Paul Krugman exhorts his fellow libs to hold their heads high - the high tax/high regulation European statist model is alive, well, and kicking America's action. Sort of kicking it, anyway - he presents some statistics that are laughable, and even he grins a bit:
...it’s important to get the facts about Europe’s economy right because the alleged woes of that economy play an important role in American political discourse, usually as an excuse for the insecurities and injustices of our own society.
OK, no one doubted he had a political axe to grind. Let's get some facts:
In fact, however, tales of a moribund Europe are greatly exaggerated.
It’s true that Europe has had a lot of economic troubles over the past generation. In the mid-1970s the Continent entered a prolonged era of sluggish job creation, which contrasted with vigorous employment growth in the United States.
And in the 1990s, Europe lagged behind America in the adoption of new technology. For example, in 1997 fewer than 15 percent of French homes contained personal computers and fewer than 1 percent were connected to the Internet.
But that was then.
Since 2000, employment has actually grown a bit faster in Europe than in the United States — and since Europe has a lower rate of population growth, this has translated into a substantial rise in the percentage of working-age Europeans with jobs, even as America’s employment-population ratio has declined.
My goodness - Europe has outperformed America in job creation when measured from the peak of America's internet bubble in 2000. Oddly, the Bush White House was able to cherry-pick a different time frame and boost America.
Prof. Krugman also includes some uplifting information about a statistic that gets almost as much attention as employment, namely, per capita broadband internet access:
Meanwhile, Europe’s Internet lag is a thing of the past. The dial-up Internet of the 1990s was dominated by the United States. But as dial-up has given way to broadband, Europe has more than kept up. The number of broadband connections per 100 people in the 15 countries that were members of the European Union before it was enlarged in 2004, is slightly higher than in the U.S. — and Europe’s connections are both substantially faster and substantially cheaper than ours.
Slightly higher! To be sure, Krugman includes a "To be sure" paragraph noting that Europe has (unspecified) problems. He then attempts to explain its glorious success:
What’s behind Europe’s comeback? It’s a complicated story, probably involving a combination of deregulation (which has expanded job opportunities) and smart regulation.
Deregulation? Gee, conservatives have been saying for decades that Europe needs to cut taxes and deregulate its labor market if it wants to create jobs (this IMF study from 2000 said the same thing.) Now we are seeing some impact, so conservatives ought to pipe down?
Krugman's punchline :
What European countries definitely haven’t done is dismantle their strong social safety nets. Universal health care is a given. So are a variety of programs that support families in trouble, helping protect Europeans from the extreme poverty all too common in this country. All of this costs money — even though European countries spend far less on health care than we do — and European taxes are very high by U.S. standards.
In short, Europe continues to be a big-government sort of place. And that’s why it’s important to get the real story of the European economy out there.
According to the anti-government ideology that dominates much U.S. political discussion, low taxes and a weak social safety net are essential to prosperity. Try to make the lives of Americans even slightly more secure, we’re told, and the economy will shrivel up — the same way it supposedly has in Europe.
But the next time a politician tries to scare you with the European bogeyman, bear this in mind: Europe’s economy is actually doing O.K. these days, despite a level of taxing and spending beyond the wildest ambitions of American progressives.
Two minor points are not allowed to intrude on this liberal fantasy - Krugman ignores immigration and the impending demographic bulge that challenges Social Security and Medicare in this country and threatens to swamp Europe.
On immigration, even Krugman admitted that the United States cannot offer both a generous social safety net and open borders. Would he care to renew his call for tighter controls on illegal immigration? He was bashed last time, IIRC, and no current Dem national candidate is willing to deviate from the party's current pandering, but maybe its tine for Krugman to step up. Let's hear it.
And on public finances, everyone, even Paul Krugman, realizes that Europe faces a demographic disaster. Their population is aging, their low birth rate means the next generation of workers won't be home-grown, and they don't seem to care for immigrants from the Third World. Let's pick this report as typical:
Ageing populations pose a major challenge to public finances across the EU. Under current policies government debt is set to rise from 63% of GDP today to nearly 200% by 2050. But, if resolute action is taken to ensure fiscal consolidation and implement broad structural reforms, this challenge need not turn into a crisis in the coming decade, concludes a new Commission report that compares the gaps in public finances between the ‘business as usual’ case and more prudent economic responses to the challenges.
That "resolute action" involves getting more people into the work force and (I predict) reducing benefits, and good luck to them. Apparently Europe can avoid a crisis if the reforms that have been virtually impossible for the last twenty years finally come to fruition - good to know.
In contrast, across a list of European countries, the average expenditure on state pensions was over 10 percent in 2000 and is expected to rise to nearly 14 percent by 2040.(5) By comparison, in the United States expenditure on Social Security benefits was 4.3 percent of GDP in 2003.
If we have a Social Security problem what does Europe have?
I am not sure Krugman has convinced even himself that the European model is alive and well, but only the gullible and pre-convinced will be swayed by the case made here.
MORE: As if torn from today's headlines, here is today's headline from the Financial Times:
US's triple-A credit rating 'under threat'
So what is the outlook for the various European countries? Last summer Italy was downgraded from AA- to A+ by S&P.