...the key variable [is] output per hour worked, Europe matched or surpassed the US some time ago. The faster US growth of the past decade is in part catchup.
Furthermore the greater number of hours worked in the U.S. is not just a labor-leisure preference. Some of the difference stems from the higher tax rates in Europe, as argued by Ed Prescott (plus Europeans have to work harder at shopping and at home, see the link). Admittedly this question is not fully resolved, but it is wrong to attribute the entire hours difference, or even most of it, to preferences. In other words, measured output per hour is not the key variable.
Many stories can be told about why the US is gaining on Europe. Most plausibly they involve greater micro-productivity in R&D, higher education, and the use of information technology. In fact, some of these stories can be told from a pro-government point of view. These stories are not just seen in the statistics, they are confirmed by a wide range of case studies and more impressionistic accounts.
But it is not plausible to suggest that the U.S. has been growing more rapidly because it is playing catch-up to Europe.
There is more, but this post is running long...
It is true that some European nations are at a par with the United States, and Norway (oil) and Luxembourg (financial services and small population) are above the United States. But keep in mind that these figures for the top European performers are averages. Creating low-wage jobs or taking in immigrants will lower such an average butthis effect should not downgrade the true economic performance of the United States.
A further question is how much "cherry-picking" in Europe should be allowed (e.g., ruling out Greece), while not doing the same for within the United States. Louisiana and Mississippi are a drag on U.S. averages, and DC probably looks like Luxembourg.
Note also that high rates of government employment, as we find in many parts of Europe, tend to overstate measured gdp.
If we look at recent rates of growth, whether of productivity or of gdp, the U.S. clearly is ahead of Europe, although a forthcoming U.S. slowdown may change that ranking at least for a while. Much of this seems to stem from information technology, as best we can determine, not "American catch-up." Try also the Lewis book on productivity. The micro-evidence all suggests that the U.S. has obtained an ongoing flexibility lead in certain key categories, most of all retailing.
In short, if we view the numbers in context, they still indicate a serious economic problem for social democracy. Try some demographic projections as well, and their implied economics, a topic on which Quiggin and CT commentators were conspicuously silent.
None of this is counting the America’s greater future capacity to either respond to globalization or absorb immigrants. I’ve heard many a European envying the future of the American economy, but I’ve never heard of an American envying the future of the French or German economy (except perhaps at CT).
As I said in my original essay, I still see two "plausible" scenarios for Europe not collapsing. Eichengreen is yet more optimistic than I am. But if defenders of social democracy continue to deny the problem, there is no reason to be optimistic at all.