The big fiscal fight in Washington is whether the United States should become a European-style welfare state.
In part, this is automatically happening because of demographic change and poorly designed entitlement programs. But there’s also a major effort by Joe Biden to accelerate America’s fiscal decline with massive expansions of redistribution and dependency programs.
There are two reasons why it would be a bad idea for the United States to become more like Europe.
- Since there are not nearly enough rich taxpayers to finance big government, it would mean massive tax increases on lower-income and middle-class households.
- It would sap economic vitality and depress growth, undermining the huge advantage Americans enjoy as measured by per-capita living standards.
Regarding the second point, here’s a chart that was part of a tweet from Stefan Schubert. It shows that the United States is widening it lead over the other nations of the G-7 (Canada, France, Germany, Italy, Japan, and the United Kingdom).
The above chart is from the Economist, and here are some excerpts from an accompanying article.
America remains the world’s richest, most productive and most innovative big economy. By an impressive number of measures, it is leaving its peers ever further in the dust. …America’s dominance of the rich world is startling. Today it accounts for 58% of the g7’s gdp, compared with 40% in 1990. Adjusted for purchasing power, only those in über-rich petrostates and financial hubs enjoy a higher income per person. Average incomes have grown much faster than in western Europe or Japan. Also adjusted for purchasing power, they exceed $50,000 in Mississippi, America’s poorest state—higher than in France. …Americans work more hours on average than Europeans and the Japanese. …they are significantly more productive than both. …Another lesson is the value of dynamism. Starting a business is easy in America, as is restructuring it through bankruptcy. The flexibility of the labour market helps employment adapt to shifting patterns of demand.
The most important sentence in that excerpt was the one about America’s poorest state (Mississippi) being richer than France.
That’s something to share the next time you’re talking with a leftist who thinks America should “catch up” with Europe.
P.S. I can’t resist sharing one more excerpt from the article. As you can see, the Economist does not approve of Biden-Trump protectionism.
…more likely their politicians are to mess up the next 30 years. Although America’s openness brought prosperity for its firms and its consumers, both Mr Trump and Mr Biden have turned to protectionism.
Excellent point. Hopefully the US eventually will have someone in the White House who understands that free trade makes the country more prosperous.
