Recent European elections have dealt a stunning blow to austerity, one of most profoundly mistaken economic policies propounded in modern times.
The French voted President
For several years now, German politicians and technocrats, primarily, have directed their profligate southern European neighbors to impose brutal austerity to counter the continent's continuing debt crisis. This was the price for German assistance -- and neatly fit the German state of mind. In German, the word for debt is the same as the word for guilt.
The truth is, that's exactly what some congressional Republicans are also demanding, to bring down America's growing debt -- even as
Day after day, senior economists continue inveighing against austerity strategies. But none of these people seem capable of explaining in plain, simple language why imposing austerity now is utterly foolhardy -- in fact, just plain stupid. Consider a typically obtuse economist's phrase, this one from
Here's what it means in clear, unambiguous language: Under austerity plans, governments must radically reduce their spending. How do they do that? They buy fewer goods and reduce government services.
Well, manufacturers sell those goods, people provide the services. When the government cuts back, the companies and manufacturers lose significant income. So they have to lay off large numbers of workers. That reduces the government's income-tax revenues, raises the nation's unemployment rate and increases unemployment-benefit payouts.
All of that ricochets through the economy. Other businesses suffer, too, because consumers have less money to spend. In
Austerity programs drive weak economies directly into recession. It's just that simple. And that's exactly what's happening in
With Sarkozy's loss, 11 European heads of state have been driven out of office largely because they embraced austerity programs. The Dutch government just fell over a proposed austerity plan.
Others are holding vast, angry rallies, like the ones across
In fact, as
Francois Hollande, the French president-elect, is calling for what he calls "growth" policies instead. Generally that means spending stimulus money (as the Bush and Obama administrations did in the U.S.) so that the economy will grow and begin producing more tax revenues that can then be used to pay down the debt.
In the U.S., the Obama administration argues that its stimulus spending in 2009 and 2010 staved off an even more serious economic contraction. While that seems logical, the assertion is unprovable. But imagine where the U.S. would be today if instead he had imposed a harsh austerity plan.
Certainly, domestic politics are helping define her position. But millions are suffering; scores are dying. In
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