There was a story in the New York Times today that all Americans should read, about the reverse miracle of the Irish economy. You see, the deficit hawks worked their magic in Ireland before it became the policy of the rest of the European Union -- doing the same things that Tea Party-inspired Republicans will do if they ever take power again in the United States.
Politicians here have raised taxes and cut salaries for nurses, professors and other public workers by up to 20 percent. About 30 billion euros ($37 billion) is being poured into zombie banks like Anglo Irish, which was nationalized after lavishing loans on developers.
The budget went from surpluses in 2006 and 2007 to a staggering deficit of 14.3 percent of gross domestic product last year — worse than Greece. It continues to deteriorate. Drained of cash after an American-style housing boom went bust, Ireland has had to borrow billions; its once ultralow debt could rise to 77 percent of G.D.P. this year.
“Everybody’s feeling quite sick at what happened because things were going so well for Ireland,” said Patrick Honohan, the Irish central bank governor. “But we don’t have the flexibility to do a spending stimulus now. There’s no one who is even arguing for it.”
The article also notes that -- unlike the United States -- Ireland is still in a recession, with unemployment at a whopping 13 percent. The irony is sad -- being deficit hawks not only increased the deficit in Ireland but will continue to do so for a while, until the economy can recover, and God knows when that will be. And this is what will happen here, when either Obama retreats into an anti-stimulus program or the GOP takes over. And they won't be able to say they weren't warned of the consequences.