Death by Austerity

More than five years after the great recession, our economy is inching its way towards health. Each month a few more jobs are added, the stock market has rebounded nicely, the economy is growing.

It is therefore somewhat hard to believe that what progress we have made is but a fraction of the progress we should have made. In five and half years we have staggered towards an economic recovery despite many self-inflicted wounds.

I'm talking, of course, about the economically backwards idea of imposing austerity when times are hard. This is most clearly visible in the sequester, but even the failure to pick up public spending at a time when the government could have borrowed money essentially for free and revamped infrastructure was a serious mishap. We should have recovered quicker, but instead we chose the hard way (actually this isn't entirely true, a handful of right wing fringe lunatics running on a platform of lies in districts that are safely gerrymandered chose this for all of us, largely against our will).

But as bad as our problems have been, Europe's have been worse. Why? Because while sensible politicians in America - those who took Econ 101 in college - fought austerity, Europe embraced it.

What does Europe have to show for austerity? Not much worth talking about. The only country that has escaped the doldrums in Europe is Germany, which had been implementing smart economic practices well before the recession. The dose of austerity Germany tried to enforce on its neighbors after the recession - some harsh German medicine - has been a largely unmitigated disaster. Whereas America has been recovering, the lights are still off in Europe.

Yet this hasn't stopped austerity's champions - a dwindling and increasingly quiet bunch - from trying to find a success story, anything to validate views and policies which have been staggering failures almost everywhere, and hence we get Ireland, the supposed success story of austerity.

Now I have been laughing off austerity and the Irish recovery for quite some time, but since I haven't been there and I'm not Irish perhaps you can dismiss this as a misunderstanding on my part. But what better lens through which to view Ireland's woeful recovery than that of an Irishman. They are, after all, a talented bunch of writers, and journalist Fintan O'Toole (what a wonderfully Irish name) has given us quite a glimpse at how austerity has failed Ireland.  I'll let you read O'Toole's piece for yourself rather than summarizing, but the data he gives should surprise no one. O'Toole neatly points out that while you can't spend yourself out of debt - the idea of austerity being that public spending crowds out the private sector and thus inhibits growth - you can spend your way to an economic recovery and therefore more tax revenue without higher tax rates. In Ireland, not only has austerity failed to produce economic growth and jobs for the Irish, but it has actually led to a sharp increase in debt. No growth, no jobs, and higher debt. Two out of three ain't bad, but zero out of three is actually pretty horrible.

And yet this is as close as the proponents of austerity can get to claiming success. This is the where the disastrous policy of austerity has led Ireland, and this is where the US would have ended up had we followed the Tea Party's lead and slashed spending wantonly without any regard for the effects - which is more or less what the sequester was. Death by austerity is real, and we almost took that path. I hope Americans will consider this the next time those who espoused this view put forth economic proposals. The poor Irish suffered for us this time around. Let's make sure we don't give ourselves a dose of their own bad medicine moving forward. There is a time for austerity, but that time is when the economy is healthy and booming, not when it flounders.