As American tourists head to Paris, London and Rome this summer, the most important sight to see is not the Eiffel Tower or the Coliseum – it’s the cramped living quarters and scarcity of modern conveniences in most European homes. The lower standard of living in Europe should serve as a warning that the United States must avoid becoming “Europeanized.” In fact, the spendaholics in Congress should consider the plight of Europeans before raising the debt ceiling.
America’s rapid increase in government spending over the past three years risks pushing it from a highly productive market economy to an European-like welfare state. To see what that change would mean to the typical American household, just look across the Atlantic.
The average American home is nearly twice as big as the average Western European home. (1,875 square feet v. 976 square feet), according to the Swedish think tank Timbro. Even taking into account larger family size, Americans have nearly twice as much living space. Amazingly, even poor Americans, defined as the bottom 12%, have more living space than the average European.
Americans also enjoy more labor saving devices, according to the Timbro study’s authors, economists, Frederik Bergstrom and Robert Gidehag. Every American household (99%) owns a vacuum cleaner, but only half of Italian households do. In the U.S., at least four out of every five households own clothes dryers and microwaves. In France and Germany these are rare luxuries, owned by less than one out of every five households.
Poor Americans are far more apt to have microwaves, clothes dryers, and air conditioners than the average European. Why can’t the French, Germans, Italians, British, Dutch and Spanish have spacious homes and modern appliances? There are two reasons. First, in these countries, government spending consumes half, or nearly half of all the wealth produced.
In France, government spending consumes 52% of (GDP), in Italy 49%, in the most other European countries above 45%. The government spending supports welfare programs, guaranteed health care, parks, and other public programs. But it leaves less for families to spend on what they choose.
That fact dampens the incentive to work, Europeans clock fewer hours, retire in there fifties, or stay home altogether, taking advantage of welfare programs. The result is dramatically lower productivity per capita than in the United States. The French economy produces less than three quarters the goods and services per capita that the U.S. economy produces. Voila! – France’s lower standard of living.
That could happen here, if the government-spending binge of the last three years is not halted. Throughout all of American history, government spending never reached 40% of GDP except once — during World War II — when the nation was fighting for its survival. Nothing today justifies government consuming 40% of what we all produce going to work.
Yet in every one of the last three years, that 40% danger line has been crossed, largely because of a surge in federal spending to a shocking 24 – 25% of GDP, up from the customary 18%-20%. . Add in state and local spending, and government programs now consume 42% of GDP. We are on the road to Europeanization. And this is before the costly new entitlements created in the Obama health law go into effect in 2014.
Many Republicans in Congress are demanding that federal spending be capped at 18% to 20% of GDP as the quid pro quo for raising the debt ceiling. Capping spending is essential. Unfortunately, Republicans control only one house of Congress, enough to halt a deal but not to make a deal. The President is trying to scare the nation with untrue threats that any delay in raising the debt ceiling will endanger Grandma’s social security check.
Worse even, he falsely claims that his approach to deficit reduction is “balanced.” Increasing taxes to support – and normalize – higher federal spending is not balanced. It would be a radical departure from the fiscal policy that has boosted America’s living standard far above Europe’s.
The President has questioned the ethos of American exceptionalism. But he cannot contest America’s exceptional standard of living. Americans produce more and get to keep more of what they produce. Europe, it’s a nice place to visit. But Americans don’t want to live like Europeans.
Betsy McCaughey is a former Lt. Governor of New York State. She can be reached at defendyourhealthcare.com.
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