So much for government 'austerity'!

Forbes has just published an excellent article pointing out that all those baying for more Keynesian economic stimulus instead of so-called 'austerity' programs have one major problem:  there is no government austerity to speak of.  Here's an excerpt.

The official Keynesian story is that the PIIGS of Europe (Portugal, Italy, Ireland, Greece and Spain) have been devastated by cutbacks in public spending. Austerity has made things worse rather than better – clear proof that Keynesian stimulus is the answer. Keynesians claim the lack of stimulus (of course paid for by someone else) has spawned costly recessions which threaten to spread.  In other words, watch out Germany and Scandinavia: If you don’t pony up, you’ll be next.

Erber finds fault with this Keynesian narrative. The official figures show that PIIGS governments embarked on massive spending sprees between 2000 and 2008. During this period, their combined general government expenditures rose from 775 billion Euros to 1.3 trillion – a 75 percent increase. Ireland had the largest percentage increase (130 percent), and Italy the smallest (40 percent). These spending binges gave public sector workers generous salaries and benefits, paid for bridges to nowhere, and financed a gold-plated transfer state. What the state gave has proven hard to take away as the riots in Southern Europe show.

Then in 2008, the financial crisis hit. No one wanted to lend to the insolvent PIIGS, and, according to the Keynesian narrative, the PIIGS were forced into extreme austerity by their miserly neighbors to the north. Instead of the stimulus they desperately needed, the PIIGS economies were wrecked by austerity.

Not so according to the official European statistics. Between the onset of the crisis in 2008 and 2011,  PIIGS government spending increased by six percent from an already high plateau.  Eurostat’s projections (which make the unlikely assumption that the PIIGS will honor the fiscal discipline promised their creditors) still show the PIIGS spending more in 2014 than at the end of their spending binge in 2008.

As Erber wryly notes: “Austerity is everywhere but in the statistics.”

There's more at the link.  Recommended reading.

The same can be said of the United States.  When President Obama took office in 2009, he unleased the biggest increase in federal government spending we've ever seen.  It's bankrupting us, and making our fiscal plight worse every day that it continues.  The only way we can restore our financial health is to spend less - we can't possibly increase taxes to the point where they can cover the expenditure, as that would cripple our economy.  However, the Administration continues to spend, spend, spend as if there's no tomorrow.  Of course, it won't have to pay for tomorrow . . . we, the taxpayers, will.





Peter