There’s an old joke. A tourist is lost in rural Maine and arrives at a general store stuck out in the middle of nowhere. The tourist asks the geezer sitting on the porch of the general store for directions. After hemming and hawing for awhile the Mainester responds “You cahn’t get the-ah from he-ah”.
In a piece in the Washington Examiner Richard Rahn urges the U. S. to adopt the “Swiss debt model”:
Rather than fight about specific spending cuts in the next two months (which are likely to be very small at best), it might be wiser to demand spending process reform. Two decades ago, the Swiss reformed their system to require a balanced budget over the business cycle, known as the â€œSwiss debt brake.â€ It has worked very well, as can be seen in the table, and is fiscally responsible. Congress should try a similar system in the U.S.
The Swiss approach is interesting and completely in alignment with Keynes’s advice. Swiss public debt is around 14% of GDP compared with U. S. public debt at 115%.
However, the differences between Switzerland and the U. S. are stark. Switzerland is a small, landlocked country with an allergy to involvement in any form with the affairs of other countries. It is not a member of the European Union and didn’t join the United Nations until 2002.
Switzerland’s is a consensus-based society and, despite having four official languages, is highly socially cohesive. It’s probably the most democratic country in the world—all legislation of any substantial scope is subjected to a referendum. Switzerland has a universal draft.
Switzerland has never had debt as high as ours. To push our debt down to Switzerland’s level would take trillions in spending cuts, tax increases, or both. That would fall very hard on the poor and, since the poor are disproportionately black or Hispanic, would fall hardest on blacks and Hispanics and would be castigated as racist.
We can’t get there from here.