Who Will Save the Drowning Man?

InkityAnd just who is the drowning man? Is it the US, sinking rapidly into a deepening debt quagmire? Or is it Europe, with its naughty little PIIGS flirting on the edge of permanent insolvency, threatening to pull the rest of the EU down with them?

Ambrose Evans-Pritchard calls Europe's economic situation a "horrible truth."

This NYTimes article suggests that a European debt crisis might spread like a contagion, with dire consequences.

Here is a comparison of the US government's financial situation with that of some European countries:

The French government's revenue stood at an unbelievable 48% of GDP and Greece consumed a little less, but still a high percentage at 37%. By comparison, the U.S. Revenue/GDP ratio was a miniscule 15%, although we still feel that government taxes are too high and wasteful practices don't seem to end. What does that mean? Despite the negative economic impact, the U.S. government can raise taxes and increase revenue, while the European Union has virtually no room to maneuver.

Add austerity plans and public sector jobs cuts like we've seen in the U.K. (a reduction of 500,000 government jobs), and one will wonder how the bills will be paid on the Eastern side of the Atlantic. As 2011 approaches, the spending cuts will start to affect — and infect — the European economic engine. The bloated public sector that was created over the last 50 years cannot be undone in 2 or 3 years without major restructuring and disruption — and that task will take a generation to "correct." _SeekingAlpha

The NYTimes recently provided a nifty interactive puzzle, which allows each reader to attempt to balance the US Federal budget for both 2015 and 2030, using a combination of spending cuts and tax increases. The puzzle lacked the most important ingredient for achieving fiscal health -- the ability to eliminate harmful regulations which are preventing the private sector from growing and thriving. The NYTimes editors likewise neglected to offer the reader the ability to eliminate public sector unions. In addition, the NYTimes feature did not provide the power to institute strong tort reforms -- except in a very modest way for medical malpractise.

I balanced the budget with a combination of 88% spending cuts and 12% tax increases. But what I really wanted to do was to cut the size of government by 50%, as an appetizer. After that preliminary cut, I would begin looking at the tough choices for downsizing government.

A sane existence will involve a certain amount of pain and risk. It is the heedless avoidance of all pain and risk that leads to total extinction.

So, who is the drowning man?