Not the result they'd hoped for

[fskimospy]

The UK just released its budget deficit projections for next year. After several years of savage austerity as compared to the US' mild austerity, the UKs deficit projection clocks in at nearly double that of the US for FY2014-2015. Oddly, there seems to be at best a mild change of course planned.

I seriously don't get it anymore. Not only has austerity ground economic growth to a halt, it has not even achieved its purpose for existing, bringing the country's deficit to heel. How can people and politicians continue to support a policy that has failed to completely? Is it pride? Ideological inflexibility? What?

www.economist.com/blogs/freeexchange/2013/03/britains-budget

 

[Craig234]

The wealthy who benefit know they can keep fooling people with simplistic fallacies.

Obviously, they didn't cut enough. Cut more. When it's back to 1900, it's fixed.

 

[randomrogue]

Between this and trickle down economics it keeps the rich richer and the poor poorer.

 

[Jaskalas]

You face the continued push for Austerity because:

1. It's American to oppose government intervention.
2. The alternative is... of epic proportions.

One part is ideological. Ideally the government would not be involved to such an extent that a reduction in its own spending would have such an negative impact. The other is we don't want a WW2 style stimulus to double the debt.

If you think deficits don't matter, then it's all fine and dandy to spend, spend, spend. It's not such a simple answer if you do think they do matter.

 

[Mursilis]

Is it so much that austerity is bad, or that the timing of it is bad? I'm guessing it's the latter.

 

[fskimospy]

Is it so much that austerity is bad, or that the timing of it is bad? I'm guessing it's the latter.

It is the timing, yes. Austerity is not inherently bad, but austerity in current circumstances is. When the economy is functioning well, deficit spending is counterproductive much the way that trying to balance the budget is counterproductive now and so austerity then is just what the doctor ordered.

It just blows my mind that people have inflicted such enormous damage to their economies, have actually ended up WORSE off from a debt standpoint, and have decided that this is still a good path.

 

[Mursilis]

It is the timing, yes. Austerity is not inherently bad, but austerity in current circumstances is. When the economy is functioning well, deficit spending is counterproductive much the way that trying to balance the budget is counterproductive now and so austerity then is just what the doctor ordered.

It just blows my mind that people have inflicted such enormous damage to their economies, have actually ended up WORSE off from a debt standpoint, and have decided that this is still a good path.

Understanding other perspectives is good mental exercise, and doesn't mean you have to agree with them.

 

[Sonikku]

One persons spending is another persons income. When spending is scaled back dramatically it stands to reason that many peoples income will be effected, and not for the better. Austerity isn't necessarily a bad thing. Though it seems as though in practice those instances of wasteful spending and business subsiding are held onto tight by those benefiting who in turn write the campaign donation checks. The spending that is the first to be cut is often to those that have the least and need it most.

 

[fskimospy]

You face the continued push for Austerity because:

1. It's American to oppose government intervention.
2. The alternative is... of epic proportions.

One part is ideological. Ideally the government would not be involved to such an extent that a reduction in its own spending would have such an negative impact. The other is we don't want a WW2 style stimulus to double the debt.

If you think deficits don't matter, then it's all fine and dandy to spend, spend, spend. It's not such a simple answer if you do think they do matter.

But nobody is making the argument that deficits don't matter, so why bother saying that?

What people DO argue is that deficit spending now is preferable to cutting deficits. This seems to be quite handily borne out by the evidence as not only has the US' economy grown faster than the UK's, but our deficit/debt picture is better as well. ie: they have sacrificed economic growth and caused themselves enormous damage for nothing, all because they bought into the idea of austerity.

Since you seem to support it, can I ask you what level of failure would be required in order for you to abandon it as a preferred fiscal policy?

 

[fskimospy]

Understanding other perspectives is good mental exercise, and doesn't mean you have to agree with them.

Hey, if someone can make a coherent argument for this policy I'm ready to hear it.

 

[Fern]

"Savage austerity"?

LOL. I've heard their spending has INCREASED every year.

The 'no austerity' thing worked great for Greece, huh?

And the devil's in the details. Where/how you cut and (deficit) spend is more important than simply cutting and spending.

Fern

 

[fskimospy]

"Savage austerity"?

LOL. I've heard their spending has INCREASED every year.

The 'no austerity' thing worked great for Greece, huh?

And the devil's in the details. Where/how you cut and (deficit) spend is more important than simply cutting and spending.

Fern

We've already covered this before. In this thread I am referring to austerity in the way that economists and policymakers refer to it. If you wish to make up your own economics definitions you are welcome to them, but that's not useful here.

As for Greece, what you're saying is nonsensical and I can't help but feel that you know that considering how many times this has been discussed.

EDIT: Here's a pretty useful chart from the IMF that shows the effects of austerity. Ouch.

 

[Jaskalas]

But nobody is making the argument that deficits don't matter, so why bother saying that?

What people DO argue is that deficit spending now is preferable to cutting deficits. This seems to be quite handily borne out by the evidence as not only has the US' economy grown faster than the UK's, but our deficit/debt picture is better as well. ie: they have sacrificed economic growth and caused themselves enormous damage for nothing, all because they bought into the idea of austerity.

Since you seem to support it, can I ask you what level of failure would be required in order for you to abandon it as a preferred fiscal policy?

I would say that we have opposing goals. There's this notion that austerity is free, that it isn't recognized as causing some degree of pain. On the contrary. That goes with the territory of de-leveraging the government from the economy, which itself is the goal.

People in favor of austerity are generally afraid of deficit spending in the context of printing money. We don't want to risk inflation and devaluing the dollar to the point where our poor are being reamed for cost of living.

When we see proposals that the good of the economy rests on a WW2 style spending spree, that our current "record" spending is not nearly enough - that scares us. It sets off alarm bells. There are folks on our side who firmly believe that trying to stimulate our way out of this economy would destroy the economy later. It remains to be seen if that is actually the case. We're waiting for inflation to manifest, or this newly inflated bubble to pop.

To move me from fear of government intervention in the economy, I'd have to see it work for our betterment. We'll have to restore the economy back to its former glory. You'll have to smoothly ease off the stimulus as it recovers. Seeing something succeed for the first time is a good way to shake those describing it with dire warning.

Do you forget that there are those crediting the New Deal with deepening the Great Depression? Perhaps we'd more easily learn from history if there were not two versions of it.

 

[chucky2]

What will the numbers for the US and UK be in 20 years?

 

[Agent11]

Unless they address the underlying issues in trade policy I do not think any budget contortions will have much of an effect.

 

[Craig234]

What will the numbers for the US and UK be in 20 years?

No one can know can they, so what's your point in asking a question without an answer?

 

[Craig234]

Do you forget that there are those crediting the New Deal with deepening the Great Depression? Perhaps we'd more easily learn from history if there were not two versions of it.

Does all those who want things bad for the country and good for a few have to do is put up contrary claims to muddy the waters?

I'd say that arming for WWII made us more vulnerable, fighting Vietnam saved Vietnamese lives, creating the FDIC created risk for small savers, allowing unlimited money in politics reduced corruption, ending slavery reduced freedom for blacks, giving women the right to vote took away their political power, making gay marriage legal discriminates against gays.

There, how's that. I guess there's no lesson from those issues, since there are two sides being claimed to them.

The point is that a side is right and a side is wrong, much of the time - the fact that there are perverse, wrong, contrary people who claim the 'other side' doesn't make you have to say 'there are two sides so no lesson there'. It's usually a bit more subtle - a nugget of truth exaggerated into a lie.

Take Bill Clinton's budget - rarely have we had a clearer test of economic policies than his first budget, when every Republican on record predicted doom for the economy if it passed.

It did and the opposite of what they said would happen happened. So where's the accountability? Where are the people who got it wrong learning a lesson?

They didn't say what they say to get it right - they say it to get your money. And so they just kept making the same false claims to get your money ignoring the facts.

And it worked. Much of the country went right on listening to them because that's how propaganda works.

They'd come up with new names for it from time to time, but it was the same wrong policy sold for decades and decades and still is. That's a point of this thread.

What policies took us to the great depression? What policies took us out?

Sadly, the voice of the propagandists whose policies are set by what benefits the rich and powerful is much louder for many Americans than the voice of who's right on the policies.

Paul Krugman has been called 'the guy who is always right', and he does have many years of getting his economic predictions correct against wrong right-wing ideologies.

But the advertisements for the hucksters are well-funded and continue to dominate our policies.

So the fact there are some propagandists and wrongheaded people who say wrong things - climate change deniers is just one example, with your Great Depression example - doesn't mean they are correct. You are raising a question whether democracy can triumph over the special insterests' lies, and the answer seems to be, rarely.

 

[fskimospy]

I would say that we have opposing goals. There's this notion that austerity is free, that it isn't recognized as causing some degree of pain. On the contrary. That goes with the territory of de-leveraging the government from the economy, which itself is the goal.

People in favor of austerity are generally afraid of deficit spending in the context of printing money. We don't want to risk inflation and devaluing the dollar to the point where our poor are being reamed for cost of living.

When we see proposals that the good of the economy rests on a WW2 style spending spree, that our current "record" spending is not nearly enough - that scares us. It sets off alarm bells. There are folks on our side who firmly believe that trying to stimulate our way out of this economy would destroy the economy later. It remains to be seen if that is actually the case. We're waiting for inflation to manifest, or this newly inflated bubble to pop.

To move me from fear of government intervention in the economy, I'd have to see it work for our betterment. We'll have to restore the economy back to its former glory. You'll have to smoothly ease off the stimulus as it recovers. Seeing something succeed for the first time is a good way to shake those describing it with dire warning.

Do you forget that there are those crediting the New Deal with deepening the Great Depression? Perhaps we'd more easily learn from history if there were not two versions of it.

I don't forget that there are those that credit the New Deal with deepening the Great Depression, but I do know that the consensus opinion is that they are wrong. Not only that, but in the more important realm of this current crisis predictions of economists arguing for less government intervention have been shown to be wrong over and over and over again. Particularly as it relates to inflation, actually. (although what I can't wait for is after the economy recovers and inflation picks up they will say I TOLD YOU SO, despite an increase in inflation after recovery being explicitly predicted by Keynesian economists, and not at all in holding with the predictions that conservatives have made throughout the crisis)

As for your substantive points, one thing I have to note is that they aren't actually relying on real economic performance. If your goal is simply less government involvement and economic performance is irrelevant, then I guess it doesn't matter how much damage austerity causes to the economy. In our case it seems like we have a pretty good natural experiment going on between the US and the UK. Our economies are quite similar in a lot of important ways, particularly as they relate to this financial crisis. If you look at the UK's performance after it switched from stimulative policies to austerity you see a steady worsening of both economic performance and (most importantly for this case) deficit and debt projections while the US has continued to improve in both.

It seems to me that any policy argument should always be what gives us the greatest benefit to the most people. I don't see removing the government from the economy as intrinsically valuable, it is only valuable if removing it improves our lives. In this case it's hard to see how less government spending has made the lives of UK citizens better.

 

[Mursilis]

Hey, if someone can make a coherent argument for this policy I'm ready to hear it.

You know why economics (especially macro) is called the dismal science, right? It's because the theories far outnumber the facts. You admitted yourself that's not austerity that's the problem in the UK, it's the timing of it. They obviously thought differently. It's not incoherent to look to trim budgets when you're operating in the red, and not everyone's a Keynesian, so I suppose those in the UK merely picked a bad time to pursue a good policy. You don't have to agree with it to at least understand that there was reasonable thought behind it.

 

[Craig234]

It seems to me that any policy argument should always be what gives us the greatest benefit to the most people.

That's the real disagreement.

Those at the top do not benefit from that - quite the opposite, at least in the short term.

 

[chucky2]

No one can know can they, so what's your point in asking a question without an answer?

Then no one knows if a QE or austerity approach works out for the best in the long term. Given we're at after QEfarmorethan3, I wouldn't be crowing about it...

 

[Mursilis]

It seems to me that any policy argument should always be what gives us the greatest benefit to the most people.

We may all agree that maximizing the "benefit" to all, but good luck finding consensus on what the word "benefit" means.

 

[chucky2]

We may all agree that maximizing the "benefit" to all, but good luck finding consensus on what the word "benefit" means.

Benefit in this case means to keep the money gravy train moving at any and all costs. Stopping that flow of money in effect stops the growth and power of the Fed gov, and that cannot be allowed to even be considered, much less actually risked to happen. When you understand the ideology behind Spenders, it's not hard to understand why questioning spending must be met with a full court press offense.

Chuck

 

[Craig234]

Then no one knows if a QE or austerity approach works out for the best in the long term. Given we're at after QEfarmorethan3, I wouldn't be crowing about it...

There's a difference between 'which works' and 'where will their economy be'.

 

[Craig234]

Benefit in this case means to keep the money gravy train moving at any and all costs. Stopping that flow of money in effect stops the growth and power of the Fed gov, and that cannot be allowed to even be considered, much less actually risked to happen. When you understand the ideology behind Spenders, it's not hard to understand why questioning spending must be met with a full court press offense.

Chuck

Translation:

You don't have any idea what benefit means. Just snarky, hyperbolic dogma.