Joe Biden’s European Vacation – WSJ
It has been a challenge to navigate through the steady drizzle of media admiration for President Biden’s love-in with the Group of Seven leaders in Europe, but one ga-ga statement, from French President
caught my eye: “I think it’s great to have a U.S. president part of the club, and very willing to cooperate.”
The conventional interpretation of Mr. Biden’s trip to Europe is that, contra the ever-belligerent
(whom the current president dumped on by name before the global media), the U.S. is rejoining the club of multilateralism, diplo-speak and doing deals, such as the Paris Agreement on climate and the Obama-Biden-European nuclear deal with Iran, or giving the World Health Organization a redo on its noninvestigation of the coronavirus’s origin.
Still, I don’t think this explains what the discerning Mr. Macron meant by welcoming
to the “club.”
The club Mr. Biden is joining—for all of us back home—is one the U.S. has stayed out of since World War II. That is the club known as the European welfare state.
It is the government-directed system of lifetime paternalism built up by the nations of Western Europe after 1945. Maintaining this welfare infrastructure with taxes and debt occupies virtually every waking moment of its leaders. As Mr. Macron might say, it is today Europe’s raison d’être.
Public welfare has never been America’s reason for being, notwithstanding our substantial spending on social support programs. Despite the entitlement creations of FDR’s New Deal and LBJ’s Great Society, the U.S., unlike Europe, has remained a nation driven and led by capitalist initiative.
For current-generation Democrats, that fact is anathema. Especially during the Obama presidency, left-liberal Democrats expressed frank admiration for the welfare-first economic models of Germany and the Scandinavian countries, notably Sweden.
This is the “club” the Biden Democrats bid to join with their $6 trillion spending-and-tax agenda. The White House fact sheet describing the American Families Plan apologizes for not being a member already: “The United States is one of the only countries in the world that doesn’t guarantee paid leave.” Besides child leave, the Biden plan would also guarantee permanent payments for child care, prekindergarten and community college.
Mr. Biden’s most significant achievement during the G-7 meeting wasn’t the agreement to “consult” on China. It was the commitment to an international minimum corporate tax rate of 15%. The EU’s term of art for this is tax “harmonization.”
It’s well understood that harmonization is a euphemism for preventing the EU nations from competing with each other on tax rates, such as Ireland’s economic success with a 12.5% corporate tax rate, far less than Germany’s 30%.
The March stimulus bill already had one foot inside the economic club of Europe’s door: It explicitly forbids any U.S. state that accepted the federal funds from using the money to lower tax rates. Spend more, yes; cut taxes, never. EU-style “harmonization” has come to America.
Federal net spending in 2021 as a percentage of gross domestic product will reach a postwar high of nearly 33%. And I don’t mean the Afghan war. Federal net spending’s claim on GDP hasn’t been this high since 1945 (41%). In Europe, postwar domestic spending hit those heights quickly. Today in France it consumes 62% of GDP, 51% in Germany and 53% in Sweden—three of the American left’s most admired European social-welfare models.
Recognizing the dangers that ever-rising levels of national debt posed, the EU at its creation in 1993 mandated limits on national deficits and debt. Europe’s fig leaf of fiscal discipline fell away by 2003, when the spending limit was breached by two of the confederation’s leading nations, Germany and France.
Europe became famous for its perpetual-motion tax machine, which suppressed the continent’s entrepreneurial instincts. Besides income taxes, Europe relies heavily on the collection of notoriously high value-added taxes (one reason luxury-goods-buying Europeans tour the U.S.).
An analysis by the Urban-Brookings Tax Policy Center noted that total tax revenue from all governments in the U.S. as a percentage of GDP is 24%, compared with an average of more than 40% in seven European nations, and then adds: “But those countries generally provide more extensive government services than the United States does.” We will be there shortly.
Those European tax levels will never fall. Their governments gotta have the money. Mr. Biden purports that his proposed $3 trillion in tax increases hit only corporations and “the wealthiest.” But if his entitlements become law, European levels of middle-class taxation—perhaps a VAT or carbon tax—are inevitable. Mr. Biden’s plans to increase Internal Revenue Service audits lay the groundwork for that.
Presumably, one of Donald Trump’s offenses against comity with Europe was insisting that NATO’s members increase defense spending beyond 2% of GDP. Forget it. Feeding the welfare maw killed European self-defense years ago. The Biden budget increases defense spending only 1.6%. Adjusted for inflation, that’s a cut.
Mr. Biden went to Europe as America’s president. After this week, he’s also EuroJoe.
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