NYT Reports Sky Is Falling

In a front-page story blending suppressed hysteria and gleeful Schadenfreude, New York Times reporter and Paris bureau chief Steven Erlanger says that the debt crisis in Europe has "undermined the sustainability of the European standard of social welfare, built by left-leaning governments since the end of World War II." 

Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.

But who's boasting now, left-leaning cheese-eaters?

Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.  

What? Thirty percent on health care? Oh, wait-- that's 30% of 31%, or about 9%. In fact, France spends a bit over 10% of GDP on health care in total, far less than the 16% spent by the U.S. So how can France be drowning in social expenditures, when they're spending less on health care than we are?

Simple. It's an illusion. The paragraph above is not talking about social expenditures. It's talking about public social expenditures. In France, almost all health care spending is public spending. In the U.S., less than half is. One can tell a similar story for pensions and higher education, and perhaps other things. But as the example of health care shows, the fact that certain things are provided by the private sector in the U.S. does not mean that they are provided more cheaply or effectively.

The Times story fits neatly into the current conservative story about Europe: that they are fat and lazy (well, lazy anyway-- Americans have gotten more cautious about calling other people fat), but that their day of reckoning is coming, and Obama is trying to push the U.S. into following them down the road to perdition. They, and we, need to return to traditional values of hard work and lean government.

In case you missed the point, someone at the Times made the inexplicable decision to publish an incoherent, ill-informed, and generally ludicrous Op-Ed piece by a hedge fund manager about how we're about to follow Greece if we don't cut the deficit. He doesn't specify how we should do that, but my guess is that increasing taxes on hedge-fund managers is not high on his to-do list.

By the way, here's something to keep in mind: there is no crisis in Social Security. So when the commentariat tells you in coming months that we can't hope to deal with the deficit unless we have the courage to make deep Social Security cuts, just point them to this.But you would do that without my reminding you, right?