America’s fiscal federalism is less superior than you might think

QUICK: WOULD you rather face the worst economic crisis in history as a resident of America’s fiscal union, or Europe’s? An easy choice, surely; a decade ago, the euro area’s skeletal economic institutions turned an American-made panic into a near-collapse of the European project. By 2013 euro-zone output was 3% below its peak in 2008, whereas America’s was nearly 5% higher. Look again, though, and the answer is less obvious. Both fiscal federations have flaws. But the covid-19 crisis shows that Europe may not be so badly outclassed by America’s fiscal union after all.