Who is screwing up more: Europe or the US?

A million dollar q asked by Jeff Frankel. To most, it is like they are competing.

Frankel says it is US which is screwing up more:

To be sure, euroland too has made serious policy mistakes.  But one can sympathize with the difficulty of agreeing policy across 17 sovereign governments.   The political fissures have been inevitable ever since 1999, when the euro members (then 11) adopted a single currency without a single fiscal authority, in what was nevertheless a historic and laudable enterprise.  As they say, “why should anyone be surprised at the difficulty of getting 17 national legislatures to agree, when the United States cannot even do it with one?”

Criticising US policy:

On the other hand, the mistakes by US politicians are more gratuitously self-inflicted than on the other side of the Atlantic.   In 2001, all we had to do was continue the fiscal progress that had been made during the 1990s: preserve the budget surplus and move on to address the longer term problems of social security and Medicare in a deliberate and balanced manner.  Instead we recklessly enacted massive tax cuts and tripled the rate of growth of federal spending, in ways guaranteed to generate serious fiscal troubles in the decade of the 2010s and beyond.  The debt-ceiling standoff last summer was but the latest self-inflicted wound, new evidence that the US political system is not functioning.  

It is not too late for American politicians to enact the economically sensible policy:  current short-term fiscal stimulus simultaneous with steps to lock in a long-run return to fiscal responsibility (which cannot possibly be accomplished solely by discretionary spending cuts, entitlement reform, or tax revenues, but rather should include all three).   For euroland, unfortunately, even if the politicians could come together, there no longer exists an option for preserving the monetary union in quite the form originally envisioned.

Well it is true that US is about one government and should have not got into the mess at the first place.

But the way EU EU policymakers have handled the crisis makes their case of screwing up no less. When you set up a union of 17 countries you know you have to coordinate with the member politicians. But this has been such a mess.

The way they have moved during the crisis, one always wonders why was this proposed at the first place? How in the world could this union happen given so much differences in the economies.  They come out with unheard of proposals with loads of financial engineering and jazz.


2 Responses to “Who is screwing up more: Europe or the US?”

  1. PB Says:

    Off-topic but I saw you quoted in the WSJ. Congrats!


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