Economist Daniel Gros compares the U.S. and Europe and finds America’s efforts at Keynesian stimulus have accomplished little. That, even though a) the U.S. has been been running deficits 40% bigger than Europe’s, and b) debt as a share of GDP has risen by 41 percentage points vs. 25 for the eurozone.
Gros concludes “the U.S. has thus not done any better than the eurozone, although it has relied on a much larger dose of fiscal expansion.”
Two key factoids:
– U.S. economic performance has been very similar to that of the eurozone since the start of the crisis: GDP per capita today is still about 2% below the 2007 level on both sides of the Atlantic.
– The unemployment rate in the US and the eurozone has increased by about the same amount as well – three percentage points.
In fact, the economy that has imbibed the strongest dose of expansionary policy has recovered less: GDP per capita in the UK today is still 6% below the 2007 level. Of course, one could argue that the UK was particularly exposed to the bust, because financial services make up a large part of its GDP. But the fact remains that its economy, supposedly the most flexible in Europe, has not recovered from the shock five years later, despite massive fiscal and monetary stimulus, coupled with a substantial devaluation.