WASHINGTON -- Following decades of welfare state comfort and years of Keynesian stimulus spending, Europe is seeing the panicky arrival of austerity politics. Resentful debtors such as Greece, Spain and Portugal are being forced into tax increases and spending cuts that are painful, unpopular -- and just beginning. Their resentful citizens throw tantrums and sometimes rocks at police. Resentful creditors such as Germany provide bailouts while wondering why they ever shackled themselves (and the value of their currency) to such irresponsible governments.
Those not resentful are scared. Great Britain -- with a deficit that is higher as a percentage of its economy than Greece's -- has formed a coalition government united by little except a commitment to budget responsibility. The constitutional innovation of keeping the current Parliament for the next five years is designed to assure creditors and markets that David Cameron's government will be stable enough to make difficult fiscal choices.
Every looming budget crisis is eventually a political test -- a test of political foresight and discipline, or a test of crisis management. And America is not exempt.
In 2009, the federal government spent $1.67 for every $1 it collected in taxes. The Obama administration's budget proposals would dramatically increase publicly held debt as a percentage of the economy over the next decade, eventually slowing economic growth, fueling inflation and making America more dependent on the kindness of creditors.
How has our political system responded so far? Congress recently found $60 billion in savings in the federal student-loan program -- and promptly spent most of it on other education projects. President Obama's health care reform cut more than $350 billion from Medicare spending -- and soaked up all of it and more into new health entitlements.
This can go on only for so long before a challenge more similar to Britain's becomes a fate more similar to Greece's. America is about to enter its own period of austerity, which is likely to be the dominant political reality for the next decade. The new game will have few winners and many losers.
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