Tuesday, July 24, 2012

Deficit panic! We'll be just like Europe!

Yep, we should definitely look at Europe and see the dangers of a big deficit. After all, we have Spain's bonds going for 7.45% and Greece possibly running out of money within the month. Given our own deficits, I imagine U.S. bond rates are also going way up, since no one wants to buy our shit either. Right?

Uh, maybe not, that shows interest rates BELOW THE RATE OF INFLATION (H/T to Econbrowser). In fact, the U.S. 10-year note is now down to 1.40%, as investors can't seem to buy enough of America's debt.

But hey, European-style austerity should still be the way to go. After all, the UK, Spain and Greece may be going through tough times, as will happen with any contractionary policies, but at least they've gotten their deficit down with these measures, right?

Look at Spain, for example-
Concern over Spain increased after the central bank said Monday that the economy contracted by 0.4 percent during the second quarter. The government predicts the economy will keep contracting into 2013 as new austerity measures — such as tax hikes and benefit cuts — hurt consumers and businesses.

The gloomy outlook has increased worries about public finances because shrinking economic output deprives the government of revenue it needs to lower the deficit. The government has earlier this year conceded it will not meet its target to reduce the 2012 deficit to 5.3 percent of GDP, aiming instead for 6.3 percent.
Alright, alright. But Spain has 25% unemployment and was goofed up before austerity. Let's look at Greece and the UK instead.
David Cameron is now receiving daily written updates on the deteriorating situation and was warned earlier this week that a Greek bankruptcy in the next month is now a serious possibility.

Official economic figures to be published today are expected to show that Britain suffered from a third successive quarter of negative economic growth — suggesting that the country is still in recession. If the figures are negative, it will be the longest double-dip recession for more than 50 years.

Ministers are expected to blame the continuing economic turmoil in Europe for this country’s failure to recover from the last slump.

One senior source said: “Europe is now paralysing almost every economic initiative.

“The daily analysis of the situation is filled with doom and gloom. Spain is in turmoil and Greece may run out of money by Aug 20.”
And given that the UK has been spending the last several months hiring people and building up stuff for the Olympics, the fact that they're still in recession is a scary thought.

In Wisconsin, we've seen that austerity doesn't work when you want to create jobs and recover from an historic economic downturn (Wisconsin employment is down 30,000 jobs since Act 10 was passed in March 2011). In the rest of the U.S., jobs continue to be created, with private sector job growth in each month since early 2010.

And yet dingbats like Paul Ryan want these failing European-style austerity measures on the spending side, but they don't want austerity on the revenue side by making the rich pay more taxes. This is despite the fact that the only time we did cut our deficit in the last 30 years and had anything resembling shared prosperity was in the 1990s, when the rich paid higher taxes and we cut military spending.

Which means that if this country is stupid enough to put greedheads like Ryan and Mitt Romney into positions of power, we deserve the massive Depression that so far Obama has kept us out of. Just like low-income rednecks in Wisconsin deserve the unemployment and low wages they're guaranteed for themselves when they voted to retain Scott Walker.

Expecting austerity spending cuts to allow an economy to grow is like expecting the Brewers bullpen to hold a lead over the last month. You're a damn fool if you expect good results to come through, and it's only by random chance that it would even pay off once.

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