Deficit spending and the resulting growth in the United States’ Federal debt over the past 40 years, and especially the last 3 years, have put the country into an unsustainable financial situation.  It must be tough for Congress to chart the financial course for an entitlement society in such turbulent times.  It would have been immensely helpful if there had been other countries with similar financial problems from which we could have learned what worked and what didn’t work.  What’s that?  There were other countries we could have learned from? Oh, you’re right! We could have learned from the mistakes of practically all the countries in Europe!  And Japan, too!

 

Europe paved the way in the world for entitlements in the world.  Unlike the United States, it has been supported to a greater degree by higher taxes.  Taxes in Europe have been averaging around 40% of Gross Domestic Product (GDP) over the past decade.  This is about twice percentage paid in the United States.  With a couple of exceptions, growth in GDP by European countries has been less than the United States over the last two decades, and its unemployment rate has also been higher than the over here.  Great Britain now spends about 25% of its GDP on social assistance.  Out of a population of 60 million, 1.4 million people in Britain have been on the welfare for a decade.  Even with the higher tax rates, the size of European debt is comparable to the U.S. Federal debt.  Italy is probably in the worst shape, with public debt exceeding yearly GDP.  

 

Another great example is Japan.  In the early 1990’s, Japan began a massive national investment in infrastructure. Sound familiar?  Their “stimulus” programs ended up reducing the country’s economic growth and producing a stagnant decade.  Japan’s debt is now almost twice its annual GDP, just about the highest percentage in the world.

 

There are also lessons we can take from recent events.  The Greek credit crisis should certainly raise an alarm, as the US is approaching the debt percentage that Greece had that brought about its crisis.  European countries did not enact major stimulus plans when we did, and their unemployment rates are already declining.  Great Britain is now drastically cutting spending on social costs and reducing public employees.  It is also instituting work requirements for those on welfare.  We should also learn from Great Britain’s disastrous health care system.  The UK newspapers have daily national healthcare horror stories.  The riots currently going on in France and England should scare all of us.

 

Maybe the lessons will be finally learned when European countries that don’t make major changes go bankrupt.  Their entitlement societies have produced dependency, reduced productivity, increased immigration, and most importantly, reduced birth rates.  People don’t need children when they have the nanny state to support them in their old age.  Entitlement societies need an increasing number of workers to support the increasing costs for non-workers.  European birth rates are well below the rate needed to sustain its population, and well below the U.S. birth rate.  For this reason, European countries will most likely go bankrupt before the United States.