Austerity!

Friday, March 25th, 2011 @ 12:28 pm | Economy

I know anti-spending fervor was just a anti-whatever-Obama-does reactionary fart from the right in America, dutifully copied by serious people, leading to a stunted stimulus and several canceled public infrastructure projects that would have employed lots of people and improved the country, but why on earth did other countries have to copy the stupidity?

Just ask the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens. The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.

That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.

And then there’s the British experience. Like America, Britain is still perceived as solvent by financial markets, giving it room to pursue a strategy of jobs first, deficits later. But the government of Prime Minister David Cameron chose instead to move to immediate, unforced austerity, in the belief that private spending would more than make up for the government’s pullback. As I like to put it, the Cameron plan was based on belief that the confidence fairy would make everything all right.

But she hasn’t: British growth has stalled, and the government has marked up its deficit projections as a result.

Our deficit problems are largely fueled by the economy tanking in 2008, causing already low revenues (thanks, Bush tax cuts) to decline precipitously. If we don’t fix the economy constructively in a way that gets more Americans working and spending, then revenue dips even more and trying to shave a few points off Medicare gets us nowhere. Even worse, we cut funding for things that save money in the long run, going directly backwards.

Yet somehow, in our difficult times, we’ve only mustered enough courage for the “hard choices” that happen to coincide with the 30 year Republican dream of starving the beast, defunding the government in order to force shrinkage to satisfy some vague ideological goal. Steadily, we strengthen the impression that America is unable to understand, address, and solve its problems. Thus the mythical “confidence” we do all this to seek dances further from our reach.

-hw

3 Responses to “Austerity!”

  1. Jldmeyer Says:

    And the father of two of the most powerful Republican lawmakers in Wisconsin got the job of heading the state patrol. Scott Walker may have put all his pawns into their positions but there is one thing that he didn’t account for: RECALL. Go Badgers!

  2. Jldmeyer Says:

    And those constitution loving Republicans in Wisconsin also are trying to take one branch out of the American judicial system. Publishing and enforcing the law against collective bargaining despite a judicial hold shows that there must only be two branches of government in Wisconsin that they believe in. They may carry a copy if the constitution in their pocket but don’t read past Article II. That judge must be an activist judge. I guess they need to recall him and put a judge in there that is against collective bargaining.

  3. Common Sense Political Thought Says:

    Sometimes I wonder if such highly edumacated geniuses like Paul Krugman aren’t so smart that they’ve followed the curve all the way around, right back to stupid….

    From Jeff Goldstein: “Going Broke: Treasury Down to $58.6B in Cash, $130.5B Borrowing Authority” Terence Jeffrey, CNS: Imagine that you had an average monthly income of about $170 balanced against average monthly expenses of about $940–and that you wer…