Moving toward Europe--but Do Americans Want to Go?

Moving toward Europe--but Do Americans Want to Go? By Michael Barone
The European model sacrifices growth in the hope of reducing economic inequality.
AEI, Tuesday, April 28, 2009

As the Obama presidency reaches the hundred-day mark, it is becoming apparent that he would like America to take on a more European cast. Increased government spending, greater government control of health care, and the implementation of a cap-and-trade system are all goals that President Obama has tried to further in his first hundred days. Yet pursuing such policies would end up hindering growth in the name of economic equality--and Americans are ambivalent about moving their country in this direction.

Ninety-nine days in, with 1,362 days to go, and we can see with some clarity the trajectory on which Barack Obama wants to take the United States. To put it in geographical terms, he wants to move us some considerable distance toward Europe.

This is apparent in the budget he has presented for the next fiscal year and its projections for the years to come. Government spending is scheduled to rise as a percentage of the economy. This will be accomplished by raising taxes and, even more, by borrowing that will double the national debt in five years and nearly triple it in 10 years. This trajectory can be altered in the future, but much of it is set in stone by the $3 trillion-plus deficit that will, give or take a few hundred billion, be produced by the budget voted this year.

Other Obama goals are less certain of achievement. He wants government to take over much of the one-seventh of the economy that is devoted to health care, but how much and by what means are still unclear. One result, common in Europe, is likely: rationing of care. Obama also wants to reshape the energy sector by imposing a cap-and-trade system to reduce carbon emissions. This will raise energy costs, particularly on the 60 percent of Americans whose electricity is produced by coal, and will provide opportunities for corporations to make profits by gaming the system. But it's not clear that it will encourage development of the one plentiful non-carbon-emitting energy source that France, for one, relies on--nuclear power.

The European model sacrifices growth in the hope of reducing economic inequality. American experience suggests that this can work, but not perhaps at an acceptable cost.

There are two decades in which economic inequality was sharply reduced. One was the 1930s. High earners made less and low earners fell down toward zero, so incomes were more equal. But the cost in lost economic growth and human misery were very high.

The other decade was the 1940s when, in the phrase of the day, there was a war on. Government controlled wages and prices, required workers to join unions, ordered industries to produce arms and mobilized 16 million Americans into the military.

But those policies seem unlikely today.

Obama has only limited plans to take over the private sector economy (he hopes cap-and-trade will produce otherwise uneconomic "green" jobs), and he has abandoned, at least for the moment, the unions' card check bill that would enroll millions of workers in unions by effectively abolishing the secret ballot in unionization elections and then having federal arbitrators impose wage levels and work rules. And he certainly has no plans to expand the military to its proportion of the population in World War II--35 million men and women.

Still, Obama may take us some distance toward the Europe whose "dynamic union" he hailed in Strasbourg, with some marginal gains in economic equality and, if Europe's experience is a guide, considerably less economic creativity and growth.

Abroad, Obama has eschewed American "arrogance" and embraced the European model of diplomatic engagement and avoidance of confrontation. He argues that if we show "persistence" in apologizing for America's past and willingness to negotiate with Mahmoud Ahmedinejad and shake hands with Hugo Chavez, they will come to recognize our good will and make concessions they would otherwise refuse.

Perhaps. But one recalls that this was the European response to the genocide in its own back yard by Serbia's Slobodan Milosevic and that he was brought to justice only by the force of American arms. That lesson has not been lost on Obama who, for all his rhetoric, has ordered troop increases in Afghanistan despite the refusal of Europeans to do more.

Obama and his party were brought to power by George W. Bush's perceived incompetence on Katrina and Iraq, not because of some pent-up and suddenly overwhelming demand for the Europeanization of America.

Polls show voters ambivalent about Obama's expansion of government, skeptical of global warming theories, and appreciative despite the financial crisis and recession of the efficacy of market capitalism to produce economic growth. They are also confident, as Franklin Roosevelt and John Kennedy were, that America is a special and unique country. Obama audaciously believes he can lead the country in a direction it's not sure it wants to go.

Michael Barone is a resident fellow at AEI.