THE great economist F. A. Hayek said in his masterpiece The Road to Serfdom that post-World War II Europe had been seduced by the temptations of socialism. By adopting cradle-to-grave welfare programs, Hayek predicted, Europe would suffer from economic stagnation, and his warning proved correct. By the 1970s, Old Europe—principally France, Germany, Italy, Spain, and Sweden—was allowing the government to consume half of its economic output, compared with about a one-third share in the U.S. Today, the European Union is economically comatose, with sky-high tax rates on individuals and businesses, double-digit unemployment, economic growth at half the U.S. rate, and widespread disinvestment from a once-economically mighty continent.
For all these reasons, U.S. policymakers should take a close look at a new study by the Congressional Budget Office that suggests we are moving in the direction of the Euro-losers. The CBO calculates that, given our current spending trends, the federal government’s take of national output will rise from 20 percent today to 30 percent in 2025, and then to 34 percent by 2040. When we add to this the 12 percent of our national output that is presently consumed by state and local governments, about half of everything we produce in 2040 will be swallowed up by government.
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