Obama's European Socialist Empire

It has been a long time since Europe has featured so prominently in an American presidential race. Republicans, in particular, have seen the crisis plaguing the Eurozone as an opportunity to attack president Obama, who—they claim—is leading America away from its core values and towards the sickly collectivism prevalent in the European Union. Mitt Romney, in one of those hilarious-but-horrifying Republican debates last September, spoke of a president “taking his inspiration […] from the socialist democrats in Europe," before pointing out that he, in contrast, believed in America. His vice-presidential pick, Paul Ryan, was complaining to the New Yorker’s Ryan Lizza about the lurch towards a European style of government in March 2009, before the crisis in Greece had begun, and has continued invoking the frightening specter of the Europeanization of American as the Eurozone’s woes have deepened.

It is well known that political campaigns leave little room for facts and sober analysis. I will nevertheless attempt to inject some of both into the debate, to correct three misconceptions that are running through the straw-man concept the Republicans call “Europe”: that there is a single “European” model instead of many different national models, some of which the United States could benefit from emulating; that the fundamental cause of Europe’s troubles is “socialism”; and that President Obama is a closet collectivist who aims to turn the United States into a European-style social democracy.

When Republicans talk about Europe, mostly they seem to mean Greece, i.e. a country where “out-of-control spending” (as Romney likes to put it) led to a sovereign-debt crisis and to national bankruptcy. But how typical of Europe is Greece? In no other European country is tax evasion, a crucial element in Greece’s debt crisis, so widespread—not even in Italy. Spain, often lumped in with Greece in discussions of the Eurozone crisis, had one of the lowest debt-to-GDP ratios in the advanced economies before the crisis—far lower than that of the United States. In fact, the severe downturn there was caused by an enormous bubble in the property market, whose bursting has wrought incalculable economic damage—sound familiar?

When one leaves the Mediterranean South, the differences between national models grow even further. Germany, for example, has been the West’s star performer during the ongoing global economic crisis, thanks to labor market, training, and social welfare policies and that have helped it retain its manufacturing base and achieve a powerful, export-led recovery. It grew by 3 percent last year (compared with 1.8 percent in the United States) and today has an unemployment rate of 6.8 percent (as against 8.3 percent in the United States, despite Germany’s stronger social safety net). Its balance of trade for 2011 was a surplus of 120 billion euros, which compares rather well with the 423-billion euro trade deficit of the United States. Surely, then, when Romney says  that “Europe doesn’t work in Europe”, he must not be thinking about Germany.

On the idea that Europeans were brought low because of their devotion to socialism and its wicked ways, again the facts beg to differ. As we saw above, it was not “socialism” that led to Spain’s big crash. Nor did Ireland end up needing official assistance to pay off its debts because of governments spending too much on entitlements (it was because of banks lending to much to construction companies). Furthermore, as has been often documented, the debt-to-GDP ratio of the Eurozone as a whole is lower than that of the United States. The reason why the U.S. government is selling ten-year Treasuries at under 2 percent while four (it may soon be five) European countries have been locked out of the bond markets is not Washington’s fiscal prudence and its stalwart refusal to follow the road to serfdom. It is that the United States has a national government that can transfer funds from prosperous to struggling states and that controls its own currency. Spain, to use the most topical example, does not have access to sufficient funds from the EU to make a dent in its disastrous recession—it would only gain these funds if a “transfer union” was created on a European level, which Berlin is most keen to prevent. Nor can Madrid loosen the reins of monetary policy to help itself, because control over it has been ceded to the European Central Bank.

The final conservative shibboleth, that Obama aims to turn the United States into a European social democracy, also stretches the truth beyond breaking point. I will leave it to American commentators to debate whether the much-trumpeted rise in federal payments to individuals is the result of a new “dependency culture” fostered by the Obama administration, or whether it is due to the Great Recession and the immense and ongoing difficulties it has created for U.S. households. I'll stick to the two most significant of the president’s legislative accomplishments, the Affordable Care Act and the 800-billion-dollar stimulus, which have both been central to the accusation of his socialist tendencies.

On health-care, all advanced European countries have government-owned, single-payer systems: the state provides health-care services, and all citizens are covered, regardless of their ability to pay. Health-care reforms promoted by the White House kept the system private, providing insurance companies, through the Heritage-Foundation-inspired mandate, with hordes of additional customers. Obama even resisted pressure from the left to add a public option to the law, which made him into a turncoat in the eyes of many progressives.

On the stimulus, it is true that European governments that could afford to chose the Keynesian path of increased public sector spending to counter the depressed private sector in 2008-9. But they did not do this because they are socialists addicted to spending, but because it is a well-established economic fact that stimulus helps dampen recessions and hastens the recovery. It is the same path that was followed by Republican presidents Reagan and Bush Jr. early in their first terms to counter milder downturns than the one Obama had to face. And Obama's stimulus, like those of his predecessors, contained a healthy dose of tax cuts—almost one-third of the total—not just new spending.

In short, the view of Obama as a European-style socialist—and of European socialism itself entailed in the Republican attack on the president—is an extreme caricature. The Ryan pick means that the Republican ticket will emphasize variations of it in their attempt to convince voters that they offer revival where the incumbent offers decline. It is an argument that deserves to be ignored.

Comments

I live in an area dominated by Christian radio. "European style government" and "socialism" are used in the programs I hear as descriptors for the "One World Government" that is the supposed to be a precursor to the End Times. I would not be at all surprised that the otherwise irrational characterization of Obama as a European style socialist is yet another shout out to the base.

Keynesian Beauty Contest

$50 gift certificate for the winning example:

Keynesian stimulus was used in the
country _____ in the years ______,
during a __ recession/__ depression,
then the economy turned around within 2
years and then produced ___ years
of lasting growth after this. The
increased tax revenue was enough to
pay off all the deficit the stimulus
had created within ______ years.

Keynesian stimulus has been used nigh on 27 years here in the US, and the deficits keep rising. Same for all 20 top western democracies: All have massively increased deficits so they are larger per capita than the US over the last 2 decades. None are paying back the increasing debts. The US has printed $2.9 trillion dollars to prop up the failure, Europe has printed $4 trillion.

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