Wednesday, March 20, 2013

U.S. must avoid austerity-driven disaster


Focus on national deficits has drawn Americans toward austerity through hard cuts in federal spending as a solution to their economic woes.

However, before the country pushes any closer to the types of austerity programs in place in the European Union, it would be wise to examine them. It’s hardly a happy picture. 

What started out as a demand for imposed thrift has, more than anything else, produced misery, with massive unemployment and either little or no growth in the gross domestic products of the nations that imposed austerity.

Austerity has been a disaster for Spain, which has been unable to cut its 26 percent unemployment rate. The Spanish economy shrank 1.4 percent last year.

Portugal’s economy contracted 3.2 percent last year, and its unemployment rate is at a record 17.2 percent. Hundreds of thousands turned out to protest the Portuguese austerity that has made its citizens worse off than they were before. 

The Greek economy has been a Greek tragedy. In the country’s sixth year of recession, more than one in four Greeks do not have a job, a level of unemployment higher than that of the U.S. during the Great Depression.

There is little reason to doubt that adoption of similar policies in the U.S. will have the same devastating effects they’ve had in Europe. Even so, there remains a popular and strong public policy theory that suggests governments should always do less, especially in tough economic times, despite Europe’s experience.

President Herbert Hoover and his austerity approach nearly destroyed the economy of the U.S. in the early years of the Great Depression, but we Americans seem to be ignoring our own history.

The mantra of austerity repeated by House Speaker John Boehner, House Budget Committee Chair Paul Ryan and Republican Majority Leader Eric Cantor is the same now as it was in Hoover’s 1930s: Get government spending under control (because it is out of control) by cutting social programs like welfare and unemployment insurance and education.

It appears that the European Union is beginning to face the brutal fact that going very fast in the wrong direction is quite unlikely to get it where its member nations need to be.

Hopefully, U.S. leaders will demonstrate a different skill set by doing their research, reading their economic history and figuring out a better way to go before they destroy what our countrymen worked so hard to build.

In challenging economic times, austerity for the sake of austerity is simply cruel.




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