The eurozone has officially slipped back into recession, and America could soon follow if it takes President Obama’s route of cutting deficits mainly through tax hikes.
The news this past week from across the Atlantic poses a lead-or-follow choice for the U.S. The nation can either pull the rest of the world back into prosperity, or it can sink with it.
And it will be making that choice soon, in how it decides to deal with the tax hikes (huge) and spending cuts (not so huge) due to hit at the start of 2013.
One option is President Obama’s plan to raise taxes by about $1.6 trillion over the next 10 years.
The other is the Republican idea of holding the line on tax hikes while rolling back future spending with entitlement reforms. To see which plan would work better, it’s instructive to take a look at Europe.
Eurostat, the European Union’s statistical service, has made it official: The common-currency zone of the Continent has slipped back into recession after three years of weak recovery. The core economies, France and Germany, continue to grow but not by much.