United States Is Making Same Mistake as the Europeans

And what does that mean for Germany? This question is somewhat egocentric, but not unjustified when the news coming from the United States is that the biggest economy in the world is now setting about saving. The answer is: The global consequences might be slight at the present time, but in the long term are serious.

To remain with the short-term prospects: The debt crisis in the United States was a political, not an economic, debacle. National bankruptcy does not equal national bankruptcy. Greece, for example, is really broke, while the U.S. is an enormously solvent country. There, one would only have to raise taxes on the rich — and the budget deficits would disappear again.

In particular, because the United States is not threatened by a real national bankruptcy, the savings package is a joke. Cuts of $2.1 trillion sound gigantic, but spread out over ten years, it is only approximately 1.5 percent of the U.S. economic output — according to present day values. This miniature portion will sink further due to inflation and growth.

In spite of this, the American savings package is very problematic over the long term. Because it symbolizes an omission: Actually, the United States should not make insignificant cuts, but rather should spend lavishly. They would need a new economic stimulus package to decrease high unemployment.

Thus, the United States will not be able to rescue the world economic situation if the eurozone and emerging countries come into crisis. Exactly this is to be feared: Inflation in China could go out of control at any time, and more and more countries in the eurozone are forced to save themselves in a recession. In spite of this, one cannot be angry at the United States. With their cuts, they are only making the same mistakes as the Europeans.