Get a Grip: Austerity Does Not Produce Prosperity
Robert KuttnerCo-founder and co-editor of The American ProspectPosted: May 23, 2010 08:05 PM
Austerity has suddenly become the universally prescribed cure for the fallout from the financial collapse. If widely adopted, it will prove worse than the disease.
The price of the rescues of Greece, Spain and Portugal will be brutal deflation. The International Monetary Fund, which supposedly learned from its earlier mistakes of imposing austerity on already damaged economies, is back in cold-bath mode, demanding higher taxes and dramatically reduced spending as its pound of flesh.
The European Central Bank and key leaders of the E.U. are promoting economic pain as the price of relief. Here at home, President Obama has sworn off serious new outlays for jobs or aid to the states, and is using his fiscal commission to pursue a bipartisan consensus on spending cuts and higher taxes.
The nations of the European Union are being treated as the object lesson in the costs of profligacy. This is supposedly what happens when you provide decent social benefits to regular people. In fact, most of Europe had reasonably well-disciplined budgets until a made-on-Wall-Street economic crisis took down their economies. more