We Americans fool ourselves if we ignore the parallels between Europe's problems and our own. It's reassuring to think them separate, and the fixation on the euro — Europe's common currency — buttresses that mind-set. But Europe's turmoil is more than a currency crisis and was inevitable, in some form, even if the euro had never been created. It's ultimately a crisis of the welfare state, which has grown too large to be easily supported economically. People can't live with it — and can't live without it. The American predicament is little different.
Government expansion was one of the 20th century's great transformations. Wealthy nations adopted programs for education, health care, unemployment insurance, old-age assistance, public housing and income redistribution. "Public spending for these activities had been almost nonexistent at the beginning of the 20th century," writes economist Vito Tanzi in his book "Government versus Markets."
The numbers — to those who don't know them — are astonishing. In 1870, all government spending was 7.3 percent of national income in the United States, 9.4 percent in Britain, 10 percent in Germany and 12.6 percent in France. By 2007, the figures were 36.6 percent for the U.S., 44.6 percent for Britain, 43.9 percent for Germany and 52.6 percent for France. Military costs once dominated budgets; now, social spending does.