Does austerity work? The Left has said no!

[usmcstinger]

Barack Obama is to put pressure on Germany to ease the pain of austerity with policies to boost growth, as he uses two days of talks with the G8 industrial nations to warn Europe that it needs to act swiftly to spare the world economy from a second deep recession in four years.
Barack Obama tells EU: boost growth now or face a global crisis | Business | The Guardian

More austerity for U.K. despite recovery.
U.K. faces fresh austerity cuts as debt climbs - Jan. 6, 2014

Hollande Converts, Proposes Austerity and Lower Taxes To Boost Growth in*France

The results of the few countries in Europe that have tried austerity have been quite positive, in complete opposition to those on the left who keep declaring austerity a failure. As I documented last summer, Bulgaria, Latvia, Lithuania, Hungary, Poland, and Romania have all cut government spending and seen their economies grow faster than the average for the European Union.

Hollande Converts, Proposes Austerity and Lower Taxes To Boost Growth in France - Forbes

There is enough evidence to prove that austerity does work.

Any Legislation regarding Austerity and Tax Reductions will never come to the floor of the Senate.

When will this Administration and the Democrats in Congress get it?

 

[DGS49]

There is a fundamental problem with this "austerity" thing when it comes to Government: So few people in Government have ever had a Real Job or run a company that they have no idea what it is.

Anyone who worked in private sector management through the 80's can attest to the fact that top management would REGULARLY come to you and demand a cost reduction in your next year's budget. Maybe it was 5%, 10% or even more. And you were cautioned that if your department's performance suffered you would be GONE(!). So you looked at your people, your expenses, reports you were doing, production techniques - everything. And you reduced your budget as required. Maybe a couple people got laid off, but that's life. (It has happened to me more than once).

Frequently, whole layers of management were simply eliminated. Do we really need VP's AND Directors AND supervisors AND team leaders? Maybe not.

Sometimes, you would have to consider the possibility that some things you were doing were simply not necessary, and could be eliminated entirely. Do we really need a monthly employee newsletter? Can we contract out the janitorial work? Is this product line actually making us any money? Can we buy their products from outside and maintain the same margins?

The bottom line was (and remains) that virtually every private sector entity has to be prepared to cust costs dramatically on occasion, just to remain viable. And I mean REAL cuts. Spent a million last year? Spend $850 thousand this year, with no loss of production. It actually happens all the time.

When you talk to a government manager about "cut-backs" they immediately think with reference to next year's budget, which already assumes a 5% increase - then they think about reducing the increase by a couple percent. As a target, of course, not an actual commitment. And every agency, program, initiative, and layer of management is CAST IN CONCRETE, even if its efficacy can clearly be disproven.

Having worked for a long time in both public and private sectors, I have no doubt whatsoever that a good private sector manager could, given a free rein, cut costs by at least 25% in virtually any government agency, and the public served by that agency wouldn't even notice, particularly if layoffs could be done according to performance and not seniority.

And this is not just in the U.S. If you look at government spending in Western Europe over the past 7-8 years, you will not see any significant dips in spending. Mainly the rate of increase slightly levels out, and this is described in the Press as "austerity," and the people described as suffering mightily for it.

Government exists primarily for its own perpetuation. This is why every new program and spending initiative must be scrutinized with microscopic attention - because it will never go away, even if it is a total bust.

Can you believe we are still paying farmers to make motor fuel from CORN? One of a thousand examples.

 

[f252863]

Collectivists have no concept of what austerity means. To them it is a slowing down in the rate of increase as opposed to a real cut.

 

[Disir]

The IMF finally fessed up last year and said that austerity doesn't work. You know... that lovely group of people that need their behinds kicked after pushing for that crap.
IMF: Austerity is much worse for the economy than we thought

Ask the people in the US to follow the money. Ask them. Austerity for me but not for thee because um.....liberal.

 

[Moonglow]

I enjoyed my stimulus checks during Boosh, I wish Oblama would have given us two also....

 

[DGS49]

Please provide an example of a country which implemented "austerity."

I can provide a mountain of examples of countries that spent their asses off and have nothing to show for it. One might even mention the United States of Fucking America in that regard.

 

[Disir]

BBC News - EU austerity drive country by country

 

[DGS49]

Thank you for the link. Good information. Mr. Hollande seems to be, shall we say, an idiot?

 

[Kimura]

Austerity isn’t even horrible economics, it’s a failed policy with no basis in reality. It’s out of paradigm. Every time austerity has been attempted, regardless of tax policy being recommended by the jackals over at the IMF, it's been an utter failure. The end result, as we’re seeing in the EU, is the atrophy of labor and capital, which pushes countries into depression. Again, for the SFC model challenged, if the government sector goes into surplus, the domestic private sector will go into deficit, similar to the situation we saw with Clinton in the 1990s, which caused private debt loads to skyrocket among other things. Also, just to make my point clearer, a deficit reduction is the fiscal equivalent of a tax increase, since both remove income from the economy.

 

[Kimura]

There is a fundamental problem with this "austerity" thing when it comes to Government: So few people in Government have ever had a Real Job or run a company that they have no idea what it is.

Anyone who worked in private sector management through the 80's can attest to the fact that top management would REGULARLY come to you and demand a cost reduction in your next year's budget. Maybe it was 5%, 10% or even more. And you were cautioned that if your department's performance suffered you would be GONE(!). So you looked at your people, your expenses, reports you were doing, production techniques - everything. And you reduced your budget as required. Maybe a couple people got laid off, but that's life. (It has happened to me more than once).

Frequently, whole layers of management were simply eliminated. Do we really need VP's AND Directors AND supervisors AND team leaders? Maybe not.

Sometimes, you would have to consider the possibility that some things you were doing were simply not necessary, and could be eliminated entirely. Do we really need a monthly employee newsletter? Can we contract out the janitorial work? Is this product line actually making us any money? Can we buy their products from outside and maintain the same margins?

The bottom line was (and remains) that virtually every private sector entity has to be prepared to cust costs dramatically on occasion, just to remain viable. And I mean REAL cuts. Spent a million last year? Spend $850 thousand this year, with no loss of production. It actually happens all the time.

When you talk to a government manager about "cut-backs" they immediately think with reference to next year's budget, which already assumes a 5% increase - then they think about reducing the increase by a couple percent. As a target, of course, not an actual commitment. And every agency, program, initiative, and layer of management is CAST IN CONCRETE, even if its efficacy can clearly be disproven.

Having worked for a long time in both public and private sectors, I have no doubt whatsoever that a good private sector manager could, given a free rein, cut costs by at least 25% in virtually any government agency, and the public served by that agency wouldn't even notice, particularly if layoffs could be done according to performance and not seniority.

And this is not just in the U.S. If you look at government spending in Western Europe over the past 7-8 years, you will not see any significant dips in spending. Mainly the rate of increase slightly levels out, and this is described in the Press as "austerity," and the people described as suffering mightily for it.

Government exists primarily for its own perpetuation. This is why every new program and spending initiative must be scrutinized with microscopic attention - because it will never go away, even if it is a total bust.

Can you believe we are still paying farmers to make motor fuel from CORN? One of a thousand examples.

Governments don't need to be run like firms in the private sector, nor does government need to be profitable. Government is provisioned to to execute public policy. It all boils down to how many resources we want to move from the private sector to the pubic sector. These are ultimately political decisions, not financial ones.

 

[oldfart]

Please provide an example of a country which implemented "austerity."

Since no one has "tried" austerity, you must agree that there is no evidence that it works. And I suppose you therefore have no objection to trying anything else, like the policies of the 1948--1970 period which produced the greatest period of growth in world history?

 

[Kimura]

Please provide an example of a country which implemented "austerity."

Since no one has "tried" austerity, you must agree that there is no evidence that it works. And I suppose you therefore have no objection to trying anything else, like the policies of the 1948--1970 period which produced the greatest period of growth in world history?

Maybe we should post some data from from the PIIGS up until now? One example without even using teh Google: Ireland. They increased capital gains by like 25%, slashed social welfare, slashed public sector wages, increased capital gains, and imposed some idiotic carbon tax. These policies are anti-growth since they reduce national income.

I'm back from my hiatus.

 

[DGS49]

"Austerity" is just today's buzzword, but the point is this: No institution - and particularly one that is charged with the protection of the public interest - should run its affairs in such a way that its expenditures, year after year, exceed the revenues coming in.

National governments have the ability to create money, and thus spread or delay the pain of their fiscal irresponsibility, but the fact remains that it is irresponsible to SPEND more than you TAKE IN over the long term.

It is possible to increase spending in the short term to STIMULATE the economy - build roads and bridges, that sort of thing. But the theory is that the effect of the injection of funny money into the economy stimulates private investment and spending, thus increasing tax revenues and compensating for the short term stimulus. Our Progressives have decided in the current situation that the short-term spending must be perpetual, which is economic insanity.

Austerity is the term that is used of late to describe the effort by national governments to live within their revenues, and as indicated in this thread, Liberals claim that their is something "wrong" with austerity, because it inevitably results in many government teat-suckers being left out in the cold.

The situations in Europe and the U.S. are somewhat different because in Europe the countries have made a conscious decision to erect a social safety net that protects them from cradle to grave, and includes free education through university level, free healthcare, nursing homes, generous unemployment benefits and "welfare," and so on. But in Europe they also decided, at least initially, to set their tax rates high enough to pay for all of it. Their income taxes are much higher than in the U.S., and the reason why "gas" is $8/gallon is because of all the taxes that are tacked onto the price.

In the U.S., ironically, the social safety net is not only NOT mandated by public policy, it violates the U.S. Constitution, though you would never know that to hear a Democrat speak of it. We CANNOT have socialized medicine and so forth. And because we have never made this policy decision to have and PAY FOR a comprehensive social safety net, our taxes are insufficient to pay for those pieces of the social safety net that "progressives" have been able to force through the process. So, as George Will has often put it, we have a national consensus that we want to be protected by comprehensive government programs, and we also have a national consensus that we don't want to pay for it. Democrats either want (a) someone else to pay for it, or (b) to keep printing funny money to pay for it and not worry about the future*.

Thus, we have trillion dollar deficits, year after year - a number which is too large for any human to comprehend.

When the U.S. approaches a balanced budget, which happens occasionally, it has nothing to do with higher taxe rates, and everything to do with increased economic activity, which automatically increases taxable incomes, both individually and on commercial enterprises.

__________________________
*Isn't it ironic that the Dems are in a panic about global "climate change" which is uncertain and speculative, and couldn't care less about trillion dollar deficits, the disastrous effects of which are clear and very well known?

 

[sjay]

What DGS said. Excellent.

 

[Kimura]

"Austerity" is just today's buzzword, but the point is this: No institution - and particularly one that is charged with the protection of the public interest - should run its affairs in such a way that its expenditures, year after year, exceed the revenues coming in.

You cannot compare the finances of a sovereign currency issuer to that of a household or individuals. In terms of balanced budgets, it's impossible for the federal government to do this for any extended period of time. It's only feasible if the private sector decides not to net save, and decides to purchase more real more goods and services from the foreign sector than it sells to them as exports.

National governments have the ability to create money, and thus spread or delay the pain of their fiscal irresponsibility, but the fact remains that it is irresponsible to SPEND more than you TAKE IN over the long term.

The monetary circuit doesn't operate like a recycling plant. There isn't a fixed quantity of $$$$ in a vault somewhere. Money creation is ex-nihilo under a fiat system, so all government spending is money creation. When we pay taxes, it's basically a way of unprinting money, so it's more of a mechanism to control inflation and regulate aggregate demand, than a way to fund federal expenditures.

It is possible to increase spending in the short term to STIMULATE the economy - build roads and bridges, that sort of thing. But the theory is that the effect of the injection of funny money into the economy stimulates private investment and spending, thus increasing tax revenues and compensating for the short term stimulus. Our Progressives have decided in the current situation that the short-term spending must be perpetual, which is economic insanity.

There isn’t some fixed amount of savings cemented in the economy. Savings is a byproduct of national income. When we have increasing national income, we have increasing levels of savings. If the federal government spends $$$$ to get economic activity going, and increases GDP and national income, savings will increase automatically.

In my opinion, from a macro standpoint, all spending and tax decisions by the federal government should be done in such a way that total net spending in the economy is good enough to produce the levels of real output where firms will employ any and all available labor.

Austerity is the term that is used of late to describe the effort by national governments to live within their revenues, and as indicated in this thread, Liberals claim that their is something "wrong" with austerity, because it inevitably results in many government teat-suckers being left out in the cold.

The situations in Europe and the U.S. are somewhat different because in Europe the countries have made a conscious decision to erect a social safety net that protects them from cradle to grave, and includes free education through university level, free healthcare, nursing homes, generous unemployment benefits and "welfare," and so on. But in Europe they also decided, at least initially, to set their tax rates high enough to pay for all of it. Their income taxes are much higher than in the U.S., and the reason why "gas" is $8/gallon is because of all the taxes that are tacked onto the price.

In the U.S., ironically, the social safety net is not only NOT mandated by public policy, it violates the U.S. Constitution, though you would never know that to hear a Democrat speak of it. We CANNOT have socialized medicine and so forth. And because we have never made this policy decision to have and PAY FOR a comprehensive social safety net, our taxes are insufficient to pay for those pieces of the social safety net that "progressives" have been able to force through the process. So, as George Will has often put it, we have a national consensus that we want to be protected by comprehensive government programs, and we also have a national consensus that we don't want to pay for it. Democrats either want (a) someone else to pay for it, or (b) to keep printing funny money to pay for it and not worry about the future*.

Thus, we have trillion dollar deficits, year after year - a number which is too large for any human to comprehend.

When the U.S. approaches a balanced budget, which happens occasionally, it has nothing to do with higher taxe rates, and everything to do with increased economic activity, which automatically increases taxable incomes, both individually and on commercial enterprises.

Austerity can't work in the US simply because of the reality of budget surpluses and/or "balanced budgets". We define a surplus as tax revenue that exceeds spending, which destroys net financial assets within the private sector. If these financial assets aren't replenished by revenues through running a trade surplus, the constant destruction of net financial assets within the private sector simply cannot continue. The end result is depression, recession, credit bubbles and going back to budget deficits. For the United States, with our trade deficit and large output gap, which manifests in the form of high unemployment and chronic underemployment, a policy of decreasing the deficit with the goal of a balanced budget and/or budget surpluses, is highly destructive and will further erode the capacity of the economy in the US.

It's fiscally irresponsible and insane to purse deficit reduction when we have such a large output gap and trade deficit, because such a course of action, from an macro standpoint, will destroy net financial assets within the private sector year after year as long such a destructive policy is pursued. If such a plan is pursued long enough, the removal net financial assets from the private sector will result in a severe deterioration of both labor and capital, which will severely cripple the productive capacity of the economy and the government's ability to maintain productive deficit spending that produce outputs of lasting social and civil value.

Lastly, the EU is in the position its in because of nutty neoliberal monetary policy being pursued by zee Germans and Brussles. The way out of their debacle is through a prudent fiscal policy. A 1.5-2.0 trillion Euro spending program for housing, infrastructure, education, medical research, R&D, transportation, etc. on the Continent should suffice to get aggregate demand going in a sufficient fashion. We cannot compare the US - or any other sovereign currency issuer - to EU countries since they are revenue constrained, similar to a state or local municipality. This is inherently the problem of an economic union without a political union.


__________________________
*Isn't it ironic that the Dems are in a panic about global "climate change" which is uncertain and speculative, and couldn't care less about trillion dollar deficits, the disastrous effects of which are clear and very well known?[/QUOTE]

 

[f252863]

Austerity isn’t even horrible economics, it’s a failed policy with no basis in reality. It’s out of paradigm. Every time austerity has been attempted, regardless of tax policy being recommended by the jackals over at the IMF, it's been an utter failure. The end result, as we’re seeing in the EU, is the atrophy of labor and capital, which pushes countries into depression. Again, for the SFC model challenged, if the government sector goes into surplus, the domestic private sector will go into deficit, similar to the situation we saw with Clinton in the 1990s, which caused private debt loads to skyrocket among other things. Also, just to make my point clearer, a deficit reduction is the fiscal equivalent of a tax increase, since both remove income from the economy.

Austerity was implemented after the depression of 1920/1921, government spending was drastically cut. The result? The boom of the 1920s.

And don't give me the claptrap about "that led to the depression". The depression was caused by an over expansion of the money supply, loose monetary policy.

 

[f252863]

Please provide an example of a country which implemented "austerity."

Since no one has "tried" austerity, you must agree that there is no evidence that it works. And I suppose you therefore have no objection to trying anything else, like the policies of the 1948--1970 period which produced the greatest period of growth in world history?

Many countries have tried austerity, some practice it today and it works wonders.

 

[Disir]

General welfare clause, tax and spend clause, necessary and proper clause.

Yep, constitutional right there. I can produce more if necessary.

 

[oldfart]

Please provide an example of a country which implemented "austerity."

Since no one has "tried" austerity, you must agree that there is no evidence that it works. And I suppose you therefore have no objection to trying anything else, like the policies of the 1948--1970 period which produced the greatest period of growth in world history?

Many countries have tried austerity, some practice it today and it works wonders.

Your debate on this point is with DGS49, not me. I'm happy to discuss examples of austerity with you (you are wrong about 1920) but DGS49 took the position that no one lately has actually tried "real" austerity, and I was responding to that argument.

You really think the adjustment from WWI economy had nothing to do with the depression of 1920? And how do you explain that the austerity measures taken happened after the economy was well on the way to recovery?

 

[usmcstinger]

Austerity isn’t even horrible economics, it’s a failed policy with no basis in reality. It’s out of paradigm. Every time austerity has been attempted, regardless of tax policy being recommended by the jackals over at the IMF, it's been an utter failure. The end result, as we’re seeing in the EU, is the atrophy of labor and capital, which pushes countries into depression. Again, for the SFC model challenged, if the government sector goes into surplus, the domestic private sector will go into deficit, similar to the situation we saw with Clinton in the 1990s, which caused private debt loads to skyrocket among other things. Also, just to make my point clearer, a deficit reduction is the fiscal equivalent of a tax increase, since both remove income from the economy.

Obviously, you can't read or understand the post that started this discussion.
Just another Socialist living in a delusional world.