Some Americans look to European countries such as France, Germany and its Scandinavian neighbors and suggest that we adopt some of their economic policies. I agree, we should look at Europe for the lessons they can teach us. Dr. Daniel Mitchell, research fellow at the Heritage Foundation, does just that in his paper titled "Fiscal Policy Lessons from Europe."
Government spending exceeds 50 percent of the GDP in France and Sweden and more than 45 percent in Germany and Italy , compared to U.S. federal, state and local spending of just under 36 percent. Government spending encourages people to rely on handouts rather than individual initiative, and the higher taxes to finance the handouts reduce incentives to work, save and invest. The European results shouldn't surprise anyone. U.S. per capita output in 2003 was $39,700, almost 40 percent higher than the average of $28,700 for European nations,.
Over the last decade, the U.S. economy has grown twice as fast as European economies. In 2006, European unemployment averaged 8 percent while the U.S. average was 4.7 percent. What's more, the percentage of Americans without a job for more than 12 months was 12.7 percent while in Europe it was 42.6 percent. Since 1970, 57 million new jobs were created in the U.S., and just 4 million were created in Europe.
Dr. Mitchell cites a comparative study by Timbro, a Swedish think tank, showing that European countries rank with the poorest U.S. states in terms of living standards, roughly equal to Arkansas and Montana and only slightly ahead of West Virginia and Mississippi. Average living space in Europe is just under 1,000 square feet for the average household, while U.S. households enjoy an average of 1,875 square feet, and poor households 1,200 square feet. In terms of income levels, productivity, employment levels and R&D investment, according to Eurochambres (The Association of European Chambers of Commerce and Industry), it would take Europe about two decades to catch up with us, assuming we didn't grow further.
What's the European response to its self-made economic malaise? They don't repeal the laws that make for a poor investment climate. Instead, through the Paris-based Organisation for Economic Co-operation and Development (OECD), they attack low-tax jurisdictions. Why? To support its welfare state, European nations must have high taxes, but if Europeans, as private citizens and businessmen, relocate, invest and save in other jurisdictions, it means less money is available to be taxed.
The OECD member countries want the so-called tax havens to change their laws to help them identify the earnings of their citizens. Most of all, OECD wants these countries to legislate higher taxes so as to reduce their appeal. A suggestion that we should be more like Europe is the same as one suggesting that we should be poorer.