Wednesday, July 23, 2014

USA vs. Europe

I find myself in a bit of a conundrum.  Having just gotten back from a trip to Europe, my sixth in about a dozen years, I continue to be amazed by the visible and tangible evidence that Europe is kicking our butts in a number of economic areas.  Sure, I’m aware of the things we like to focus on when we poopoo Europe’s economic performance:  structural unemployment, highly socialized economies, bloated governments, frightening demography, etc.   Nevertheless, their stuff is just better than our stuff.  Just about everything that is manmade is of a higher quality, better maintained, and more functional in Europe than in the US.  And yet, I have always thought that big-government Europe could never compete with the US with its emphasis on individual liberty and limited government.  How can these bloated bureaucracies be kicking our butts when it comes to making and maintaining high quality stuff?   Apparently I need to rethink my premises.

First, some observations from my most recent trip.  The eye popping differences began with the flights.  As it happened, we flew Lufthansa over and United back.  No surprise: Lufthansa won hands down.  The Lufthansa Airbus A340-600 was new, staff was courteous (and gorgeous), food good, even in coach the silverware was metal, and alcohol, including good wine, was available without additional charge.  The United return was an aging Boeing 767 in bad need of an overhaul (as was the staff), alcohol was extra, and halfway through the flight the bathroom was out of toilet paper and remained so the rest of the flight. 

We flew into Munich where the escalators all worked, the luggage carousels purred, and the rental cars were all BMWs, Mercedes, Audis, and VWs in excellent condition.  When we landed back in Newark, somewhat depressed by the return flight experience, the first escalator we encountered was, appropriately, not working. 

Of course, tourists usually see the best of what a locale has to offer.  But the same can be said of where I live in the US.  I spend nearly all my time in areas that cater to tourists and are analogous to the areas I’ve visited in Europe.  ( I know, pinch me!)  That said, I am blown away by the level of construction and the quality of the properties in Europe.  You cannot even compare high-end construction in the US with the same level in Europe.  What we call the finest door or window in the US wouldn’t even qualify for a shed in prosperous parts of Europe.  The same can be said for just about every detail in high-end construction.  Europeans build for the long run.  In the US, most of what we build is disposable and reflects that. 

Infrastructure in Europe also wins hands-down over the US.  Trains throughout Europe are superior, even in the indebted countries like Italy and Spain.  They run on schedule, go fast, and can take you (and your bike and dog) just about anywhere.  Roads, funiculars, cog railways, and even hiking trails have been built and are maintained to an amazing degree in the most inhospitable of places.  Autobahns are plenty smooth at even 100mph.  You can hike for hours up just about any mountain in the Alps, and chance upon ancient Inns that are only accessible by foot (or now helicopter), and get a beer, a delicious meal, a hot cappuccino, and often a room. 

On the technology front, again a mismatch.  I’m proud that much technology originated in the US, but Europe has adopted it as well as anywhere.  Smart phones, computers, and broadband internet are ubiquitous.  Some things however haven’t made it the other way across the pond.  Anyone who’s stayed in a European hotel knows that the key card must be inserted before the power goes on.  How many coal fired plants could we do without if we adopted this simple idea?  European waitstaff enter orders digitally and remotely, accept credit cards remotely, and hence can serve more tables more efficiently than we can with our centralized and more manual systems.  I believe this is a consequence of the European custom where the waitstaff works for the restaurant and is paid a salary, versus the US custom where the waitstaff largely works for the diner via tips (a system I prefer as a diner, btw).  Seems to me better efficiency would benefit restaurants and diners, but this technology has not been adopted in the US. 

Back when I first visited Europe in 1974, the rap on the old world was that you couldn’t find decent toilet paper and the commode would likely be a hole in the floor.  No more.  On this trip I encountered a public bathroom halfway up a mountain, in Italy no less, that practically wiped your bum for you.  Electronic toilets, electric doors, faucets that both washed and dried your hands, and door handles that changed color to indicate occupancy.  It was a level of technology and excellent design in a public restroom I’ve never seen anywhere in the US. 

So, how is Europe able to have bigger government, more redistribution, more regulation, hence less economic freedom, and at the same time produce tangible things that are superior to ours?  The answer is that they do not necessarily have less economic freedom.  Despite the best intentions of our founders, in many ways Europeans today are the economically freer people! 

For twenty years now The Heritage Foundation has published a ranking of countries based on economic freedom.  At current standing the US is #12.  Switzerland is #4.  Overall, four European countries beat the US:  Switzerland, Ireland, Denmark, and Estonia.  Of the top twenty, ten are European.  And yet, I believe Heritage understates Europe’s economic freedom and overstates ours. 

Wherever you go in Europe you see things you would never see in the US.  Swimming pools have diving boards, hotels have trampolines, and in the Alps, parapenters (hang gliders) and squirrel suit flyers are everywhere.  Sometimes people die or are injured doing these things, but Europeans are free to take these risks, and businesses are free to offer these experiences.  A tort system that supports litigious actions effectively limits our freedom in the US without specific laws banning behavior.  I once tried to rent a mountain bike in NJ but was told insurance rates due to litigation made that impossible.  The result is a loss of freedom and economic freedom.  Heritage does not account for the effects of our tort system and our lawsuit culture on economic freedom. 

Also, remember how we were supposed to be the country specifically designed to have limited government and unprecedented liberty?  Remember how that was the thing that made us “exceptional”?  Well, according to my calculations, six European countries have more limited government than we do, and some of them are prosperity powerhouses:  Switzerland, Slovakia, Estonia, Poland, Ireland, and Norway (which is tied with the US).   Moreover, three more are within the margin of error:  Luxembourg, Czech Republic, and the industrial powerhouse of Europe, Germany. 
(*This is a larger list than the one Heritage arrives at.  See note at the end for a full explanation of the method I use versus the one Heritage uses.)

Sure, not everything in Europe is awesome.  There are slums in Europe just as there are in the US.  Having fast trains, nice buildings, great cars, and amazing infrastructure doesn’t create a classless society.  To do that you have to go full Socialist, or full Communist, and then you end up with none of the above, except of course the slums and a few grand palaces. 

Here’s the upshot: 

Europe is highly decentralized, being made-up of sovereign nations, often with semi-autonomous regions within those nations.  The US is now highly centralized with states that have fewer rights than ever in our history.  Decentralized systems are inherently more resilient.  Europe is a place where you can find limited government, reasonable regulation, democracy, human rights, personal accountability, prosperity, freedom, rule-of-law, etc. all in one place, though certainly not everywhere.  The US is a place where you cannot find all those things to that degree in a single place thanks to centralization.  Advantage Europe. 

Europe now does its redistribution in the right place thanks to the Euro - away from the political entity that prints most currency (The ECB).  The US redistributes at the federal level where it also prints it’s currency setting up a fatal conflict of interests.  Advantage Europe. 

Europe is a place where citizens can drive as fast as they please, but they are accountable.  The US is a place where the federal government dictates driving speeds.  Europe is a place where public swimming pools have diving boards, hotels have trampolines, and citizens are accountable to use them responsibly.  The US is a place without public diving boards or trampolines, its citizens denied those freedoms except in private.  Advantage Europe.

Europe produces better stuff, and in many ways, a better standard of living.  They just do.  Much of this is cultural, but the result is undeniable.  The proof is in the pudding as they say.  Advantage Europe.

I used to maintain that the US was a place with unmatched adherence to the rule of law, a constitution that protected our rights, limited government, economic freedom, and a future second to none.  Now I admire Europe. (With a caveat for demography, although ours isn’t looking too good either!) 

*Note on government spending:  My ranking of government spending differs from Heritage’s in two ways:  I compare government spending (federal, state, and local) to just the private sector portion of GDP for all countries.  Heritage uses both the public and private part of GDP, which is problematic especially in measuring the US, which has been on a money printing, borrowing, and stimulus binge.  To correct for this, I consider only the private portion of GDP (GDP less Government Spending). 

Also, Quantitative Easing is not specifically accounted for in Heritage’s government spending numbers.  I do include it because it is government spending. 
For a full explanation of my method see “The True Tax Rateis 70%!” 

All numbers come from the OECD (Organization for EconomicCo-operation and Development) data.  (not all European countries participate in the OECD)

Friday, June 27, 2014

The Immaculate Recession

Two days ago, on June 25th 2014, the third update to GDP numbers was released for the first quarter of the year, and the latest numbers show a GDP change of -2.9%.  This is pretty amazing since the consensus opinion going into the quarter was for +2.5%, the advanced estimate in April was for +0.1%, the first revision in May was for -1%, and now the second revision in June is a whopping -2.9%!

Even in a business like economic forecasting and reporting, which is known for being particularly dodgy, this discrepancy is unusual.  But there may be a simple, though not comforting, explanation for this wild swing. 

Consider that the official definition of a recession is two consecutive quarters of negative GDP growth.  Therefore, the lower the first quarter, the easier it will be to avoid the “R” word when the second quarter is reported.  For example:  if the first quarter had actually been -1.5% and the second quarter comes in again at -1.5%, that would ring the recession bell and the overall 2014 GDP would be -1.5%.  But if the GDP really is -1.5% after two quarters, and the first quarter is reported as -2.9%, then the second quarter can be reported as +1.4%, and no recession will have officially occurred!  Call it the immaculate recession. 

Now you might be saying, “that’s ridiculous , the Bureau of Economic Analysis (BEA) is a highly respected non-partisan government agency which would never manipulate official numbers to benefit incumbents during an election year!”  Yeah, tell that to the victims of the IRS, FDA, FBI, INS, DOJ, NLRB, NTSB, Fish and Wildlife, etc, etc, etc. 

Update: Oh, and remember this?  Census "faked" election 2012 jobs report.

Thursday, June 19, 2014

Oops, the IRS lost the email, sorry!

Having some fun in the face of tyranny...

Here's the raw photo.  Feel free to download and make your own meme!

Friday, June 6, 2014

Myth: Hey, this prisoner swap is the same thing Israel does!

One of the lies Obama likes to invoke is, "Hey, I'm not doing anything unusual here; everyone does it!"  Thus, when the Bergdahl fiasco blew-up in his face he invoked history saying, "Hey, this is what happens at the end of wars!"  Which of course is interesting because he skipped the signing of the treaty.  As far as I know there is still a violent jihad being waged against us by the very people Obama just released.  That makes this different from any such prisoner exchange in history.

Another lie we hear is, "Hey, the Israelis do this all the time, and they really know how to fight terrorists!"  What we have done has no relationship to what the Israelis do.  If you want some insight into what the Israelis are up to when they release prisoners, watch the movie "The Green Prince".  The eponymous prince in the movie is Mosab Hassan Yousef, son of Hassan Yousef, one of the founders of Hamas. (The flag of Hamas is green, hence "Green Prince".)  Mosab Hassan Yousef was imprisoned by Israel for terrorist activity, but subsequently was released after being secretly flipped by a sophisticated and successful effort to infiltrate Hamas.  Israel knows what they are doing.  They are playing a long game in an endless struggle for survival.  

One may speculate that perhaps we have a similar program and one of these five Taliban generals has been flipped.  Really?  Does anyone reading this believe Barack Obama knows what he is doing and is operating a successful operation to flip Gitmo detainees and infiltrate the Taliban?  Remember, this president has taken virtually no prisoners and sought no new intelligence since taking office. 

Tuesday, June 3, 2014

What’s All This Fuss About Vets and Healthcare?

As Emily Litella would say, "What's all this fuss about about vets and healthcare?"

I made one phone call yesterday and got an appointment with a top neurologist in under 24 hours.  That is incredible service by any standard.  Of course, in this case I paid cash, the provider was in private practice, and the doctor was the vet not the patient.  The patient is expected to make a full recovery and will soon be back to eating voraciously, running around, and wagging his tail.

To those like Paul Krugman, Ezra Klein, Nancy Pelosi, and Barack Obama who told us that vets had the best healthcare system available and it should be a model for the whole nation, I say they were looking at the wrong vet system.  Veterinarians are the only doctors working in a totally privatized system today.  Theirs is the best healthcare model in terms of quality and service in the US, and in fact on the entire planet. 

So while our military vets are dying on VA waitlists, while all citizens are now subject to the bureaucratic nightmare that is Obamacare, while the poor suffer on substandard Medicaid, and while the aged are herded into the socialized system that is Medicare, our pets are enjoying state-of-the-art medicine in the best private healthcare system in the world.  Heck-of-a-job America.