Sometimes it takes an outsider to put everything clearly into perspective. Daniel Hannan, a British member of the European Parliament, has a warning for America. Appearing on FOX News, Hannan asked Sean Hannity if he was familiar with the work of H.G. Wells’ Time Machine. Channeling the classic, Hannan said, “There’s a moment where a guy comes from the future, and he comes running out and he says, ‘Don’t do it! You’re making a terrible mistake. Don’t follow me!’ Well, think of me as that man.”
Hannan continued, warning all Americans, “I’ve been 11 years in the European Parliament, so I’ve seen it firsthand the kind of model towards which your current administration is taking you: European health care, European day care, European social security, European welfare, European unemployment, and believe me, you’re not going to like it.”
George Santayana once wrote that “Those who do not learn from history are doomed to repeat it.” Unfortunately, it appears that Europe’s experiment in socialism has escaped the attention of policymakers in Washington. Hannan says that he hopes the Obama Administration “will look at the European model and learn from our mistakes.”
But he’s not hopeful. “The bits of Europe that are most obviously failing — the welfare system, the high spending — are the bits that you’re copying.” He’s right. ObamaCare. “Stimulus.” State bailouts. The centralization of the financial sector. Crippling entitlement obligations. High unemployment.
America is beginning to live through the European experience. And it’s not pretty.
That’s why Hannan authored The New Road to Serfdom: A Letter of Warning to America, just released on September 28th. Inspired by F.A. Hayek’s classic, The Road to Serfdom, Hannan is hoping to catch the American people’s attention — before it is too late.
Speaking on Hannity, the author diagnoses the basic problem facing Western civilization: “We are deeply indebted… We have both been pursuing the option of trying to inflate away our debt. And that matters more than almost anything else.”
Hannan is spot on. The nation’s $13.4 trillion debt, coupled with efforts to print money to pay it off, threatens to bury the future prosperity of all Americans. The annual sale of treasuries represents a tremendous misallocation of resources away from other productive sectors of the economy. Instead of investing in new businesses and creating jobs, over $1 trillion is being put into government debt every year.
Making matters worse, the U.S. is on the wrong side of the debt curve. Whereas Keynesian thinkers believe that deficit-spending can help a nation during a time of recession, it appears the U.S. has reached the limits of that principle. A recent study by Carmen M. Reinhart of the University of Maryland and Kenneth S. Rogoff of Harvard University found that “median growth rates for countries with public debt over 90 percent of GDP are roughly one percent lower than otherwise; average (mean) growth rates are several percent lower.”
That’s important because the 90 percent threshold of debt to Gross Domestic Product (GDP) is exactly where the current U.S. national debt is. As noted the House Ways & Means Committee Republicans, “the total debt for Fiscal Year 2010 will reach $13.6 trillion, or 93.1 percent of Gross Domestic Product.” By 2012, the International Monetary Fund reports the U.S. national debt will reach 100 percent of the GDP.
But it’s even worse than that. Not only is public debt crowding out the private sector, it threatens to increase the cost of government in just a few short years. Moody’s has warned that when interest owed reaches 18 to 20 percent of revenue, the nation would be in line for a credit downgrade. We’re pretty much there, and will reach that range by 2018. According to the Congressional Budget Office, interest owed on the debt will rise from $244 billion in 2011 to $755 billion in 2018.
Hannan is concerned about these trends, and worries about its global implications. “The U.S. isn’t just a nation unlike any other, it is the embodiment of an ideal. We’re all involved in the success of America. And if we see the U.S. becoming poorer, less democratic, less free, then that’s everybody’s problem.”
He’s right. Hannan has seen firsthand what too much spending has done to nations like Greece, Ireland, Portugal, Italy, and Spain. The impact has been devastating. And still U.S. politicians have said almost nothing about the same thing happening here, nor have they presented any plan to prevent it from occurring.
What will the implications be for liberty around the world should the U.S. fail to meet its financial obligations? The consequences could be devastating unless action is taken now.
Hopefully, Hannan’s warning will be heard by the American people, who will in turn demand leaders of both political parties to address the unbridled expansion of government into every facet of life — before it’s too late. As Hannan warned all Americans, “Until you get sanity and order back to your public finances, everything else is secondary.”
Robert Romano is the Senior Editor of Americans for Limited Government (ALG) News Bureau.
