What lessons should the U.S. draw from Europe’s debacle?

Europe is a mess. But it’s a peculiar mess that both the left and the right think validates everything they’ve been saying about what we should — and shouldn’t — do here in the United States.

“The right argues we have to cut deficits now, or we’ll be like Greece,” says Tom Gallagher, a principal at the Scowcroft Group. “The left argues we can’t cut deficits now, or we’ll be like Europe.”

Ezra Klein

Ezra Klein is the editor of Wonkblog and a columnist at the Washington Post, as well as a contributor to MSNBC and Bloomberg. His work focuses on domestic and economic policymaking, as well as the political system that’s constantly screwing it up. He really likes graphs, and is on Twitter, Google+ and Facebook. E-mail him here.

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Europe’s debt crisis: Leaders continue negotiations, protesters take to the streets: As many European governments struggle under the weight of massive debt, government officials work to enact laws and agreements that they hope will save the euro. Meanwhile, citizens in Spain, Greece and elsewhere demonstrate against the austerity measures their governments have put in place to get the debt in check.

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Spain hit with second recession in three years: Spain announced April 30 that it has officially entered a recession. The news comes just three days after the country said that its unemployment rate has spiked to almost 25 percent and a day after tens of thousands of protesters rallied against cuts in health care and education.

So, who’s right? Well, which entity do you think is more comparable to the United States? Greece? Europe? Neither?

I come down somewhere between “Europe” and “neither,” but it’s worth going through each contestant in turn.

Greece is a country of 11 million people. Geographically, it’s about the size of Louisiana. It doesn’t control its own currency, and its government spent years lying about its fiscal condition. After it joined the euro area in 2001, Greece went from paying about 7 percent interest on a 10-year bond to a bit more than 3 percent because investors assumed that its debt was backed by Germany and the European Central Bank. This encouraged profligacy (which led to the dishonesty) in Athens.

The assumption turned out to be wrong. When investors figured that out, they turned on Greece. Hard. With easy money no longer masking its problems, Greece’s economy was exposed for the mess it is. The World Economic Forum ranks it as the 90th most competitive country in the world, between Lebanon and El Salvador.

The United States, by contrast, is a country of 313 million. It controls its own currency, which is also the global reserve currency. The U.S. Treasury bond is the safest of safe assets. Even after a lengthy financial crisis, the World Economic Forum ranks the United States as the fifth most competitive economy in the world, and it’s bigger than the first four combined. Whatever the United States is, it’s not Greece.

Euro area’s flaws

So perhaps it’s Europe? Or at least the euro area? After all, the euro area is also big and controls its own currency. Likewise, the euro area was once considered a safe bet.

But the euro area is also a fledgling institution facing an existential crisis. No one knows whether it will be around in its current form in 10 more years — or even 10 more months. Its central bank seems more committed to forcing member countries to cut their deficits and reform their labor markets than to preserving the currency union itself.

The crisis has also exposed deep flaws in the basic structure of the alliance. The member countries increasingly despise and mistrust one another. Critical players in the drama — France and Greece — are on the verge of electing new governments that promise to radically renegotiate the terms of euro-area compacts. Meanwhile, Germany and the European Central Bank seem determined to impose a moralistic, debt-focused narrative on a crisis that’s better understood as a problem of capital flows and growth.

The United States has its problems. Although we can borrow for next to nothing and unemployment remains above 8 percent, U.S. leaders often seem more focused on debt than growth. The political system is increasingly gridlocked and dysfunctional. One of our two major parties is engulfed in a civil war driven by an insurgency that wants to radically redefine government functions, preferring, for instance, to default on the national debt rather than increase tax revenue or borrow more.