It may come as a surprise that, while we were all atwitter about the election and subsequent fallout, life in the rest of the world went on, unconcerned, for the most part, by happenings here. But it did and now we have to take care of the one thing that the rest of the world does give a flying rat’s patootie about: The Fiscal Cliff.

They worry about this because within our solution to this problem is the answer to the Burning Question of the Planet, namely: Who is going to buy our stuff?

Not that our solution will have any bearing on the eventual outcome, because the reason we know it’s a cliff is that we’re already more than half way to the bottom. It was a problem ignored and now it’s too late.

Really.

The reasons for this are many but I think stem from a single Paleolithic survival experience which can be summed up as: The tiger is not a problem until you can see its tonsils. Humanity has lived with that rule ever since.

You can see this by comparing what US news sources consider important with what the rest of the world does. As I write, the international headline on both NPR and CNN is that protesters have been spraying the police in Belgium; with milk. On the BBC, the Europe section has its own category called “The Eurozone Crisis.” No mention of milk.

Sure, you say, that’s just the Brits going all nanny-nanny-boo-boo as they smugly sip their tea and nibble their scones secure in the knowledge that they didn’t jump in with the bloody Frogs and take up the Euro. But, unlike US news outlets, the Brits didn’t bother with the fact that it’s the last day to vote for Hero of the Year, but chose instead to put together some numbers and build some charts.

God, I love the BBC.

To give some context to the numbers it would behoove us to look at the treaty which is the underpinning of the Euro. The political and monetary union was defined in 1992 by the Treaty of Maastricht and ratified by the member states. Within the treaty’s provisions were items relating to the amount of sovereign debt any of the member nations could carry (sixty percent of GDP), and how big an annual budget deficit they were allowed to have (three percent).

When you visit that BBC page and look at the charts, the first thing that jumps out is that most of the member nations have flagrantly, blatantly, and disconcertingly ignored the rules. Nevertheless, peering at those squiggly lines can show the true financial powerhouses of Europe standing out like an unbloodied thumb at a nail driving contest. These are the nations that took the treaty to heart and stand as an example to the rest of Europe as the shining hope of the continent. Unfortunately they are: Estonia, Luxembourg, and Malta. The only countries in the EU that are living within the three-percent deficit cap of the Maastricht Treaty. They are joined by the fiscal titans of Finland, Slovakia, and Slovenia in the Acceptable Debt to GDP Ratio Club.

My reaction to all this: Malta? Isn’t that where they invented milkshakes?

My geopolitical idiocy aside, I was, in actuality, like all, WTF? Where’s Germany?

Germany, the hope of the Euro and ruler of Europe, bailer out of Greece et al was nowhere to be seen in this unfavorable mess. Total debt limit? Fuggedaboudit. They blew through that curve a decade ago. Deficit spending? Right now they’re running at a nice minus five percent (Celsius, I’m assuming, since it’s Europe.) Every government, other than the unlocatable principalities and duchies listed above, is running well in the red.

So, what’s the big deal about Germany and France being Europe’s fiscal saviors? Simple, they have what still resembles an economy so they have cash flow, and, for a while anyway, thereby the means to service Europe’s debt. But for everybody else, soon apparently to include France, the slide back into recession is well underway.

Consider unemployment. As a whole Europe’s economies are struggling along with unemployment in the same range as in the US. Germany is lower at just under six percent. But France and Italy, the second and third largest economies in the Eurozone are at ten percent. For the problem countries – Portugal, Ireland, Greece, and Spain – try fifteen, fifteen, twenty, and twenty-five percent respectively. Forget recession, those four are in the clutches of a financial depression.

Even with the rest of Europe helping out.

In terms of GDP growth, Europe is still in recession. 2010 witnessed a resurgence of GDP in percentage terms because things were just so bad in 2008 and 2009. But from 2010 on, all, yes all, countries in the zone were showing negative or zero GDP change. With the exception of our old friend Estonia.

(Excuse me while I go look at a map. Okay, I’m back. The map didn’t help.)

We are now seeing a picture, if the BBC is to be believed, of a continent in crisis, held up by Germany; the one country with some cash, which itself is deep in debt and living off the MasterCard.

I can hear you now. Europe, Europe, Europe. Always going on about Europe. Those bozos don’t have a clue. We could never screw up that badly here.

And you’re right.

Because we’ve already screwed up worse.

It all goes back to our old friend Gross Domestic Product, GDP, the sum total of all economic activity in a country. Ford rolling out cars in Detroit, farmers harvesting corn in Iowa, the kids across the street selling eggs from their chickens; all of it adds up to GDP. For the United States, almost three times the economic might of China at number two, that GDP is right at fifteen trillion dollars.

But to compare apples to apples, we have to take Europe as a whole, so we should compare the US GDP to all of Europe. In that view, the EU has seventeen trillion in GDP, an eighty-five percent debt to GDP ratio, and a ten percent (+/-) unemployment rate. Well, that’s why they’re in so much trouble.

Then we look at the good old USA, with our fifteen trillion GDP, only eight percent unemployment, and a mere 106 percent debt to GDP… Whoa! Huh? The US federal government owes more than the entire economy?

Yup. In fact, in Europe the only countries that are close to the US ratio are Greece, Portugal, Ireland, Italy, and the EU capital Belgium. The US is worse off than Spain.

But, once again looking for apples, the US is composed of states and those states, like their counterpart countries in the EU, are running in the red too. State and local debt is now at about $2.4 trillion making the real public debt to GDP ratio 116%; still better than Greece, but worse than everyone else.

Your share is fifty-four grand. In absolute terms it means that if all economic activity in the US were used to pay down the debt, we would still have the largest debt load on the planet.

So, what’s the good news? How do we get out of this mess? Simple, by increasing revenue relative to expenses. If tax rates stay the same and the economy grows, revenues increase by dint of that growth. However, as I talked about a few weeks ago, the only reason the economy is growing at all is that somebody’s been printing up C-notes in the basement. We can’t spend our way out of the problem as we did in the New Deal era because we’re already in a pile of hurt.

We could also raise tax rates, but it would take an increase to three times the current rate to make ends meet. Couple that with the fact that government spending is about a tenth as effective on stimulating economic growth as private sector spending, and you can see that raising taxes enough to do any good is just going to spin us down the tubes faster.

But it isn’t damned if you do etc. To find a solution to this mess we need to take a hard look at that historical problem of tigers and tonsils. Humans are notoriously bad at dealing with a problem but remarkable good at dealing with a crisis.

The problem: you have to change the oil in your car once in a while. The response: yeah, but I don’t have the time. The crisis: I need a new engine, but it’s only 3,000 bucks. Problem solved.

Another problem: climate change will result in statistically more and stronger storms. The response: what’s “statistically” mean? The crisis: Hurricane Sandy, but it’s only $100 billion. Problem solved.

The problem: there’s not enough money. The response: tax the rich/empower the job creators (pick your lie). The crisis: there’s not enough money.

Oops.