The last several weeks have been replete with numerous positive economic indicators.  The stock market is surging; housing is showing signs of life; corporate profits have been better than expected; consumer confidence and spending are on the upswing; the rate of job losses is declining; and manufacturing is on the threshold of expanding again.

It's reasonable to expect that GDP will turn positive this year.  In fact, some anticipate growth as soon as this quarter.  That may be slightly optimistic, but what should we look forward to insofar as a recovery is concerned?

President Obama's ten-year budget projections call for above trend line increases in GDP.  Is that realistic?

If we use Europe as a guide, dramatically increased government spending and robust economic growth have not gone hand-in-hand.  For the period 1970 to 2007, roughly coincident with Europe's move toward social democratic policies, GDP growth has averaged 2.4%, compared to nearly 3.1% for the U.S.  A delta of .7% may seem rather trivial (it isn't), but it carries with it enormous economic consequences, particularly as more and more dollars are needed to fund exploding entitlement costs and aging populations.  In the U.S., economists estimate that GDP needs to grow between 2% and 2.5% just to break even from an employment standpoint. 

The current decade has been even more bleak for Europe.  Since 2001, GDP has grown by 1.87% on average—close to a full percentage point less than the U.S. (2.78%).

With all of their government spending and social engineering, one might expect that the trade off would be lower unemployment.  Not true.  European unemployment rates have been doggedly and substantially higher than ours.  The EU25 rate has consistently been 3 to 4 percentage points (sometimes more) above what we've experienced.

What about poverty?  Has European spending at least reduced the ranks of the very poor?  The data shows a rather mixed bag.  The U.S. appears to fall somewhere in the middle of European countries in terms of poverty rate.

One of the more disconcerting statistics is government spending as a percentage of GDP.  In 1903, the figure was 6.8% for the U.S.  In 2009, it's projected to be 44.72%—a greater than 8% increase over the average of the previous 5 years—not particularly encouraging.  Less encouraging are the comparisons with major Western European countries.  In 2007, France was at 61.1%, Sweden and Denmark 58.1%, Italy 55.3%, the UK 50%, and Germany 48.8%.  Yep, we're on the march to be the equal of those paragons of economic stagnation.

I remain sanguine about our long term outlook, but that enthusiasm is diminished by unprecedented increases in spending, coupled with a policy environment that appears quite unfriendly to our prospects for trend and above trend growth.

Big government and big debt burdens do not have a favorable history.  Until we lighten the hand of government, reinvigorate the private sector, and reemphasize personal responsibility, we are in for a European-style long and steady decline in our economic vitality and international stature.

Think what you do when you run into debt; you give to another power over your liberty.  —Benjamin Franklin