Friday, 18 November 2011

The European Debt Crisis - Lessons for America

While Europeans are scrambling to resolve the European debt crisis and in turn save the Euro, there are some valuable lessons that can be learned.   America has just passed the $15 Trillion debt threshold and a Congressional Super Committee can't get their act together. 

While both sides argue about the right approach and partisan politics is at its worst, the country drops deeper into debt.  Compromise seems to be a dirty word in Washington these days.  Unfortunately the U.S. is in a constant election cycle, making bipartisan politics almost impossible.  If Members of Congress paid attention, there are five valuable lessons that can be learned from the European Debt Crisis:

1. Higher taxes lead to higher spending, not lower deficits.

 2. A value-added tax would be a disaster.

 3. A welfare state cripples the human spirit.

 4. Nations reach a point of no return when the number of people mooching off government exceeds the number of people producing.

 5. Bailouts don’t workCato Institute

A You Tube video by a an Italian student and former intern of the Cato Institute explains what caused the crisis in Europe and how t avoid it in the United States. 

The primary lesson to be gleamed from this video is that the Super Committee and Congress in general must find a way to stop spending.  It is not enough to just kick the can down the road and hope for the best. 

Italy and Greece are good examples of the need for punitive austerity measures if the problem isn't dealt with earlier. 

Below is an example of Business News discussing the European Crisis:

Greece, Ireland and Portugal had to request rescue loans from the European Union after their bond yields jumped above the seven per cent threshold.
But Spain, like Italy, is a much trickier proposition to rescue since its economy is bigger and has more debt.
Italian bond yields also touched the seven per cent level during the session.
“You could say the markets are recording a vote of non-confidence,” said Robert Gorman, chief portfolio strategist at TD Waterhouse.
“They’re very much in a ‘show-me’ state of mind and the Italians and others are going to have to come up with some pretty clear — and clear is the operative word here — statements about exactly what they’re going to do, not just talk about it, with measurable targets and timelines.”

This applies equally to Members of Congress and the Obama Administration.  Americans should also be in a "Show Me" state of mind and demand that Washington politicians not just talk about it, but come up with solutions.  Partisan political games are playing with the life of Main Street Americans.  

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