Spain attempted austerity and as reported in the Bloomeberg’s piece “Adios Austerity, But Debt Will Still Limit Spain’s Growth Measures”. It has been such a dismal failure that they are now realizing the wisdom of economists like Nobel Prize winning Paul Krugman.
Bloomberg:
Spain’s 32-month experiment with austerity-at-all-costs, as devised by Angela Merkel’s budget ultras, is drawing to a close.
Prime Minister Mariano Rajoy oversaw 62 billion euros of tax hikes and spending cuts, 851,000 job losses and three different deficit targets, all in his first year in office. Now European Union budget enforcer Olli Rehn is ready to ease up on the beleaguered premier.
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Thirty-eight hours later the National Statistics Institute duly confirmed that Spain was indeed suffering a serious deterioration in the economy. The pace of economic contraction more than doubled in the fourth quarter, when the tax hikes Rajoy had delayed to try and win power in the south region of Andalucia finally kicked in. Unemployment hit a record 26 percent.
The shift reflects a changing consensus among policy makers, which has seen the IMF join economists including Nobel laureate Paul Krugman in arguing that too much austerity is self-defeating. It damages economic activity, reduces tax revenues and tips economies into the vicious cycle of deeper spending cuts and falling output that the Greeks have been suffering since 2010.
Every country that has attempted this path has suffered the same outcome. Yet the GOP continues to hold the American economy and with that the middle class hostage to austerity type policies by refusing to enact the president’s stimulative policies that would not only increase employment but lay the ground work for increased tax receipts and economic activity. With interests rates at record lows (near zero), this is the most appropriate time to rebuild our failing infrastructure that will be much more expensive to rebuild in later years even as it negatively affects our economics.
It is the failure of government policy that has exacerbated this downturn. Republicans not allowing the institution of job creating policies is not simply a display of intransigence. It is a penalization of the American middle class to force an ideology they do not want. It is a systematic destruction of government and faith in government to enhance a private sector so out of balance with government, “we the people”, that it would ultimately overwhelm democracy.
Republicans often use Greece as a scare tactic to make Americans believe the current deficit is a bigger problem than it is. The social austerity even as they continue to build an outdated 20th century military would in fact put American in a worst position than Greece. Greece is selling off public assets, the assets of “we the people” to a wealthy few. This was attempted in Panama and as they should, the population revolted to stop the continued middle class pilfer. One can only hope the American middle class will open their eyes before it is too late. Too late is a path to depression where the wealthy buys up the public assets on the cheap.
The January jobs report while positive yet average has many red flags that do not get coverage. It shows little to know wage growth when adjusted for inflation and a deteriorating public sector. This poor recovery is political. Until the American middle class engages and demands the terms, the status quo will prevail. Whenever the status quo prevails, the middle class loses.
