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April 27, 2012 8:45 AM De Facto Austerity

By Ed Kilgore

As somewhat lower-than-expected first quarter GDP figures begin to sink in today, we’re going to hear another chorus of cries from conservatives that Obama’s economic policies have failed, and that what this economy needs is a good dose of—austerity!

No, that’s not the word they will use, of course, but claims that the “debt crisis” is America’s number one problem, or that “business confidence” needs a boost via assurances that the “debt crisis” will be addressed, or that government is soaking up resources that the private sector requires for long-term growth, etc. etc: that all adds up to the “A word.” And as Paul Krugman points out, we’ve already had a strong taste of it thanks to retrenchment of state and local governments over the last three years:

For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets.
The good news is that many influential people are finally admitting that the confidence fairy was a myth. The bad news is that despite this admission there seems to be little prospect of a near-term course change either in Europe or here in America, where we never fully embraced the doctrine, but have, nonetheless, had de facto austerity in the form of huge spending and employment cuts at the state and local level.

It’s a point that needs to be raised and repeated so long as neo-Hooverism persists: austerity is its own punishment; it hasn’t boosted growth in Europe, and it won’t boost growth here. If you want smaller government as an end in itself, fine, just say so. But don’t call it an economic growth strategy, because it’s not one.

UPDATE: This Atrios quote about sums it up the campaign for austerity: “I might actually prefer evil. This is mostly just stupid.”

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute. Find him on Twitter: @ed_kilgore.

Comments

  • c u n d gulag on April 27, 2012 9:13 AM:

    'He's BAAAAAAAaaaaaaack!'

    For some reason, my laptop's letting me post today!
    YAY for me!
    Hey, I didn't get a harumph outta everyone!!!

    As for "Austerity" - it's the case of continuing to bleed the anemic patient 'till he/she dies because, hey, they're determined to kill the patient anyway, so as long as there's still some blood left, let the leeches go to town and suck and suck until nothing but a dry husk is left.

    Btw - I've enjoyed Ed's writing, and your comments - it's just that my laptop wouldn't let me even see CAPTCHA, let alone try to solve it, so I couldn't leave a comment.
    I never thought I'd say this, but - I missed you, CAPTCHA!

    For months, 'I had no mouth, though I needed to scream."

    I don't know how long this will last, but I'll try to enjoy it as long as it does.

  • stevio on April 27, 2012 9:18 AM:

    c u n d gulag: welcome back.

    If the GNP was 4.6 the GOPOCONS would scream bloody murder that austerity worked. So frying pan/fire. If this electorate buys into a RoMONEY presidency they and the country deserves what it will surly get: Riots in the street...book it.

  • stormskies on April 27, 2012 9:29 AM:

    Gulag: WELCOME BACK BUDDY ..........

  • Ron Byers on April 27, 2012 9:41 AM:

    Looking at the first quarter numbers here and in Europe, I will take ours, thank you very much. By the way there is a chart out there that proves our half assed stimulus worked better than European austerity. It also shows that our economy and the European economy were in near perfect sink right up to the moment they bought the leeches and started bleeding themselves.

  • Ron Byers on April 27, 2012 9:43 AM:

    Hey Gulag we all missed you.

  • c u n d gulag on April 27, 2012 9:49 AM:

    Thanks!
    I missed everyone.

    Great to be back!
    Try the prime rib - and hey, don't forget to tip the wait and bar staff!

  • Texas Aggie on April 27, 2012 9:56 AM:

    C u n d, It's good to have you back, man. I actually was worried. Some time ago I saw you on another blog (CrooksandLiars?) and sent you a note, but then you disappeared. I am really, really glad that it was a technical issue and not a biological one.

  • c u n d gulag on April 27, 2012 10:13 AM:

    Texas Aggie,
    Thanks.
    Any problems are always more likely to be mental, anyway. :-)

  • emjayay on April 27, 2012 10:19 AM:

    But once again Mr. Gulag, what's the story with your name? Maybe I'm just a dumb guy, but I don't get it.

  • dede21206 on April 27, 2012 10:36 AM:

    Nice to see you back c u n d gulag.

  • c u n d gulag on April 27, 2012 10:37 AM:

    I started using it when commenting back at the height of 'The Bush Reign of Error," when criticism was likened to treason, and the critic being accused of being a traitor.

    And so, with many of my parent's relatives being sent to, and dying in Soviet Gulag's, and the talk of opening up "Detention Facilities" here, I started using 'c u n d gulag' (see you in the Gulag), and stopped using my former monikers, "Nuffs Ed" and "Nuff Said."

    That's my story, and I'm stickin' to it!

  • boatboy_srq on April 27, 2012 11:19 AM:

    CUND - welcome back. You were missed.

    ---------------------------

    In the states' defense, it's a lot harder to spend when you have a BBA in the state Constitution. And unless all the new confederalists decide that's in the states' interest to deficit spend, then they're stuck with the limitations of their receipts. State taxes are pretty hard to raise (property and sales taxes being the big ones), so there's not a lot of opportunities there to boost spending. "Austerity" there is almost a necessity.

    OTOH, legislators from states in this kind of trouble should be clamoring for federal spending to make up the gap - instead of demanding Washington spend just as little as their states' capitals.

  • Jimo on April 27, 2012 11:45 AM:

    There's a meme floating around this week that the British economy, which has just tipped back into recession (as I predicted), isn't really affected by austerity.

    The argument goes: most spending cuts haven't taken effect yet and those that have are modest so far.

    This is a confusion with budgetary austerity and economic austerity. The two are closely related but they are not the same thing.

    What matters to the economy most directly is the economic austerity. Economic austerity is the gap between the lost economic production of depressed economy and where economic production would be following the trend line.

    Unless this gap is filled with Keynesian stimulus, you have economic austerity, and typically an economic contraction. Sure, the economic spirits may eventually gather strength (after much unnecessary human suffering) but this tends to be a very long time following economic panics such as we saw back in 2008.

    (I would also note that you have to take into account outside contextual information. For Britain, this significantly is the weakness in neighboring economies such as Italy and Spain. Austerity becomes even more toxic in this environment.)

  • Sgt. Gym Bunny on April 27, 2012 12:05 PM:

    GULAG!!!!! Welcome back!

  • emjayay on April 27, 2012 1:08 PM:

    cundgulag:

    Ohhhh. C-U-N-D Gulag. I get it now.

  • emjayay on April 27, 2012 1:25 PM:

    Of course the Keynsian problem here in the USA is that while driving the economy off the cliff with lack of newly essential regulation and lack of enforcement or attention to any regulations that did still exist, and ignoring everything but nonexistent foreign threats, the Bush administration simultaneously ran up the budget deficit astronomically instead of continuing to pay it off.

    Another two Clintonesque administrations like say two Gore administrations (you remember, the guy who was no different than Bush because the two parties are about the same anyway) paying off the deficit would have left us in good shape to spend our way out of the crash if it did still happen.

  • c u n d gulag on April 27, 2012 1:51 PM:

    Thanks everyone!

    It's nice to be back - for as long as it (my laptop) lasts.

  • Herb Smith on April 29, 2012 6:31 PM:

    Jimo says:

    "There's a meme floating around this week that the British economy, which has just tipped back into recession (as I predicted), isn't really affected by austerity.

    The argument goes: most spending cuts haven't taken effect yet and those that have are modest so far."

    The harm to the macroeconomy from austerity comes well before the actual cuts because recipients can see smaller government checks in the future and make cuts in anticipation, and because business can see that the purchases of their government customers will be less in the future so they cut their expenses in anticipation.