European Model Avoids Risk of Inflation

As we know, European countries are suffering from the same economic crisis as America. Yet, Europe's efforts to slow and end the recession do not run the risk of inflation. America, on the other hand, will almost certainly suffer inflation in a few years. What's the difference?

In Europe, each country has implemented a fairly elaborate social safety net. To name just two such measures, European countries offer universal health care and robust minimum income measures. There are many others, of course.

As a result, European countries do not require a gargantuan stimulus package, because (a) human suffering is kept to a minimum through these safety nets, and (b) such government spending replaces the lack of private economic demand.

Thus, inflation is not likely to result in Europe.

Role Reversal / Strange World

As reported by the WSJ...

Defense Secretary Robert Gates unveiled a sweeping overhaul of the Pentagon's top weapons priorities...
....
The ambitious shake-up, a combination of defense contract cutbacks and policy changes, will stoke a smoldering debate in Congress about the importance of weapons manufacturing jobs and may mark an inflection point after the industry's record run during the Bush administration

As a general rule, I believe that our defense budget is too big; hence, I would typically support this proposal by Gates. However, these budget cuts will kill jobs, and the last thing our slogging economy needs is fewer jobs. Instead, we need more jobs, more government spending, and we can worry about the deficit and inflation later. Thus, in an unusual role reversal, I am opposed to a Republican's call for military budget cuts.

Strange world.