When Greece blew up, its government debt was 126 percent of gross domestic product. Ours is on track to exceed that in about 10 years.
If we haven’t learned from Greece, might we learn when other countries blow up? That may be about to happen, says Daniel Hannan, author of The New Road to Serfdom: A Letter of Warning to America.
Hannan, a British member of the European Parliament, says, “The consequences of the better part of 40 years of reckless borrowing have caught up with us.”
I told him that most Americans don’t notice Europe struggling. I hear people say: “I went to Paris. I went to Rome. Things are OK.”
“Things are OK in the same sense that a house that is massively overmortgaged can still be a nice-looking house....But there comes a point when the bills are due, and we’ve reached that point.”
On the surface, things do look good on the other side of the Atlantic. Europeans have shorter workdays and longer vacations than Americans. Many of us would say, “Sounds good.”
“In the short term, it’s lovely. What’s not to like?...The trouble is you can’t carry on doing that indefinitely....In the mid-1970s, Western Europe accounted for more than a third of the world’s economy. Today, it’s about a quarter. And in 2020, it will be 15 percent. That’s the reality of burdening yourself with more taxes, more regulations...deeply uncompetitive practices.”
Adding to the fiscal burden is the fact that people live longer.
“It’s a good problem to have....But, of course, the longer people live, the worse the (worker-to-retiree) ratio grows....We introduced the old-age pension in the U.K. almost exactly 100 years ago....And in those days, you typically drew your pension for about 18 months. That was the gap between retirement and death. Fortunately, we can all now look forward to much longer periods of life. But, of course, you’ve got to pay for that....We are going to have to ask people to make a greater contribution or to retire later, or both.“
People don’t want to hear that. Hannan notes that his fellow Europeans are remarkably selfish when it comes to things they think they’re entitled to. Some understand that cuts must be made, but don’t touch their handouts.
“In France, they call it the ‘droits acquis,’ the acquired rights....As the governments try belatedly to...restore some order, some sanity to their public finances...people who now feel entitled by right, and who have stopped thinking about where the money comes from...quite understandably turn around and say: ‘This wasn’t what I expected when I started doing this job. Go and find the money somewhere else.”
But there really isn’t anywhere else.
We Americans feel entitled, too. We work longer and harder than Europeans, but American students say they are entitled to government loans; industries and their friends in politics insist that housing, agriculture, energy and all sorts of other businesses deserve subsidies; and most everyone expects health care to be free, or nearly free. Many politicians tell people that’s all possible, and some promise more.
But that just moves us closer to the cliff.
Why don’t we learn? Because there are problems that must be solved, and politicians act so interested in our welfare that we believe them when they say, “Yes, we can.” But the educated response to “Yes, we can” is “No, they can’t.” Not when “they” means government.