Forget the crisis!, urges Krugman

[ddstory]

http://www.washingtonpost.com/opinions/the-speed-read-paul-krugmans-end-this-depression-now/2012/05/04/gIQALJl31T_story.html

The governments should finally start spending, Nobel laureate in economics Paul Krugman recommends in his new book End This Depression Now, where he sharply criticizes the austerity programs. So let's look a bit closer.

Comments

[dwer]

certainly, Austerity hasn't worked yet, and we know spending will.

[the_rukh]

Oh and Iceland.

[the_rukh]

Yep in the article itself it states that they have not remained unscathed yet they are doing much better than most the rest including having a higher employment rate than the US. They still have their social safety net intact and have managed to revive their local banking industry too.

[the_rukh]

It's a good example that there is successful ways out that don't involve chopping down the foundations of your society though.

[the_rukh]

That's very true. The biggest benefit of their way though is it doesn't cause the suffering of a large portion of their population, that's why I brought it up.

[oslo]

Your claims, unsurprisingly, require facts not in evidence.

Unsurprisingly, your facts are cherry-picked and decontextualized for reasons not explained.

To begin with - why measure "austerity" in terms of GDP? Isn't the relevant comparison the budget/expenditures/income? A $1 billion cut doesn't seem very big against a GDP of $200 billion, but it would represent a significant cut if the budget was $2 billion initially (not that I'm claiming Ireland's budget is that small).

Second - the "headline" figures you've cited omit the breakdown of how those particular savings were achieved. A $1 billion cut that is achieved by an even and balanced set of expenditure reductions and tax increases is a good deal less austere than the way Ireland actually achieved this result, which - surprise! - involved significant cuts to social programs and increases in income taxes

[oslo]

Other failures of austerity: UK, Italy, Portugal.

The response here is usually that austerity just hasn't had a chance to work its magic, but the truth is that many of these countries have been moving towards austerity or outright austere for a while now. And there's an additional truth: no one could really expect austerity to grow economies. That's just not what austerity is designed to do; you take a bunch of government spending out of an economy, particularly debt-financed spending, and what you get is a smaller economy. It's supposed to be harsh medicine that's necessary to restore confidence, but it fails to do this, again and again, precisely because it causes economies to shrink, deficits to grow, and further austerity measures to be taken

[rasilio]

Draconian budget cuts?

The only Republicans who have proposed budget cuts are the Pauls, even Ryan's plan does not cut the budget until something like 2025 with budgets increasing year over year even after adjusting for inflation every year until then.

How can spending increases be a draconian budget cut?

[kylinrouge]

Are the public sector and private sector even in the same business? Aren't most jobs created by small businesses? I've never went to a government-owned clothing store or restaurant.