Editore"s Note
Tilting at Windmills

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June 29, 2010

THE IRISH MODEL OF AUSTERITY.... The New York Times has a rather disheartening front-page piece today on Irish austerity measures, which I hope folks -- especially federal policymakers -- will read. Ireland responded to a sharp economic downturn with aggressive austerity measures -- which has made the country's economy worse.

Much of the world -- and domestically, all of the Republican Party -- believes the lesson to be learned is that belt-tightening and deficit reduction works. "Other European nations," the NYT, "including Britain and Germany, are following Ireland's lead."

Paul Krugman helps highlight the larger context.

The key thing to bear in mind about calls for harsh austerity in the face of a depressed economy is that such calls depend on two propositions, not one. Not only do you have to believe that the invisible bond vigilantes are about to strike -- that you must move to appease markets, even though right now bond buyers are willing to lend money to the United States at very low rates; you must also believe that short-term fiscal cutbacks will in fact appease the markets if they do, in fact, lose confidence.

That's why the Irish debacle is so important. All that savage austerity was supposed to bring rewards; the conventional wisdom that this would happen is so strong that one often reads news reports claiming that it has, in fact, happened, that Ireland's resolve has impressed and reassured the financial markets. But the reality is that nothing of the sort has taken place: virtuous, suffering Ireland is gaining nothing.

Of course, I know what will happen next: we'll hear that the Irish just aren't doing enough, and must do more. If we've been bleeding the patient, and he has nonetheless gotten sicker, well, we clearly need to bleed him some more.

Remember, here in the U.S., Republicans are desperate to do exactly what the Irish have done -- respond to an economic downturn by taking money out of the economy, focusing on the deficit, fearing inflation that doesn't exist, and taking steps to reassure investors -- that don't actually reassure investors.

It is, as Krugman noted yesterday, "the victory of an orthodoxy that has little to do with rational analysis, whose main tenet is that imposing suffering on other people is how you show leadership in tough times."

Postscript: I'd add, by the way, that if U.S. policymakers decide to follow Dublin over this easily-avoidable cliff, it will be after Dublin followed the U.S. over the last cliff. Henry Farrell had a great piece on this in the most recent issue of the Washington Monthly, highlighting the Irish's combination of crony capitalism and worship of American-style market fundamentalism -- and where it got them.

Steve Benen 11:20 AM Permalink | Trackbacks | Comments (13)

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Stabenow, Brown Lash Out at Republicans for Killing Jobs Bill
By Annie Lowrey 6/25/10 6:08 PM

Earlier today, I participated in a reporters’ call with Sens. Debbie Stabenow (D-Mich.) and Sherrod Brown (D-Ohio), regarding the collapse of the jobs bill, also known as the extenders package or H.R. 4213, yesterday. They lashed out at Republicans and made the case for the stimulative effect of unemployment insurance — also accusing Republicans of cynically starting to worry about deficits they caused in the midst of an unemployment crisis. Here is a flash transcript of some of the remarks:

Stabenow on what the collapse of the bill means:

People who lost their job through no fault of their own [got] caught up in this economic crisis. We didn’t even get one Republican colleague to join us to stop the filibuster. What we saw instead was them standing with the oil companies and the corporations shipping jobs overseas and wealthy investors. [This was] very much like the fight on Wall Street reform, where we saw them standing with those who wanted to block any changes.

And, it’s very much what we’ve seen from them all the time in the Senate. We’re at 244 objections now, 244 efforts to block us from moving forward. It’s unheard of, absolutely unheard of. We’ve never seen the kind of obstruction that we see now.

People who lost their jobs are being caught up in this, and used as political pawns in a partisan battle about an election.

Brown on who the collapse of the jobs bill has hurt:

These are people who, if they lose their insurance, if they don’t get unemployment insurance, they’re more likely to lose their health care. They’re more likely to lose their home … Most Senators voting against [the bill] do not personally know people who have lost their jobs, lost their health care, lost their homes … Some Senators think unemployment is welfare. It’s called unemployment insurance, not unemployment welfare. You pay in when you’re working, to help you when you are not.

Brown on Republican hypocrisy:

[Republicans] voted for tax breaks [and] two wars without paying for them … now that it’s unemployment, now that it’s middle-class workers that need help with unemployment compensation or to keep their health insurance, then all of a sudden they’ve got budget religion, then everything is about cutting government spending.

Brown on the impact of unemployment insurance:

We want to extend these benefits. And we want to extend them clearly because it is good economics … [Sen. John McCain’s (R-Ariz.) own] economic adviser argued that unemployment compensation has the best stimulative effect in terms of the multiplier effect.

We’re all concerned about the national debt. Sen. Stabenow and I have been concerned about it for a decade and a half. And that’s why, when [President Bush took office], we had left it with a budget surplus. When I hear Republicans talk about the budget deficit — after the war, tax cuts, Medicare, insurance company bailouts — they caused it. It appears a bit hypocritical. I’m interested in dealing with the deficit, but at this stage in the recovery, we can’t.

Stabenow on the relationship between unemployment and the deficit:

We’re never going to get out of the deficit if 15 million people are out of a job.

Stabenow on governors needing federal aid for states:

There is a group of governors coming in on Monday. It’s my hope that we’ll see the Republican governors talking with us stand up and join, so it’s a bipartisan effort [to push for funding for states]. We received a letter prior to the vote from 47 governors, Republican and Democrat, asking us to pass this critical state funding. What’s [going to be] most helpful to us is to have the Republican governors talking to their Republican colleagues." www.washingtonindependent.com

And Joe McCarthy thought Communists were the biggest threat to America.

Seems these Republican corporatists are trying to accomplish what the Communists could not. Stalin would be proud!

Posted by: MrsD on June 29, 2010 at 11:24 AM | PERMALINK

The whole austerity thing is ridiculous from the U.S. point of view. In the current global economic climate, investors are going to keep their money where the most innovation and productivity will be found, with the most political freedom, in the most land area. That is their best bet. Where else are they going to go? So the U.S. has a little more breathing-space to do a stimulus. And if the new CBO long-term budget outlook (which is due this week) shows some improvement, then there will be a little more breathing-space. And we should use it, to help get global demand back up. If we don't do a stimulus and the economy continues to tank, why would interest rates go up to lure investors back to Treasuries? It makes no sense.

Posted by: Lee A. Arnold on June 29, 2010 at 11:33 AM | PERMALINK

whether the Republicans believe their own Hooverism or not, putting the economy into the dumpster gives them the political argument that Obama is bad for the economy. They've already worked this quite well by their having shortchanged the stimulus ...

Posted by: sjw on June 29, 2010 at 11:35 AM | PERMALINK

Actually, Irish austerity might be paying off: Ireland's economy is slated to grow by 3%, one of the highest levels the EU Commission has forecasted:

http://www.rte.ie/business/2010/0505/eurozone.html

Posted by: Da Pup on June 29, 2010 at 11:40 AM | PERMALINK

The GOP is a lost cause, but what about the Democrats who have not had the intestional fortitude to do the right thing? what can you say about someone like Feingold who will support a GOP led filibuster of financial regulation because it does not go far enough--sounds about as relevant as Dennis Kucinek. I am at the point where letting the GOP ruin the country might be the only way to ever get the majority to wake up and start insisting that their legislators do the right thing. I thought Dumbya had accomplished that, but like a vampire the stupid self interest keeps coming back to life.

Posted by: terry on June 29, 2010 at 11:55 AM | PERMALINK

Da pup did you even read that article. It actually states that the Irish economy will contract by.9% this year and that they think it will go up 3% Next year. Pretty flimsy.

Posted by: Gandalf on June 29, 2010 at 12:00 PM | PERMALINK

"Irish's combination of crony capitalism and worship of American-style market fundamentalism..."

A combination of crony capitalism + free-marked fundamentalism is also a perfect description of the USA under GWB, and how things will be again if the GOP gets back into power.

-Z

Posted by: Zorro on June 29, 2010 at 12:09 PM | PERMALINK

I'm all for legitimate austerity measures where they will actually help. But simply taking the huge percentage of unemployed who WANT to work and making them destitute is not going to solve anything.

Real austerity means cutting our preposterous military budget in half. Sure, that would mean letting a large percentage of military-industrial complex workers go, but they could be easily covered by the government with the money it saves on tanks and planes and bombs and shit.

Real austerity means CEOs taking massive pay cuts to keep their employees working.

Real austerity means financial institutions with robust and painful regulations that force them to play fair.

Real austerity means shutting down the Tea Party. I've seen a lot of Baggers bitching about the evils of spreading wealth around. But who do they think is going to keep the country moving and eating and clothed when business is bad? Corporate CEOs? Glenn Beck?

If our nation needs to make sacrifices to come out of this recession in a stronger position, then everybody — including the corporations that can now legally purchase candidates — should suffer together.

Otherwise, we're a serfdom with a pretty flag.

Posted by: chrenson on June 29, 2010 at 12:29 PM | PERMALINK

Like Krugman notes, one of the problems we face is not only interpretational, but the media dissimulates about what happens - per the pretense that Ireland is doing OK.

Posted by: neil b. on June 29, 2010 at 1:01 PM | PERMALINK

This all reminds me of the 1980 presidential election where Carter took the position we needed to tighten our belts and make sacrifices for a better tomorrow while Reagan said a huge stimulus was needed. Now we have the Republican party taking Carter's argument and the Democrats (who were not too thrilled with Carter in 1980) taking Reagan's side.

Posted by: Th on June 29, 2010 at 2:06 PM | PERMALINK

But Reagan cut taxes too much and considered that a baseline approach instead of an emergency approach. Nor was he big on "stimulis" spending per se. But it is good to bring up ironies like that. So why do people look at the Parties in the usual stereotypical way?

Posted by: neil b. on June 29, 2010 at 2:22 PM | PERMALINK

Evidently conservative economic principles are based on the classic SNL skit 'Theodoric of York'.

Posted by: Nat on June 29, 2010 at 10:31 PM | PERMALINK

If only it were funny, though, Nat. Ireland stands as a sad example of how dire this argument is, and what will happen if deficit hawks win out. Marshall Auerback, who warned of this before Paul Krugman was even thinking about it (and was even quoted by him), has an excellent piece on it today: http://www.newdeal20.org/2010/06/30/ireland-in-decline-or-what-austerity-looks-like-13658/

Posted by: Bryce on June 30, 2010 at 12:39 PM | PERMALINK




 

 

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