The top three lessons from Europe are these:
- Deficits matter and sooner or later will have to be cut
- Trying to cut deficits in the middle of a recession makes the recession worse
- When the cutting starts, it will cause major social and political upheaval, as well as very real pain.
Europe’s pain is coming America’s way
ReplyDeleteby Frida Ghitis
http://edition.cnn.com/2012/04/05/opinion/ghitis-europe-america-debt/index.html?hpt=ieu_c2
Unlike most European countries, the United States has the luxury of printing money and borrowing almost at will. The crisis in Europe has actually made it more attractive to lend to the United States, so it’s easy to pretend the deficit and the debt don’t matter. But America’s deficit of about 10% of GDP and debt of $15 trillion, roughly 100% of GDP, cannot go on forever. Interest payments on the debt already consume more than $200 billion each year, and the debt is rising at blinding speed.
ReplyDeleteThe United States was right to deal with the recession first before tackling the longer term problem. Europe is proving what the Hoover administration already showed in the 1930s, that cutting spending in a recession is counter-productive.
But, with the economy recovering, the time will soon come for the difficult decisions: Will the government cut defense spending, Social Security, or Medicare? Or perhaps other programs that keep millions out of poverty?