From here to austerity
From here to austerity
I've always heard that the definition of insanity is doing the same thing again and again and expecting a different result. Here's another one: Doing the exact same thing that's just been tried in Europe, which failed miserably:
We all know about the weaknesses in Europe's "periphery" -- Greece, Ireland, Spain, Portugal, and Italy. But the drop in Europe's core is dizzying. Germany grew at an annualized rate of just half a percent last quarter, down from 5.5 percent in the first quarter of the year. France didn't grow at all.
What's going on in Europe's core? Partly it's a loss of confidence due to debt crises in the periphery. But that's hardly all. Europe depends on exports -- especially to Asia, India, Latin America, and the United States. But exports to China and other emerging markets have been dropping. China, worried about inflation, has pulled in the reins on its sizzling economy. Brazil has been pulling back as well. And as the United States economy sputters, exports to America have been slowing.
But chalk up a big part of Europe's slowdown to the politics and economics of austerity. Europe -- including Britain - have turned John Maynard Keynes on his head. They've been cutting public spending just when they should be spending more to counteract slowing private spending. The United States has been moving in the same bizarre direction.
Bizarre indeed. Of course, as noted here last week, policy makers on both sides of the pond overlook the lessons of the 1930s, when America roared back in the early part of the FDR's presidency, which he took a stimulus-oriented approach to government spending, only to contract in 1937 and 1938 with a shift toward (duh-duh-DUH) deficit reduction, The ultimate cure was World War II, but I really don't think we want to go through that solution again, do we?
On a very loosely related point, I heard most (but not all) of an interesting debate about the Obama presidency on WHYY's "Radio Times" yesterday between liberal critic Drew Westen (who wrote this much ballyhooed op-ed) and blogger Matthew Yglesias, who's more willing to cut POTUS 44 some slack. Yglesias said something I'd not heard before -- that the reason the Obama administration never made a big deal about the tax cuts in the 2009 stimulus package because if it was tangible -- i.e., like that check that George W. Bush sent you in the mail in 2001 -- people would have just saved it or paid down their credit card, but if they had a few extra dollars mysteriously in the bank every week they might start spending more, which would boost the recovery.
You know, the Obama people get accused of being "too smart for their own good," and here's a classic example. They got bludgeoned in 2010 by voters who mistakenly thought Obama had increased taxes. Proof there's something to be said for doing things the simpler, old-fashioned way, no?