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05/30/2010

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Shelia

the arguments presented spring more from an ideological position than anything else--government intervention is bad, pension benefits are excessive, etc. Most of these arguments are simply not supported by the data--especially when they are investigated at the country and sub-national levels. Few countries in Europe use either a collectivist system or exist as "welfare states." An in-depth look at the health care expenditures of the US v. European countries would immediately show the enormous--and I emphasize enormous--savings in the European systems.

Likewise with the labor markets

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Why is he the BBC’s Business Editor again?

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Europe needs high income and other tax rates in order to finance its system of early retirements and generous pension benefits, especially among its large numbers of government employees, its liberal unemployment benefits, easy access to welfare payments to support unmarried mothers, the care of children, and many other government subsidies. Edward Prescott has shown (see e.g., his “Why do Americans Work so Much More than Europeans”, Federal Reserve Bank of Minneapolis, Quarterly Review, 28, July 2004) that higher marginal tax rates account for a significant part of the difference in employment, earnings, and hours worked between the US and the main European countries. High tax rates reduce both the level of income at any moment and the rate of growth of income over time.

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Read this last night but had trouble commenting at the time, so I'll chime in now to say good job of relating your experience here.

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Marcelo

Apropos of comparisons between US and Europe, the US faces many of the same problems as Europe, but generally they are in a more muted form. The US has more flexible labor markets, lower marginal tax rates, fewer invasive regulations, a smaller welfare state

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