By Howard Rich — Like a lengthening shadow creeping across the Atlantic, the economic despair we’re witnessing in Europe is an ominous harbinger of things to come here in the United States. The only question is whether American taxpayers will be forced into even more dire straits by the administration of Barack Obama — which is hoping to bail out Europe’s bad bank bets and bureaucratic excesses with your money.
Obama wants U.S. taxpayers to fork over tens of billions of dollars that we clearly can’t afford on a European bailout that clearly isn’t going to work — with no expectation of any of the money ever being repaid. In fact if Obama gets his way, America would go beyond committing to an expansion of its existing European bailout efforts — it would effectively give European governments a blank check to continue throwing good money after bad.
Does that sound like a smart investment to you? Of course not — although it’s precisely the sort of thinking that has resulted in the federal government racking up more than $4 trillion in new debt over the last three years.
The European economy — mired in an ongoing recession — is teetering towards an inevitable collapse. The Eurozone’s banks simply aren’t solvent and its sovereign governments do not have the money to bail them out.
The European Central Bank has already purchased €183 billion worth of bonds from the Eurozone’s most heavily-indebted nations, while the European Financial Stability Facility (EFSF) has already committed at least half of its €440 billion lending capacity. Additionally, the International Monetary Fund (IMF) has an estimated €415 billion available — which the global bank has already begun tapping at levels well above those permitted by its rules in funding bailouts of Portugal, Ireland, and Greece.
Yet despite this unprecedented infusion of capital, there’s simply too much debt to cover — particularly now that the Eurozone crisis has spread to Italy, the world’s seventh-largest economy.
Italy alone has €1.9 trillion in debt — €300 billion of which is coming due in the next year as the nation’s borrowing costs spike and its economic output contracts. Add the plight of Spain to the mix and the total debt of the Eurozone’s most vulnerable nations is well above the €3 trillion mark.
That’s a recipe for disaster — including sustained capital flight from the continent which will put an even greater strain on these cash-strapped nations.
Increasingly, the writing is on the wall. Earlier this month, the European Commission revised its 2012 growth forecast from 1.8 percent to 0.5 percent. That same week, it was revealed that industrial output in the Eurozone had slipped by 2 percent during the month of September. Meanwhile the economies of Portugal and Greece — which received bailouts totaling €78 billion and €110 billion, respectively — remain stuck in reverse thanks to growth-crippling tax hikes imposed as a condition of all that largesse.
In America — where trillions of borrowed dollars have been pumped into unnecessary bureaucracies and our own version of the welfare state — economic growth remains similarly elusive.
Despite an inflation-fueled 2.5 percent growth rate for the most recent quarter, America’s economy is projected to expand by a mere 1.2 percent for the year. Chronically-high unemployment is limiting expansions in consumer spending to necessities like food, fuel and clothing – while Washington’s ongoing failure to restrain its appetite for new government spending has resulted in our nation’s debt exceeding its gross domestic product for the first time since World War II.
Like Europe, America’s current fiscal course is unsustainable — yet in addition to proposing new deficit spending here at home, Obama and his allies want our taxpayers to continue subsidizing Europe’s lavish culture of entitlement.
Americans shouldn’t be paying for bureaucratic excesses and unsustainable entitlements at home or abroad. But it isn’t enough to simply cut Europe loose. More importantly, our leaders must take the necessary steps to avoid its fate.
The author is chairman of Americans for Limited Government.
