USA vs. Europe: Who's Worse?

Simon Johnson, who used to be chief economist at the IMF and now teaches at MIT and has a pretty good blog, has a good post comparing the US's problems to Europe's.  I agree with the crux of his argument: that Europe has a near-term problem rooted in its disaster of a common currency which both keeps the afflicted countries from growing their way out of trouble, and leave the core economies with the tab for either their fiscal profligacy (Greece) or their disastrous, deregulated banking sector (Ireland).  The worst part of their problem is the contagion-- Greece's growth AND fiscal problems are so bad that it needs regular bailouts just to stay above ground, and the jitters that the market feels about Greece are bleeding over into Italy and Spain, both of which have their own problems (albeit nowhere near as bad as Greece's), but whose collapse would be disastrous not just for Europe but for the whole world.

The US's problems, on paper, are nowhere near as bad.  Contrary to what scaremongers in Washington might say, the US's budget picture isn't particularly bad.  In other words, we look NOTHING like Greece-- we're more like Ireland.  We had a fairly small debt load and manageable deficits (Ireland actually ran a surplus in the mid-2000's...), but our runaway deregulated financial sectors and subsequent housing bubbles caused big economic problems that depressed revenues, necessitated bigger government expenditures, and made our finances look much, much worse than they really are, at least in the short term.  To be sure, we do have a significant health care cost problem (as I've acknowledged in this post, we need to deal with health care cost), but that's a problem for the long run, not right now.

So why is the US in crisis? Well, the answer is bad politics.  We've got scaremongers who insist that we have to cut spending NOW NOW NOW (but, funny enough, won't say the same about raising taxes because, well, we can't afford to raise taxes modestly "in this economic climate", though apparently we can afford to cut spending by a whole lot more), and are willing to risk a default on the government's obligations to get their draconian cuts.  In a way, the problem we have may be worse.  Europe does have flexible politicians doing their best to get out from a policy straitjacket caused by a terrible decision to adopt a common currency.  The US has a bunch of crayz politicians who don't understand the consequences of their actions.  To put the analogy another way, if the US and Europe are cars driving along a highway to a destination, Europe has a broken car that it can't control, while the US has a functioning car, but a crazy drunk in the passenger seat grabbing at the steering wheel and doing his best to run the car over a cliff.  That crazy drunk is the Tea Party nonsense that's taken over the Republican Party and is threatening to destroy the country's fiscal situation.