The Welfare State and the Pax Americana

In January, I predicted that by the end of this year the idea of a European-style Value Added Tax would be under discussion by the Obama administration. Well, here is a story by Niles Gardner in which the beginnings of that debate may be discerned.

The relentless drive by the Obama administration to undercut economic freedom in the United States continued yesterday with Paul Volcker’s call for the possible introduction of European-style value-added taxes as well as energy or carbon taxes. Volcker, the former Federal Reserve chief, is currently the most powerful economic adviser to the president after Treasury Secretary Timothy Geithner, and sits as the chairman of the president’s Economic Recovery Advisory Board.

This is not empty, throw away rhetoric, but a call to arms by an aggressively interventionist and uncompromisingly left-wing US administration that is actively seeking to refashion the United States in the image of the European Union, both in terms of foreign and economic policies.

Volcker made the remarks at the New York Historical Society, and his comments were picked up here by Reuters:

In addition to regulatory reform, Volcker said lawmakers would likely have to make some tough choices in the coming years to bring U.S. deficits under control and prevent inflationary pressure from building.

While highly unpopular, he said the United States should consider raising taxes and consider introducing a European-style value-added tax and perhaps an energy or carbon tax.

The value-added tax “was not as toxic an idea” as it has been in the past, he said, adding it may be necessary to fund entitlement costs and decrease U.S. deficits.

“If at the end of the day we need to raise taxes, we should raise taxes,” he said.

By building up staggering levels of debt – projected to rise by $12 trillion over the next decade according to the Congressional Budget Office – through a massive expansion of government spending, including universal health care, the Obama administration is digging itself into a massive hole with no light at the end of the tunnel.

Read the rest here.

We may be witnessing the beginning of the end of the "pax Americana," which has lasted from the end of World War II until now. After the war American took over from the exhausted British Empire the task of policing the world and ensuring opportunities for trade and travel. The containment and eventual defeat of Communism was an integral element in this endeavor.

The creation of a European-style social democracy in the US is Obama's goal, but it is incompatible with the levels of military spending required to maintain the pax Americana. Europe (and Canada) can only have the social welfare state it has only because of low military spending and even then it looks like the EU may be entering a period of reckoning for overspending as the default crisis in Greece threatens to spread.

Only because America has been keeping Europe safe has Europe been able to direct so much government spending to entitlement programs for the middle class, as well as the poor. The smug sense of moral superiority many Europeans have toward the US is pretty disgusting. Once Iranian nuclear missiles with a range that enables them to reach Europe are trained on them, and the implications of Obama's reversion to pre-World War I style isolationism sinks in, the more perceptive among them may well end up pining for the good old days when "Cowboy George" paid the freight for their hedonistic lifestyle.

Obama's agenda must be derailed in November for the good of the whole world. Fortunately, the prospects for the Republicans taking control of the House and making strong gains in the Senate continue to be good.