Skip to comments.NY Times Column: Why Budget Cuts Donít Bring Prosperity
Posted on 02/23/2011 8:19:02 AM PST by SeekAndFind
Remember the German economic boom of 2010?
Germanys economic growth surged in the middle of last year, causing commentators both there and here to proclaim that American stimulus had failed and German austerity had worked. Germanys announced budget cuts, the commentators said, had given private companies enough confidence in the government to begin spending their own money again.
Well, it turns out the German boom didnt last long. With its modest stimulus winding down, Germanys growth slowed sharply late last year, and its economic output still has not recovered to its prerecession peak. Output in the United States where the stimulus program has been bigger and longer lasting has recovered. This country would now need to suffer through a double-dip recession for its gross domestic product to be in the same condition as Germanys.
Yet many members of Congress continue to insist that budget cuts are the path to prosperity. The only question in Washington seems to be how deeply to cut federal spending this year.
If the economy were at a different point in the cycle not emerging from a financial crisis the coming fight over spending could actually be quite productive. Republicans could force Democrats to make government more efficient, which Democrats rarely do on their own. Democrats could force Republicans to abandon the worst of their proposed cuts, like those to medical research, law enforcement, college financial aid and preschools. And maybe such a benevolent compromise can still occur over the next several years.
The immediate problem, however, is the fragility of the economy. Gross domestic product may have surpassed its previous peak, but its still growing too slowly for companies to be doing much hiring.
(Excerpt) Read more at nytimes.com ...
The logical extension of this article is that we spend ourselves into oblivion(which we’ve already done) as a goal; while government and taxes go higher.
What a concept.
I’m guessing we should try taxing ourselves into prosperity.
The writer seems to have forgotten the German economy of 1923. If the value of your currency is destroyed, there’s not much prosperity either. And what better way to undermine the country than the economic decisions of those currently in Washington?
Germany is the biggest trader/exporter within the EU. Its decline last year didn't have anything to do with greatly reduced austerity budgets (and even riots) in the PIIGS countries would it?
this article is rubbish.
Budget cuts are supposed to bring sanity.
So we can print money as a means of prosperity. Sure, why not?
We can all be trillionaires.
Lets see....because of the increase in taxes, the hours lost at work (each of us lost 1-2 hours instead of laying 1 person off), the increase in my insurance premiums I can no longer afford my mani's and pedi's I was quite fond of.
I can no longer go get my hair done every 6 weeks. I am now on a "if I can't pay cash I can't afford it" budget.
With these cuts in my personal life I can afford to pay all my bills....even with a tad bit left over to save.
I am no longer "in debt" because of my budget cuts. I am not rich my any means, but I can afford my bills and now can afford to get my Ford Explorer's tranny rebuilt.
Please, don't tell me budget cuts dont bring prosperity. I may earn less now, but can afford more with my own budget cuts.....including couponing
For those of you on a tight budget get on PJ-Comix "The Coupon Whisperer" ping list. It's amazing how much you can "afford" with paying very little.
Just gotta keep spending, spending, spending. Oh and taxing, taxing, taxing.
Germany's growth "slowed" but is still growing, while here in the USA a decline less than "Expected" is great news
Output in the United States where the stimulus program has been bigger and longer lasting has recovered.
I swear, I don't even think Goebbels had the balls to print such whoppers as these reporters do day in and day out.
I wonder do they think people really believe their lies or are they really that delusional that they believe it themselves ?
The NYSlimes is a dead paper walking, when it goes under and these reporters are unemployed I would love to ask them "How's that Recovery going for ya?"
It’s not about attempting to reach “prosperity” in the short run. It’s about putting an end to the government accounting shenanigans and debt so that there’s something left to build on for the future.
What else would you expect from this fading bastion of Left Wing weenies.
I’m not an expert on the situation, but I suspect that German commitments through the EU to continue to prop-up the spendthrifts in Greece and the other PIGS caused the German private sector to cool it.
You're barking up the wrong tree. The object at this point is survival, not prosperity.
This article reminds me of the stories about bankruptcy lawyers telling a potential client to go buy a new car before coming back to file. They just don’t have enough debt yet to benefit by BK.
It’s simple to see how ludicrous this is by reversing the statement. If budget cuts (and by derivative, less tax/debt burden) means less prosperity, then increased spending (and thereby more taxes/debt) will mean more prosperity.
He’s not taking a great many other factors into consideration. The Fed may be keeping interest rates down artificially through various maneuvers, but like any price control it doesn’t work. We’re paying with the weak dollar and falling bond market and the resulting consequences - inflation and lack of business investment due to banks unwillingness to lend.
He’s also missing the point that even if more govt spending means prosperity, growing bureaucracy and regulation doesn’t. So much of the stimulus hasn’t went to ‘shovel-ready’ it’s went to agencies that have created more draconian regulations on business and hiring more paper shufflers. We’re not going to get any bang from a construction project because any expansion in demand isn’t going to be met with hiring due to regulatory, taxing, and monetary uncertainty. The job gains if any will be temporary at best, and businesses will use tech to do more with less.
The last thing of course is global competition. More debt, taxes, regulations reduces our competitiveness. Businesses close or go overseas, jobs are lost, tax base is lost, and a vicious cycle ensues.
Keynesians are always one dimensional and simplistic thinkers. Economics is like a spider web, pull on one thread and you pull on many.