipedia - I'll rely on 25 years of experience as my fact resource.
CSalafia posted at 9:51 am on Thu, May 24, 2012.
The dishonesty coming from the right these days is pathological.
No, "entitlements" are not solely the fault of the Eurozone crisis, no matter how many times you repeat it. Is it part? Sure, but the crisis is much more complex than you, or Mr. Patterson, present.
Speaking of facts, here's some for you.
- Federal spending has been essentially flat during Obama's Presidency.
- Annualized growth of federal spending under Obama, 1.4%. Lowest growth in over 30 years.
If low taxes on the "job creators" meant jobs would be created, we'd be swimming in them because they're the lowest in over 50 years. While it's a great talking point, it's not based in reality. No wealthy person can purchase enough in our economy to make up for the loss in middle class consumer demand. Not now, not ever. In fact, it's the middle class consumer that's truly the 'job creator' because it's their demand that drives business expansion and increased production.
Sincerely,
The comic act in the news rag.
mnjcpa posted at 10:17 am on Thu, May 24, 2012.
You have no idea what you're talking about pal - in fact your post gave me a really good laugh. Good luck - you need it.
CSalafia posted at 11:22 am on Thu, May 24, 2012.
People often laugh when they're nervous or their worldview is in conflict with reality.
mnjcpa posted at 1:23 pm on Thu, May 24, 2012.
I love legends in their own minds. But before you do take a look at my moniker and decide for yourself if you're still that brilliant about taxes. I stand by what I said - you don't understand what you claim. But it's not entirely your fault - there's tons of false information bent on training people to think a certain way particularly before this election.
ValenS posted at 1:33 am on Sun, Jun 24, 2012.
The real burden of the government on the economy is the spending - not the taxes. If you run deficits to pay for spending in excess of tax revenues, you still burden the economy with borrowing and/or inflation. So spending is the only thing that matters in the end. Tax cuts in the US in the 2000s did not help the economy because they were not accompanied by spending decreases. So-called austerity is not helping Europe because there are no real spending cuts - only higher taxes which hurts common people and make them apply to directcash till pay day providers. if you dramatically cut government spending, you will see increased economic growth
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