Friday, April 9, 2010

Is the US Going the European Way ?

That’s what I claimed in several posts on this blog.

Now Jonah Goldberg writes in National Review Online that the US cannot become more like Europe, a "high tax-high transfers" zone, because no one then would be left to spend enough money on defense to protect both sides of the Atlantic against a potential third party aggressor.

I am afraid, however, that the trend is already well under way, as I mentioned in my February 28 post illustrated by the following graph.

Defense spending as a percentage of GDP

The recent nuclear disarmament treaty between the US and Russia shows that the US indeed is betting on a future no-war environment. And in that case it is to be expected that the welfare state spending share in the federal budget will take the place of defense spending.

The risk however is that the bet could be proved wrong. The US is thus likely to accept more risk by reducing its supply of international security (a public good), limiting the European free ride, in order to develop its welfare state supply of bureaucratically provided private security.

No comments: