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by Free Market Duck

 

The European Crisis

by Vedran Vuk

(Sep 15, 2011)

Washington, DC -- In many ways, the European crisis is more than just a financial event; it's the death of the argument for a European-style welfare state. This topic hasn't been discussed much in the media, but as the crisis gets worse, this realization should become more apparent to others.

From justifying universal healthcare to unions, to public housing, Europe has been the poster boy in American politics. "If Europeans can do it, so can we" has been the rallying motto. Unfortunately for the Left in particular, this argument is becoming less sensible by the day. With overspending as the root cause of Europe's troubles, only a fool would suggest the same policies here.

In the US, the 2008 crisis has been called the "subprime crisis," and for good reason. The main problem was injecting too much money into the system and causing an unsustainable bubble. Unfortunately, many US and international banks were holding these inflated junk mortgages and toxic assets - hence our current predicament. If anyone was to blame, it was the world's central banks - particularly the Federal Reserve.

However, the current European crisis is much different. The problems of Greece, Ireland, Italy, Portugal, and Spain are very clear. There are no fancy derivatives or monetary policies behind their problems. These countries overspent and didn't keep their fiscal houses in order. Now government bonds are threatened with default, not subprime mortgages. With these governments on the verge of default, the dream of a European welfare utopia is coming to a close.

Furthermore, the defaults themselves aren't the only metrics of failure. The unemployment rates in these countries are immense, with Ireland at 14.5%, Greece at 16.6%, and Spain at 21.3%. Compared to these "utopian" European states, the United States still looks like a land of opportunity with its 9.1% unemployment rate.

Think about the arguments that are finally on their death bed. I've always heard, "If America wasn't fighting numerous wars, then we could afford all those European programs." I'm very sympathetic to reducing military spending, but this idea is just flat-out wrong. Did Greece get into its current fiscal mess with military spending? What about Ireland? Surely, their tank brigades set them back horribly. And we all know that the Spanish were building their second Armada, right? A country doesn't need extravagant military spending to destroy it, a regular welfare state will do.

But don't take this as praise of the US either. Europe is only revealing to us our own future. A future that can't be avoided with some cuts here and there. For example, the idea that cuts to the military budget will save us is simply a false hope. Also, we can't just raise taxes on the rich and magically pay for everyone's healthcare benefits. If the US doesn't cut the military spending and many welfare expenditures, we're on a straight shot to becoming the next Greece.

This recent crisis has shown that the European welfare state is quite literally a bankrupt idea. Unfortunately, with the US coming closer to the European model and the wars still raging, the country is paddling double time to the waterfall around the bend. FM Duck

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