What the U.S. didn't do and Wisconsin did - failed European austerity

As I was writing the previous piece (here it is, if you want to read it), it occurred to me that to handle the fallout of the Great Recession, austerity was and still is on the table as a policy solution. And in recent years, the U.S. has already done a version of austerity in addition to the stimulus that was passed in 2009, as I've pointed out that if it wasn't for politicians in both Washington and the state houses cutting spending in large amounts, our GDP and employment growth would be higher. But that being said, much of the stimulus and tax cuts for Social Security taxes have stayed, and deciding not to totally back off into austerity has kept the U.S. on a growth trajectory 3 years after the recession officially ended in Summer 2009.

Compare that to many countries in Europe. This failure of austerity reared its head again last week when the Eurozone showed record-high unemployment of 11.3%. And the countries that have imposed austerity are the ones doing worse, including Greece and Spain.

Joblessness increased in Spain and bailed-out Greece, both countries at the center of the European sovereign debt crisis which has thrown a cloud of doubt over the future of the single euro currency.

In Spain, the jobless figure rose by another 0.2 points to reach 25.1 percent, the highest in the eurozone. For Greece, the latest data available was for May, which saw a 0.5-point increase to 23.1 percent. A year earlier, it was 16.8 percent.

Youth unemployment was even worse. In Spain it stood at 52.9 percent for people under 25 and at 53.8 percent in Greece.....

Europe’s economy has been hit by the combination of government savings measures — cuts to public sector payrolls and benefits and tax hikes — and the uncertainty that has caused huge volatility in financial markets. That uncertainty is keeping companies from hiring and investing and scaring households away from big purchases.

Another country failing with austerity policies is Great Britain. Reports are out that the U.K stands to achieve the rare "triple-dip recession as the stimulus from the Olympics wears off. In fact, this last week, Liberal Democratic party leader Nick Clegg is asking for a wealth tax to be instituted to make the rich pay a bigger share of the sacrifice. This is no small thing to note, as the Conservatives do not have a majority in Parliament, so if Prime Minister David Cameron wants to stay in power, he probably has to work out some kind of compromise. If there is no compromise, Clegg could choose to break up their coalition, and cause another election to be called (you want uncertainty, "job creators"? I'd call having a new, unforeseen UK election a whole lotta uncertainty!)

Here in Wisconsin, we've seen the failures of austerity first-hand, as our state continues to lose the most jobs in the U.S.- down nearly 28,000 jobs from when Scott Walker took office in January 2011, and down 37,600 jobs since Act 10 was imposed in March 2011. It also has manifested itself with Wisconsin having GDP and income growth well below the U.S. averages, and last month's Philly Fed report said that not only had Wisconsin fallen back into recession, it was expected to stay there for the rest of this year.

As the CBO pointed out a couple of weeks ago, if U.S. policymakers decide to concentrate on the deficit instead of continue several pro-growth programs and tax cuts, the U.S. would join the UK, Greece, and Spain in recession. You'd think that after all the difficulties of the past 5 years and the failures we're seeing in Europe, no one would want to risk going through that again in the U.S..

So that's why it's bizarre to hear pro-austerity Republicans complain that the anti-growth group who favors European-style policies is Obama and the Democrats (well, bizarre or infuriating, because it shows the Republicans to be sociopathic liars). Reince Priebus got caught mumbling an example of this doublespeak during his when Chris Matthews was giving him an epic smackdown at last week's RNC. Reince mentioned that Obama and Dem policies were "European" as a reason for why he felt they didn't work (and hilariously, Priebus said this 30 seconds after denying that Republicans were trying to make Obama seem "foreign").

In fact, the real party that is clinging to failed, European fiscal policies is the GOP. And if they don't get stopped in the next 2 months, we will slide over the fiscal cliff and all the way back down into the hole that we were in 4 years ago. I doubt that we'd even cut the deficit because the job losses would be so great that revenues would continue to go down and assistance like unemployment insurance would go up. And this time, I fear the damage would be permanent.