Austerity Now?

Aug 28th, 2011

The Economist laments the current obsession with reducing debt in Western economies generally, but their harshest critique is directed at our own:

"America... has done virtually nothing to deal with its medium-term deficit, but on current policy will see the biggest short-term tightening of the big rich economies next year. That would have been a poor choice even in a reasonable recovery. Given the economy’s weakness, it looks daft. But it could be fixed. The congressional supercommittee charged with finding ways to trim the ten-year deficit as part of the recent debt-ceiling deal could agree on a bolder package of entitlement cuts and new revenue, while Barack Obama and the Republicans could limit the short-term squeeze by extending the temporary payroll-tax cut and boosting spending on things like roads and school repairs."

I part ways with their editors on issues of "entitlements" but they are otherwise dead on.

Matthew Desmond notes how eerily similar this preoccupation with debt reduction at the expense of all other policy initiatives is to the disastrous path once taken by the Hoover Administration.

Alas, we are now in a climate dominated by zealots who proceed as if they worship Murray Rothbard's historical revisionism and laissez-faire extremism. That is to say, the debate has been hijacked by people who actually don't believe in government directly stimulating the economy in any form to alleviate the crisis.