Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism. Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.
But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead. With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.
“We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister.
It is interesting that we are sliding in this direction just as Europe, and especially Greece, is realize that this social and economic model is simply untenable. It should be no surprise. Congress gives themselves a raise pretty much every year. As a people, we have realized that putting the right people in office can likewise increase our own government benefits on a regular basis. A people who gives little to their country but demands every kind of cradle-to-grave benefit will only have some combination of tyranny, corruption, and poverty as their reward.
This is the shape of the “change” to come. As Fareed Zakaria put it aptly,
In the long run, health-care costs will destroy the federal budget and with it the American economy. Interest rates will surely rise, which will force up the cost of servicing debt. New competitors emerge every year in every industry from other countries that are working hard to make themselves attractive to business.
Events have conspired to give America some breathing room. Leaders in Washington should take the current climate as a godsend and use it to start retooling the American economy. Everyone knows what needs to be done — restructure entitlements (including state pensions, which are the next catastrophe); force down health costs; reform immigration, taxes and regulation — and thus restore the country’s competitiveness. Or our leaders could sit around and put off all the hard decisions until America finally does look like Greece.