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"Austerity Works"

Uh-oh:

In bemoaning the pain of fiscal responsibility, the Democrats show they still haven’t learned the lessons of Europe.

So writes Newsweek.

Newsweek.

Let me repeat that again. So writes Newsweek:

To American commentators, notably New York Times columnist Paul Krugman, the lesson is clear. “In Europe,” he wrote last week, “the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer … [But] Europe’s troubled debtor nations are … suffering further economic decline thanks to those austerity programs.” Elsewhere, Krugman has repeatedly badmouthed the British government for trying to cut its deficit.

It’s certainly true that the economies of Greece, Ireland, and Portugal—the three countries committed to austerity programs as conditions for European and International Monetary Fund bailouts—have shrunk over the past year. The unemployment rate is above 10 percent in all three. Meanwhile, the U.K. economy is growing sluggishly. But to infer from this that the United States can postpone serious attempts at fiscal stabilization would be completely wrong—and deeply dangerous.

The point is that Greece & Co. are in trouble because of excessive borrowing. Between 1999 and 2010 the structural deficit of the Greek government rose from 2 percent of gross domestic product to nearly 18 percent. Ireland went from surplus to minus 11 percent. Portugal was little better. The result was a debt explosion. The net government debt of Greece, the worst offender, soared from 76 percent of GDP to 142 percent last year.

I’d like to point out here that this is the position of Newsweek — whose typical position re: the Obama administration is on all fours, greased and naked as a pink hog save for a choker collar around its neck.

The real lessons for the United States are clear. Those who run up debt in good times can borrow only so much more when a recession strikes. And heavily indebted governments postpone fiscal stabilization at their peril. If you wait to reform until the bond market calls time, you are—to use a technical term from economics—screwed.

The best option is, of course, to be Switzerland, a country strangely ignored by Krugman. The Swiss have run a prudent fiscal policy throughout the economic crisis. They have had a structural surplus in each of the past five years. Their net debt is actually lower today than it was in 2005. And guess what? In 2009 their economy suffered the smallest contraction in Europe, with unemployment today below 4 percent. As for sound money, the Swiss franc is up 95 percent against the dollar since 2000.

Too bad American presidents never visit Switzerland. But I guess they can’t afford to.

So chides Newsweek.

Newsweek.

Far more suggestive than any polling data, let me tell you. I mean, who’s next? The New York Times…?

13 Replies to “"Austerity Works"”

  1. Joe says:

    If the economy is in the toilet in November 2012, all the spin in the world is not going to change that. And blaming Bush only works for so long. We are already well past the half life on that excuse.

  2. Abe Froman says:

    It was written by Niall Ferguson. So, Newsweek, but not really.

  3. Squid says:

    For how much longer will Newsweek continue to employ such an unhelpful writer?

  4. LBascom says:

    New York Times? Yep.

    Republican lawmakers have responded to renewed signs of weakness with a jobs plan that prescribes more of the same “fixes” that Republicans always recommend no matter the problem: mainly high-end tax cuts, deregulation, more domestic oil drilling and federal spending cuts.

    The White House has offered sounder ideas, including job retraining, plans to boost educational achievement and tax increases to help cover needed spending

    Sounder ideas? Lets see, the problem is low consumer spending, with rising costs of food and energy, and high unemployment as the culprits. So, the “sounder” thing to do is job retraining(when no jobs is the problem), better education achievement(though there’s no jobs to graduate to) , and higher taxes to fund government spending(when low consumer spending is the problem).

    Sounders like the NYT’s to me…

  5. Ernst Schreiber says:

    The White House has offered sounder ideas, including job retraining, plans to boost educational achievement and tax increases to help cover needed spending

    In other words, the same “solutions” that Democrats always recommend no matter the problem.

  6. Jeff G. says:

    Don’t ruin the bit, Abe.

  7. mojo says:

    The only thing strange about Krugman is that anybody pays attention to the twit.

  8. Vlad the Impala says:

    A month ago, I found an invoice from my wife’s contribution to NPR or some local parasite equivalent. I panicked when I saw the invoice line for “Newsweek: $1”.

    I only could relax when I saw it was only a year’s subscription, and she had NOT bought the entire magazine by accident.

  9. JHoward says:

    To American commentators, notably New York Times columnist Paul Krugman, the lesson is clear. “In Europe,” he wrote last week, “the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer … [But] Europe’s troubled debtor nations are … suffering further economic decline thanks to those austerity programs.” Elsewhere, Krugman has repeatedly badmouthed the British government for trying to cut its deficit.

    Sometimes merely highlighting remarks by Paul Krugman serves to illustrate their stupendous idiocy. In this case, Krugman is unaware of monetary Delirium tremens.

    Yes, both of the above are unbacked opinion. One earned a public figure an illustrious international prize. The other appeared here anonymously and was correct.

  10. geoffb says:

    <i>House rejects debt ceiling increase, 318-97
    […]
    Fully 82 Democrats voted with the GOP — among them Pelosi, Hoyer, and … DNC chief Debbie Wasserman-Schultz, which is all the proof you need of how nervous the White House is about being on the wrong side of this issue.

  11. Bob Reed says:

    So, does this mean that Newsweek has officially become racist?

    And who knew that the Swiss as a nation were such horrible racists as well.

    I mean, they’re obviously trying to embarrass Obama. And make poor women and children suffer…

  12. LTC John says:

    You should try working for the Swiss, Bob. If I have to steal pennies from the poor one more time, and mail them to Bern to be deposited in a secret account, I swear I will take a sick day…

  13. zino3 says:

    “I’d like to point out here that this is the position of Newsweek — whose typical position re: the Obama administration is on all fours, greased and naked as a pink hog save for a choker collar around its neck.”

    Absolutely beautiful!

    So I am not the only one, eh?

Comments are closed.