On "Welfare States Can't Run on Autopilot"


This editorial is a weakly constructed farce. The writers claim that:

"Some American economists argue the United States should temporarily run even bigger deficits. Perhaps that would work, but Europe's experience counsels otherwise. Big deficits there led to higher interest rates, reflecting investors' greater fears of default. Default anxieties in turn weaken banks — large holders of government bonds — and, through them, the broader economy. Although the United States hasn't yet suffered this fate, it might."

Europe is a continent comprising roughly 30 countries and 500 million people. Do the facts bear out their criticisms of "Europe?"

The New York Times ran some nice graphics today comparing the states of different countries' bonds. The most generous welfare state in the world, Switzerland, currently has a 1.5% 10-year bond yield and a AAA rating.

Japan, another very generous welfare state whose citizens have enjoyed the highest life expectancy in the world for the last three decades, has a debt: gdp ratio of 200%, compared to the USA's of 100%. Japan is able to sell its bonds at 1.1% interest, so the markets are not upset by this level of debt in a very wealthy country.

People claiming knowledge of economics should not make clearly false statements. If one looks at facts instead of rhetoric, the rest of the column can be dismissed as ideological garbage. The writers have a duty not to lie to their readers and distract them with myths that "Governments everywhere are striving to protect the old order because they fear and do not understand the new" in order to push their agenda of cuts in social services.

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