So, who has it right, the United States or Europe? Normally unless the topic is soccer my kneejerk answer each time is the good ole United States. But things have changed a lot. Ironically in the area of economics, Europe is doing many things right but those things are from the old playbook from the old United States. In the debate over the economy, all we hear about is taxing the rich, admittedly it's a hot button issue and perhaps a vote-getter for Democrats but the larger issue is spending. The creation of new entitlement programs, official like those borne out of healthcare reform and unofficial like the unlimited extensions to unemployment insurance, are budget busters.

The nation was heading toward insolvency before all the new laws passed by this administration and still the topic of spending cuts doesn't even get lip service. Germany was faced with the same issues as other western nations and the first thought was to raise taxes. But this is a nation in a continent that's been there and done that too many times. Instead, and despite enormous pressure from the White House, Germany decided on €80.0 billion in spending cuts. There has been an attack on the rich and special taxes on bankers across the continent; it is still Europe, after all. But, its amazing Germany could take such a pragmatic approach, even as America is teeing up the largest tax hike in history.

They say the proof is in the pudding. Germany reported 2Q10 GDP growth of 2.2% from 0.2% in the first quarter. The surge is the strongest since unification of the two Germanys in 1990. Coming into the number the pundits were looking for growth of 1.3%. France saw GDP growth of 0.6% beating consensus of 0.5% on an increase in household and government spending. There is tension; however, as France wants Germany to promote more domestic spending and it's obvious the have-nots on the continent are falling further behind. Remember, all these nations are linked together so Greece GDP falling 1.5% mitigates a lot of good news from Germany. But, nothing can mitigate the fact that Germany has it right.

It's going to take a serious gut check and honesty to do the right thing.

In today's WSJ a survey of 53 economists revealed some sobering predictions.

* Unemployment - Will not drop under 9.0% through June 2011
* GDP - Growth - 2.5% in 3Q10, 2.9% FY11
* 35 - Don't support allowing the Bush tax cuts to expire
* 11 - Bush tax cuts extended on people making $250,000+
* 23 - Extensions supported with offsets -spending cut or other taxes

I like the action or non-action in the market for an August summer and week of disappointing news.

Have a great weekend