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Posts Tagged ‘regulation’

Do we really want to be European?

Let me start by stating that I’m not anti-European.  I have European roots, European friends, and am fascinated with their rich history and heritage.  I really enjoy the cuisine, cobblestone streets, outdoor cafés and centuries-old buildings.  I also respect their current government and political structures, but I happen to disagree with some of their fundamental economic philosophies.

I often hear politicians and friends say that we should be like____ (insert name of European country).  It was one of the biggest arguments for passing Obamacare (i.e., we were the only major industrialized country without socialized medicine).  People seemed to forget who leads the development of new medical products, procedures and technology, but that is a separate matter.

I’ll admit, that there are days when I would enjoy a 35 hour work week, 4+ weeks of vacation (holiday) and a 13th month pay, but I know that it comes with a cost.

  • Gasoline and diesel prices are nearly double the U.S. pump prices
  • Accommodations are small and vehicles even smaller
  • High taxes
  • Complex and intrusive government regulations
  • High unemployment

Since the recession hit in 2008, the U.S. unemployment rate has been on par with the European Union.  However, the U.S. unemployment rate has historically been considerable lower than France, Germany, Italy and Spain.  The United Kingdom is the notable exception.   We may be contending with a 30-year high rate, but unemployment in France and Spain has barely dipped below 8% in the past five years.

As economic recovery has dragged along, the unemployment rate remains high, which has caused many economists to speculate that we may have reached a new level of “full  employment.” You can read this article for a greater discussion on the rationale for this speculation.

Time will tell if this is true, but there aren’t any indications that unemployment is going to dramatically decrease in the near future.  This may be an unintended consequence of our drive to be more European.  Concerns of higher taxes, more regulation and mandatory health coverage may be causing employers to refrain from expanding their workforce.  You may argue the merits of such structural changes, but it will definitely require a shift in the American psyche for us to accept 7-9% constant unemployment as normal.

I’m not advocating for the Europeans to change their social or economic structures.  It’s great if it works for them, but that doesn’t mean it is right for the U.S.  I also don’t believe that we have all of the good ideas.  We can definitely learn from our international brethren.  However, we must be careful in trying to reshape our economy and society to be like someone else.  Albeit different, every nation has its challenges and struggles.  There is no utopian society.

Consequently, we should ponder whether we really want to be like the Europeans or any other nation for that matter.  Embracing our differences doesn’t mean we have to stop celebrating what makes them or us great.

More Government Regulators

President Obama has rolled out his proposed 2012 budget earlier this week.  Of course, Congress has yet to pass the 2011 budget, but that is a separate matter.  As expected, there is a tremendous amount of scrutiny regarding this budget.  People are looking for the specifics of how the President and Congress are going to tackle federal spending, the deficit and total debt.

There is one consistent message you can glean from the proposed budget, President Obama wants to increase the number of government regulators, especially for the Departments dealing with money and finances.  The following is a snapshot of the number of the proposed new government hires:

Some of the funding will come from a direct allocation of taxpayer dollars (or additional federal borrowing), and the remaining portion will come from user fees charged by the various agencies.  For instance, the total 2012 cost to implement the financial regulations from the Dodd-Frank Act will be $6.5 billion. Of that amount, $4.8 billion is part of the federal budget’s discretionary spending, and the remaining $1.7 billion will come from user fees assessed to financial institutions.

Bloomberg has estimated that the new $6.5 billion of spending to implement Dodd-Frank is the equivalent of creating a new agency equal in size to the Army Corps of Engineers.  I can’t want to see how many people will need to be added to implement, operate and regulate the provisions of the health care bill.

There is no guarantee that all of these positions will be filled.  The budget has to make it through Congress, which will likely make some alterations, and cuts.  These new positions may serve a valuable purpose, but there is a cost to adding nearly 10,000 new employees to the government payroll.  Congress will have to decide if the cost is worth it.

The President’s 2012 budget shows just how hard it’s going to be to trim federal spending.  Even while talking about deficit reduction and getting government debt under control, the Administration wants to create thousands of new government positions.  They may believe in less government spending, but their budget certainly indicates they believe in more enforcement of government regulations.