Let us assume—you can tell I’m an economist—that the contemporary USA were like the Eurozone, that there was little labour mobility, no Federal Treasury, that Congress was weak and that power lay almost entirely with the individual states (as indeed it did in the late 18th century). Let us further assume that because there was no Treasury but only a Central Bank, there was no federal borrowing and that individual states had to finance themselves through taxation and state bond issues.
In such a world, the ‘rating agencies’ would look at the trade statistics of the various US states. Suppose that most US state-level trade was with other states (which it is) and that Michigan and Ohio (which produced mainly manufactures) had enormous trade surpluses while the relatively poor states of Louisiana and Mississippi (which produced mainly fish) ran persistent trade deficits. (Remember, this story is allegorical.)
Ohio and Louisiana might initially both have AAA+ ratings, but because Louisiana was dirt poor and suddenly was struck by a hurricane causing coastal devastation, its economy became a basket case and its tax receipts collapsed. In consequence, the rating agencies downgraded Louisiana’s dollar bonds, making it nearly impossible for the state to borrow. Nor could Louisiana export its way out of trouble because, as part of the dollar zone, it could not devalue. Drastic cuts (internal depreciation) would make it even poorer and more likely to default.
So Louisiana—-together with Alabama and Mississippi— needed help from richer states like Ohio and Michigan. But Ohio, Michigan and various other ‘northern states’ were not without internal problems, and their citizens were reluctant to help the ‘lazy and feckless southerners’. Nor would they let the Central Bank buy the bonds issued by these poorer states … until a major crisis occurred.
I leave the reader to finish the story. Needless to say, the crucial point is that the USA is not in the above situation because it has the economic institutions necessary for operating a federal economy.
At least the USA had Alexander Hamilton and James Madison to shape its structure—today, Europe has Angela Merkel and Nicolas Sarkozy. I’m not optimistic.
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There is of course another difference, more political/moral.
The US is a nation state. For the man in Ohio regards the woman in Louisiana as 'us'. Thus consents to the transfer of funds across state lines.
In the European Union that consent is not granted, but take as such by the European elite. This builds resentment.
Hell, even in Belgium, Flanders has no real fellow feeling for Walonia. You would be lucky to find 5% of Brits happy to bail out Bulgaria, and the Germans have shown they are not so keen on doing the same for Greece.
There is no European demos, which for all its faults the US has in spades.
Thus the situation that you posit has no real meaning outside the dismal science. In the real world we know why they are different.
So, what you are saying is that EU has a lot of options to improve the economy and it is actually doing not much less then US today. What kind of options does US still have?
@Gawain: Yes, I agree about the lack of an EU demos. But to say that the economics of the EU is irrelevant to the real world is just a touch over the top!