This morning, 10-13-13 on meet the press David Gregory asked a guest if the experiences of Europe prove once and for all that austerity doesn't work. Austerity is the radical notion that governments should reduce their spending, increase taxes, or both in order to stop spending more than they take in. What gripes me about Gregory's question is the liberal assumption that austerity has even been tried, let alone has failed.
Data from Eurostat show that only a few European countries decreased spending since 2008. Take a look at the graphs for Greece, Spain, Italy, and Portugal and note they have all INCREASED spending since 2002 and have at best flattened spending since 2008. Most austerity measures in these troubled countries have involved increasing taxes more than cutting spending. In fact according to Eurostat, only 8 of 30 European countries reduced spending between 2008 and 2012. In terms of GDP growth 6 of the eight countries that practiced austerity are above the European average (one the 2 that didn't grow above average was Iceland, which had a complete meltdown of it's banking system). 3 of the 4 countries with the best GDP growth in the Eurozone have tried real austerity. Austerity can indeed work if a country is willing to try it. Government spending does not generate growth the way Keynesian style government deficit spending advocates believe. Every buyer requires a seller; you cannot buy a product unless someone has made it and is ready to sell. An increase in demand (from government) simply results in higher prices. You have to attack the supply side and make businesses willing to take the risk to create things to generate growth in the economy.
For those who criticize the government shut down, realize that the pressures being brought to bear are from people who believe government has to shrink. Despite all the protests and nashing of teeth, even when a government claims to reduce budgets they are often lieing. Really they are often talking about shrinking the size of the previously planned growth in spending. In my opinion, no government department or program is sacred. Not education, not farm subsidies, not corporate tax breaks, not even military spending or veterans benefits. All of these must be slashed. In addition, medicare and social security are going to go broke if the outlays can't be curtailed somehow. The non partisan CBO report projects Social Security revenues will no longer be sufficient to fund all promised benefits beginning in 2019 This means my generation will have to take cuts in social security, retire later, and accept reduced medical benefits. The fight in Washington is about doing this hard work sooner rather than later. Neither democrats or republicans have proposed nearly enough budget cuts to make a difference. If you're a liberal and think all this spending is critical PLEASE think about what happens when your car breaks and the repair is $1000 and you only have $100 in the bank. You can ask for a pay day loan, but it's going to cost you in interest. If you make that necessary choice you also need to plan on reducing future spending to get it paid back. It's time we stopped acting like borrowing money is the solution to our budget deficits. I believe that what the Fed and our government is doing will, at some point, create hyperinflation and more job loss. This will further hurt the middle class in the U.S. The rich will have assets like real estate, equipment, business ownership, and commodities that will help protect them against both inflation and job loss. The current government policies will make the income gap between rich and poor much worse in the years to come. When it happens, don't hate on the 1%. Hate on government bureaucrats who can't stop spending.