ShareThis Page

Austerity works (if it's really implemented)

| Saturday, June 8, 2013, 9:00 p.m.

Europe's struggles prove that “austerity” fails. So say the Big Spenders. With a condescending sigh, they explain that Europe made deep cuts in government spending and the result is today's high unemployment.

“With erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far,” writes Paul Krugman in The New York Times.

One problem with this conclusion: European governments didn't cut! That doesn't stop leftists from complaining about cuts or stop Europeans from protesting announced austerity plans. But if austerity means spending less, that hasn't happened.

Some European countries tried to reduce deficits by raising taxes. England slapped a 25 percent tax increase on the wealthy but it didn't bring in the revenues hoped for. Rich people move their assets elsewhere or just stop working as much.

If politicians honestly want to boost their nation's economies, they should look to what happened in countries that bounced back from economic slumps.

Iceland was hit by bank collapses — but government ignored street protests and cut real spending. Iceland's budget deficit fell from 13 percent of gross domestic product to 3. Iceland's economy now is growing. Canada slashed spending 20 years ago and now outranks the U.S. on many economic indicators.

Around the same time, Japan went the other way, investing heavily in the public sector in an attempt to jump-start its economy, much as the U.S. did with “stimulus” under President Obama. Japan's economy stagnated. The left now claims Japan didn't stimulate “enough.”

In the U.S., politicians imply spending limits would be “cruel” because vital programs are “cut to the bone.” But we are nowhere near bone.

Consider this family budget:

Annual Income — $24,500

Annual Spending — $35,370

New Credit Card Debt — $10,870

Existing Debt — $167,600

When I show that to people, they laugh and say the family is “irresponsible.” They are dismayed when I point out that those are really America's budget numbers, with eight zeros removed:

Revenue — $2,450,000,000,000

Spending — $3,537,000,000,000

Deficit — $1,087,000,000,000

Debt — $16,760,000,000,000

Then people say: “That's terrible! We have to balance the budget.”

Actually, we don't need to “balance” it. We just need to slow spending growth to about 2 percent a year, so the economy can gain on our debt. But politicians won't do even that.

The first step toward a solution is just being honest about the deep hole we're in — giving up on the lie that governments elsewhere failed with “austere” budgets. They haven't.

John Stossel is host of “Stossel” on the Fox Business Network. He's the author of “No They Can't: Why Government Fails, but Individuals Succeed.”

TribLIVE commenting policy

You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.

We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.

While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.

We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers

We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.

We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.

We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.

We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.