June 23, 2009
Hello Europe, Good-bye EuropeBy Randall Hoven
There has been much talk recently that the US is becoming more like Europe. To be more technically accurate, we should say that the US is becoming more like what Europe used to be. In the meantime, Europe is un-Europeanizing. We are about to make France look like a holdout for rugged individualism.
Plenty of sophisticated observers, including Mark Steyn and Claudia Rosett, have said the US is undergoing Europeanization.
Too late. In February of 2008, I said that we are just another European country now. Exactly one year later, Newsweek agreed with me, under the title "We are all socialists now" and the subtitle, "In many ways our economy already resembles a European one. As boomers age and spending grows, we will become even more French."
While many of us ask whether Obama is a socialist, and he continues to deny it, the question becomes less and less relevant. Yes, of course he is. But so is everyone, or every developed country.
Socialism is not so much a "yes or no" type question. It is more a matter of degree. We can put a number on it by using total government spending as a fraction of GDP as a proxy for degree of socialism. And for that, we have Table 1315 of the US Statistical Abstract as a data source.
Where did the US sit in 2007 (the last year of data in Table 1315)? Somewhat less socialist than the OECD (Organization for Economic Cooperation and Development) average, but well into the mix. In 2007, government spending in the US was 37.4% of GDP, or more than Australia, Ireland, Japan, Slovakia, South Korea and Switzerland. The OECD average was 40.4% and the European average was 46.2%.
In 2007, the federal government spent "only" 20% of GDP (the remaining 17.4% of GDP was spent by state and local governments). According to the Congressional Budget Office, President Obama will spend 28.5% of GDP in 2009. If states and localities have remained roughly constant, government spending is now about 46% of GDP, or almost exactly the European average in 2007.
We are as much in the thick of socialism right now as, say, Germany, Greece and the Netherlands.
But the trends in these figures tell an even more interesting story. Table 1315 lists 28 OECD countries. At some point prior to 2007, 16 of those governments were spending over 50% of GDP. The European average peaked in 1993 at 52.2%. But by 2007, only four governments spent over half of GDP: Hungary, Denmark, Sweden and France. The European average fell from 52.2% to 46.2%.
At one point, Sweden was the top socialist in the OECD states, at 70.9% of GDP. But by 2007, France was in the lead, at just 52.4%. Sweden's government had cut its spending by almost 20% of GDP between 1993 and 2007. That is the size of the entire US federal government as a fraction of GDP!
The cutting of government spending (as a fraction of GDP) has been almost rampant among OECD countries in the last two decades. Eleven of the 28 countries cut spending by more than 10% of GDP from the peak year (typically near 1993) to 2007. The European average cut was 6% of GDP.
What was the US doing then? Virtually no cutting of government spending. Government spending in 2007 in the US was only 1.1% of GDP below its peak in 1992. The United Kingdom was the only European government to cut less: 1.0% below its 1993 peak.
So while Europe was cutting government spending, in many cases by dramatic fractions of GDP, the US was essentially treading water. And that was before the Bailout Fairy arrived in 2008 and President Obama and his stimuli arrived in 2009. We will likely never see a 20%-of-GDP federal government again. Per the CBO, the best we will see in the next 10 years will be 22.7% of GDP (for total government spending near 40% of GDP) in 2012. And even these projections do not include ObamaCare, estimated at somewhere between $1 trillion and $2 trillion of government spending over the next decade.
In short, on the socialism scale, we are smack in the middle of Europe right now. But we are becoming more socialist, and Europe is becoming less.
Let's look at political elections rather than spending and GDP. The US elected Barack Obama in 2008, the most liberal member of the US Senate in 2007. But in recent years, European and OECD countries have been leaning center-right: Merkel in Germany, Sarkozy in France, Berlusconi in Italy, Harper in Canada. The recent EU elections surprised many by the strength shown by conservatives.
For those looking for a tipping point, look behind you. It happened November 4, 2008.
Count me as a pessimist. I have given up on an American Resurgence of any meaningful kind. Ironically, America's new weakness could feed Europe's new strength. Without the US as either the rhetorical whipping boy or the deus ex machina superpower that saved Europe from Nazism and Soviet Communism and could have saved it from crazy-state nukes, Europe will have to start acting as an adult.
Before 2009, Europe could act like an insolent teenager, criticizing dad while living cost-free in dad's house on dad's food. The European Rebel Without a Cause now has to make it in the world on his own.
Suddenly all those "easy" problems that Father Bush screwed up, from axes of evil to economic globalization, loom into stark, personal, reality. Iran is about to go nuclear, with rockets that can reach Europe. Those "youths" burning cars in the suburbs might be jihadi warriors, or sympathizers at least, more than juvenile delinquents. The US can no longer afford to buy the products that Europe produces with sinecured union workers. The top carbon emitter is now China, not the US, and China can't be guilt-tripped into economic suicide quite as easily as the US could .
About 15 years ago, Europe apparently recognized the limits and consequences of the welfare state. And it became better for it. Now it is about to recognize the limits and consequences of a diplomacy-only foreign policy. And Europe is closer to the crazy-state nut-cases than the US is.
Reality, just as the prospect of being hanged in a fortnight, has a way of focusing the mind. And right now, Europe seems to have a better grasp of reality than the US has.
If you are like me, you are keeping your eye on countries other than the US. Here are those OECD countries other than the US whose governments spent less than 40% of GDP in 2007.
If you are hoping for a resurgence somewhere, I'd start with that list. Can you believe that conservatives would be looking to Canada as a possible refuge? Yes, it's that bad.