Max Brantley noted today:

Paul Krugman should make teabaggers’ heads explode today — and by ‘baggers I mean Arkanas’s Republican delegation in Congress. It’s another explanation about why, in a tenuous recovery, the government needs to put job stimulus, not debt reduction, at the forefront. We need more government spending, he writes.

Now, the fact that federal debt isn’t at all like a mortgage on America’s future doesn’t mean that the debt is harmless. Taxes must be levied to pay the interest, and you don’t have to be a right-wing ideologue to concede that taxes impose some cost on the economy, if nothing else by causing a diversion of resources away from productive activities into tax avoidance and evasion. But these costs are a lot less dramatic than the analogy with an overindebted family might suggest.

And that’s why nations with stable, responsible governments — that is, governments that are willing to impose modestly higher taxes when the situation warrants it — have historically been able to live with much higher levels of debt than today’s conventional wisdom would lead you to believe.

It is obvious to me that the stimulus in 2009 failed. However, the liberals keep saying that we must spend more. Where will that take us? It will take us to Greece.

Too many riding in the wagon and not enough pulling the wagon. Is the USA heading down the same path as Greece?

U.S. Should Learn from Europe’s Welfare State Mistakes

by Daniel J. Mitchell

This article appeared in US News and World Report on November 7, 2011.

Our long-run outlook is grim, but at least we still have time to reform the entitlement programs and save America from Greek-style fiscal collapse.

The conventional wisdom among economists is that a nation gets in deep trouble when government debt reaches 90 percent of GDP. That’s generally true, but it would be much more accurate to say that a nation gets in deep trouble when debt approaches 90 percent of GDP and the fiscal outlook shows even more red ink.

But this distinction doesn’t really matter much for the United States and Europe. Thanks to a combination of entitlement programs and aging populations, both face a bleak fiscal future. A 2010 study from the Bank for International Settlement shows that government debt in most industrialized nations will soar above 200 percent of GDP (in some cases, much higher) within the next few decades.

At some point, investors are going to realize that the United States is on an unsustainable path.

The only major difference is that European nations are farther down the path to fiscal collapse. The welfare state was adopted earlier in Europe and government spending among euro nations now consumes a staggering 49 percent of economic output. This heavy fiscal burden, especially when combined with onerous tax systems, helps explain why growth is anemic.

But the United States is only a couple of decades behind. According to long-run forecasts from the Congressional Budget Office, the burden of federal spending will reach European levels as the baby boom generation retires.

At some point, investors are going to realize that the United States is on an unsustainable path. Whether that’s 10 years from now or 20 years from now is anybody’s guess.

What we do know, however, is that Greece, Portugal, and Ireland already have stuck their snouts in the bailout trough, and it’s probably just a matter of time before Italy, Spain, and Belgium are in the same category. Heck, they’re already receiving indirect bailouts from the European Central Bank, which is buying up their dodgy debt in hopes of postponing the day of reckoning.

The one silver lining to this dark cloud is that the United States still can turn things around. Greece, Italy, and other welfare states have probably passed the point of no return, but it’s still possible for American lawmakers to fix the entitlement crisis by turning Medicaid over to the states , modernizing Medicare into a premium-support system, and transitioning to a system of personal retirement accounts for younger workers.

If those reforms don’t take place, the consequences won’t be pleasant. To be blunt, there won’t be an IMF to bail out the United States.

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