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Lessons from the euro crisis for the United States

Author

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  • Desmond Lachman

    (American Enterprise Institute)

Abstract

As the European economy slides ever deeper into recession, it is time for the United States to draw cautionary lessons from Europe's painful budget adjustment experience, especially as the dismal state of America's public finances now bears an uncomfortably striking resemblance to that of some of Europe's more troubled economies. Among the more important lessons is that the United States should not be lulled into a false sense of budget complacency by the very-low interest rates at which its government can presently fund itself. Rather, the United States should embark upon a serious program of medium-term budget adjustment if it is to avoid going further down the path to fiscal ruin. The European experience also suggests that medium-term fiscal consolidation is best effected through public spending cuts rather than tax increases, and that such an adjustment effort should be supported by accommodative monetary policy action.

Suggested Citation

  • Desmond Lachman, 2012. "Lessons from the euro crisis for the United States," AEI Economic Perspectives, American Enterprise Institute, November.
  • Handle: RePEc:aei:journl:y:2012:id:16205
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    Citations

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    Cited by:

    1. Haytham Y.M. Ewaida, 2016. "The European Crisis Without End: The Consequences of European Monetary Integration," International Journal of Business and Social Research, LAR Center Press, vol. 6(8), pages 15-30, August.
    2. Haytham Y.M. Ewaida, 2016. "The European Crisis Without End: The Consequences of European Monetary Integration," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 6(8), pages 15-30, August.
    3. Mogaji, Peter Kehinde, 2015. "Review of Architectural Flaws of the EMU: What Eurozone Crisis Lessons for the Proposed ‘Afrozone’?," MPRA Paper 99334, University Library of Munich, Germany.
    4. Gheorghe MATEI & Luiza APOSTOL, 2014. "The Impact Of The Public Debt On The European Union Member Countries," Annals of University of Craiova - Economic Sciences Series, University of Craiova, Faculty of Economics and Business Administration, vol. 1(42), pages 81-88.

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