Replies to post #166715 on Tornado Alley (PROG)

[arizona1]

Hi Steph. This is very exciting....first time I'm hearing about it.

Good Morning, California! Time to Kick Some State Senate Behinds and Win Single Payer.

Tomorrow is it. That's the deadline for the California State Senate to vote on SB 810, Single Payer health care for California. They have nineteen votes; they need two more. They took a vote a week ago and four Democratic State Senators abstained. (See Shockwave's diary from this weekend for more explanation and a very amusing phone call from Jasmin).

Here is the contact information those four Senators:

Senator Alex Padilla (Pacoima/LA area)
Email: [e-mail]
Phone: [phone]
Fax: [phone]

Senator Juan Vargas (San Diego area)
Email: [e-mail]
Phone: [phone]
Fax: [phone]

Senator Michael Rubio (Fresno/Bakersfield area)
Email: [e-mail]
Phone: [phone]
Fax: [phone]

Senator Rod Wright (Los Angeles area)
Email: [e-mail]
Phone: [phone]
Fax: [phone]

You know how to use a phone. You know how to say "Please support SB 810, Single Payer health care for California."

Just Do It.

If you feel like getting angry at someone, here's two Democratic Senators who voted, unbelievably, nay last week:

Senator Ron Calderon
Phone: [phone]
[e-mail]

Senator Lou Correa
Phone: [phone]
[e-mail]

And if you feel like calling your own Senator, if it isn't one of the above, and telling how important it is that SB 810 passes, you can find their contact information using this handy webpage.
http://www.dailykos.com/story/2012/01/30/1059973/-Good-Morning,-California!-Time-to-Kick-Some-State-Senate-Behinds-and-Win-Single-Payer?via=siderec

[StephanieVanbryce]

getting back to the Austerity Debacle__In Athens, Austerity’s Ugliness

By NICHOLAS D. KRISTOF March 7, 2012

ATHENS

Europe declared war on Keynes, and Keynes is winning.

In the United States, Republicans lambaste President Obama’s stimulus package as a failure and insist on bone-crunching budget-cutting. If you want to know how well that works, come visit Europe — especially Greece.

Yes, Greece needed a wake-up whack and economic reform, but Republican-style austerity knocked the patient unconscious. Contrast the still-shrinking economies of Europe with the stirrings of recovery in the United States, and you feel lucky to be an American and a beneficiary of President Obama’s stimulus.

It’s stunning here in Athens to see many traffic lights not working, to see beggars pawing through garbage for food, to see blackened ruins of shops burned in rioting. I was even greeted by a homeless man who spoke impeccable British-accented English.

That man, Michael A. Kambouroglou, 35, claims that he studied English literature at Cambridge University and worked for years in the tourism industry, most recently at a five-star hotel. He told me that he had enjoyed a good life, visiting the United States and traveling around the world, until the day nearly a year ago when the collapsing economy caught up with him, and he was laid off.

“To be honest, I never thought it could come to me,” he recalled. “It happened in a flash.” Kambouroglou says he goes out every morning, knocking on doors and looking for work, but in this economy it seems hopeless. The overall unemployment rate here is 21 percent — 48 percent among young people — and the European Union forecasts that the Greek economy (and all of the euro zone) will shrink further this year. [ http://www.nytimes.com/2012/02/24/business/global/eu-forecasts-mild-recession-for-euro-zone-in-2012.html ]

When Kambouroglou’s savings ran out, he moved under a bridge in Athens. The suffering is widespread. Some 250,000 Greeks now receive free meals from churches or shelters, according to the Greek Orthodox Church.

There’s no doubt that Greece had been living recklessly and needed structural reforms. While much of Europe was fundamentally healthy until the crisis hit — the caricature Americans hold of a socialist Europe in decline is a vast exaggeration — Greece truly was a mess. For example, if you’re a business owner, taxation often works like this: Instead of paying a tax bill of, say, $100,000, you pay $40,000 to the state, hand a $20,000 bribe to the tax collector, and keep $40,000.

Republicans are right to see in Greece some perils of an overgenerous government: The state sector was bloated, early retirements and pensions were sometimes absurd, and rigid labor markets undermined Greece’s competitiveness. But the problem was not a welfare state — Greece has much less of a safety net than northern Europe. Rather, it was corruption, inefficiency and a system in which laws are optional.

I drove around Greece and found driving here easy because traffic rules don’t seem to matter. If you’re blocked by a one-way street, you barrel through in the wrong direction. Stop signs are merely suggestive. No-passing markers before blind turns mean: pass anyway, and pray. When an entire economy operates without rules, it has a problem.

Yet instead of structural reforms or improved tax collection, what has changed in Greece, so far, has mostly been slashed budgets. And, as in the rest of Europe, austerity in the middle of recession has made matters worse — just as John Maynard Keynes predicted.

Granted, there are no easy solutions for Greece, but this path doesn’t seem to be working. “It might end up as a social revolution,” Kambouroglou said grimly. That’s too pessimistic, but my hunch is that the latest rescue package will fail (except that it will buy time, perhaps its purpose) and that Greece eventually may leave the euro zone. In any case, the rescue packages seem more about saving French and German banks than saving Greece.

Countless Greeks are giving up on their homeland and emigrating to northern Europe or Australia. Gloom is as thick as a morning fog on the Peloponnesus.

“The state has ceased functioning,” editorialized an Athens newspaper, The Kathimerini.

That’s an exaggeration, but schools, hospitals and social services are devastated. Staff at some halfway houses for the mentally ill haven’t been paid for six months, and electricity has been cut off. “And it’ll get worse,” predicted Dr. Cristos Panettas, the chief psychiatrist of the Psychiatric Hospital of Attica.

One of the earliest recorded economic crises in the Western world came in Athens in the 5th century B.C. Fortunately, Athens was then led by the great Pericles, an early Keynesian who did not respond by slashing budgets.

Instead, he ordered a public works initiative and built the Parthenon. I dropped by the Parthenon the other day, seeking inspiration, and a guide, Miranda-Maria Skiniti, was incisive about the lessons: “We need Pericles today.”

There’s ageless wisdom there for Greeks, Europeans — and Americans.

I invite you to visit my blog, On the Ground. Please also join me on Facebook and Google+, watch my YouTube videos and follow me on Twitter.

http://www.nytimes.com/2012/03/08/opinion/kristof-in-athens-austeritys-ugliness.html?hp=&adxnnl=1&adxnnlx=1331180882-r22PLkLIoMzqQM9tqlQJWw

I truly recommend Nicholas Kristof's blog ..so much to learn .. ;)



http://kristof.blogs.nytimes.com/

[fuagf]

Spanish workers protest reforms
Daniel Woolls
March 30, 2012

"The Austerity Debacle"


Trouble on the streets ... a bloodied protester after being struck
by police during a national strike in Madrid yesterday. Photo: AFP

MADRID: Spanish workers angry over labour market reforms have formed boisterous picket lines outside wholesale
markets, some TV stations are off the air and car factories are all but idled in the early stage of a general strike.

A total of 58 people were detained and nine injured in scuffles as the strike got under way a minute after midnight, the Interior Ministry said.

Unions are challenging a conservative government not yet 100 days old, protesting changes to labour market rules long regarded as among Europe's most rigid, that include making it cheaper and easier for companies to lay people off and cut wages.
Advertisement: Story continues below

The demonstrations come just a day before the government will serve up even more austerity pain with a budget to feature tens of billions of euros in deficit-reduction measures.

Unions are trying to bring the country to a crawl by guaranteeing only about 30 per cent of normal public transport service at rush hour times.

The union UGT said virtually all workers at Renault, SEAT, Volkswagen and Ford car factories around Spain, and at other industrial, mining and port facilities, honoured the strike during the overnight shift. It said overall participation in the strike so far was ''massive''.

Picketers tried to block wholesale markets in Madrid and other cities, and train services were disrupted in Barcelona, but otherwise the situation was fairly normal in the early hours of the strike, said Cristina Diaz, an Interior Ministry spokeswoman.

The government cuts are aimed at helping Spain in its struggles, to satisfy both the European Union and the international investors who determine the country's borrowing costs in the global debt markets, and therefore have a lot of say in whether Spain will follow Greece, Ireland and Portugal in needing a bailout.

On top of a round of spending cuts and tax increases, and reform of the bank sector, the newly elected government of the Spanish Prime Minister, Mariano Rajoy, passed a decree on workers' rights last month.

The piece of legislation, among other things, makes it easier to lay off workers, trim wages and modify other working conditions by citing concerns over, for example, productivity.

The idea behind the decree is to make Spain more competitive, once the rest of Europe recovers and employers are less wary of hiring. The country's jobless rate is now nearly 23 per cent, a eurozone high, and nearly 50 per cent among young people.

''The question here is not whether the strike is honoured by many or few, but rather whether we get out of the crisis,'' the Finance Minister, Cristobal Montoro, said. ''That is what is at stake, and the government is not going to yield.''

Associated Press

http://www.smh.com.au/world/spanish-workers-protest-reforms-20120329-1w1dq.html

[fuagf]

George Osborne is wrong. Austerity is for the boom years, not the slump

Now is not the time for cuts. They create waste and prolonged idleness we cannot afford

Robert Skidelsky .. guardian.co.uk, Friday 23 March 2012 19.45 GMT .. Comments (374)


Satirical artist Kaya Mar carries a painting of George Osborne
pulling carrots out of a top hat outside No 10 on 21 March.
Photograph: Andy Rain/EPA

The main test of a budget at this time is what it does for the recovery and growth of the British economy. George Osborne has repeatedly made clear that he wants to be judged by this test. He believes that deficit reduction is a growth policy which will be vindicated by its results. Growth has been postponed but, he insists, it is about to happen. So is he right?

Some people believe this debate is not even worth having. For instance, the economist Tim Congdon .. http://www.imr-ltd.com/founder.asp .. has dismissed the debate between austerity and growth as "nonsense". The evidence, he claimed, was clear: countries with smaller government deficits grow faster than countries with larger ones. This is untrue, as a general rule. According to the International Monetary Fund, the US, whose government debt to GDP ratio is 105% and whose deficit is 7.9% of GDP, is projected to grow by 1.8% this year; while Britain, with a debt ratio of 81% and a deficit of 7.0% of GDP, is expected to grow by just 0.8%.

Intuitively one would expect economic growth to shrink the deficit and stagnation to enlarge it, because growth increases government revenues and reduces expenditure on the unemployed. The fact that net public sector borrowing in February was £15.2bn, up from £8.9bn last February and almost double the forecast £8bn, confirms this expectation.

Osborne claims his deficit reduction plan is on course and borrowing has come in below targets – but these are the same targets that were revised upwards by £112bn only in November. Keynes's remark, "look after unemployment and the budget will look after itself" is more to the point than Osborne's "look after the budget and unemployment will look after itself".

Osborne's claim rests on the view that a shrinking deficit will automatically, if mysteriously, revive the "animal spirits" of businessmen, while confidence in the government's finances will reduce the cost of its borrowing. However, the opposite logic is more compelling. If the government is cutting its own spending at the same time as households and businesses are cutting theirs, the result is a fall in total spending which means a fall in total buying. This depresses output and employment. And the low cost of government borrowing may not be a sign of confidence at all. It may mean the money has nowhere better to go, or simply that the Bank of England is busily buying up government debt.

Osborne has said the government cannot afford to spend at the present rate because it hasn't got the money. But if the country were more fully employed, the government would receive extra revenue – which would make its spending "affordable".

Osborne aims to cut down waste in the public services. And there is a lot of waste. But cutting waste also means cutting jobs, and that creates even greater waste. It is odd that people who pride themselves on sound thinking prefer the total waste of unemployment to the partial waste of public employment. The most extravagant housing scheme still leaves the nation with houses. Unemployment leaves it with worse than nothing, for prolonged idleness renders the unemployed unemployable.

Ed Miliband was right to highlight the failure of Osborne's "budget for growth" last year. Twelve months ago .. http://www.guardian.co.uk/uk/2011/mar/23/budget-fuel-duty-cut-miliband .. the forecast growth for 2012 was three times the meagre 0.8% figure revealed by the Office for Budget Responsibility, now hailed by Osborne as an improvement. He blames the eurozone crisis and high oil prices for the continued sluggishness of the recovery – anything but his own policy. Labour has also started to argue that austerity is not enough: hence Miliband's welcome endorsement of the idea of a British investment bank, .. http://www.newstatesman.com/uk-politics/2012/02/banking-sector-banks-pay .. which could become a powerful engine for jolting us out of our semi-slump.

But Labour has not engaged directly with Osborne's claim that budgetary austerity is necessary to get us out of our economic hole. Indeed, it would be difficult for it to do so, since the logic was accepted by Osborne's predecessor, Alistair Darling. Instead the party has skirmished at the edges – about the speed of the cuts and distribution of sacrifice. So it has been bereft of the strongest anti-cuts argument: the boom, not the slump, is the time for Treasury austerity.

The debate we need to have is intellectual, not party political. One doesn't have to be a Conservative to support Osborne's cuts (evidently the Lib Dems do), and one doesn't have to be Labour to oppose them. The intellectual debate opens up a wide field for distinguishing between good and bad capitalism. It needs to be framed in a European as well as a British framework, since the eurozone's recovery prospects are even more dire than our own, and Europe offers examples of a more benign capitalism than our own Anglo-American model. It is only through vigorous intellectual give and take that one can hope to rekindle people's interest in politics.

http://www.guardian.co.uk/commentisfree/2012/mar/23/deficit-reduction-george-osborne-budget

[StephanieVanbryce]

Death of a Fairy Tale

By PAUL KRUGMAN April 26, 2012

This was the month the confidence fairy died.

For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets.

Critics warned from the beginning that austerity in the face of depression would only make that depression worse. But the “austerians” insisted that the reverse would happen. Why? Confidence! “Confidence-inspiring policies will foster and not hamper economic recovery,” declared Jean-Claude Trichet, the former president of the European Central Bank — a claim echoed by Republicans in Congress here. Or as I put it way back when, the idea was that the confidence fairy would come in and reward policy makers for their fiscal virtue.

The good news is that many influential people are finally admitting that the confidence fairy was a myth. The bad news is that despite this admission there seems to be little prospect of a near-term course change either in Europe or here in America, where we never fully embraced the doctrine, but have, nonetheless, had de facto austerity in the form of huge spending and employment cuts at the state and local level.

So, about that doctrine: appeals to the wonders of confidence are something Herbert Hoover would have found completely familiar — and faith in the confidence fairy has worked out about as well for modern Europe as it did for Hoover’s America. All around Europe’s periphery, from Spain to Latvia, austerity policies have produced Depression-level slumps and Depression-level unemployment; the confidence fairy is nowhere to be seen, not even in Britain, whose turn to austerity two years ago was greeted with loud hosannas by policy elites on both sides of the Atlantic.

None of this should come as news, since the failure of austerity policies to deliver as promised has long been obvious. Yet European leaders spent years in denial, insisting that their policies would start working any day now, and celebrating supposed triumphs on the flimsiest of evidence. Notably, the long-suffering (literally) Irish have been hailed as a success story not once but twice, in early 2010 and again in the fall of 2011. Each time the supposed success turned out to be a mirage; three years into its austerity program, Ireland has yet to show any sign of real recovery from a slump that has driven the unemployment rate to almost 15 percent.

However, something has changed in the past few weeks. Several events — the collapse of the Dutch government over proposed austerity measures, the strong showing of the vaguely anti-austerity François Hollande in the first round of France’s presidential election, and an economic report showing that Britain is doing worse in the current slump than it did in the 1930s — seem to have finally broken through the wall of denial. Suddenly, everyone is admitting that austerity isn’t working.

The question now is what they’re going to do about it. And the answer, I fear, is: not much.

For one thing, while the austerians seem to have given up on hope, they haven’t given up on fear — that is, on the claim that if we don’t slash spending, even in a depressed economy, we’ll turn into Greece, with sky-high borrowing costs.

Now, claims that only austerity can pacify bond markets have proved every bit as wrong as claims that the confidence fairy will bring prosperity. Almost three years have passed since The Wall Street Journal breathlessly warned that the attack of the bond vigilantes on U.S. debt had begun; not only have borrowing costs remained low, they’ve actually fallen by half. Japan has faced dire warnings about its debt for more than a decade; as of this week, it could borrow long term at an interest rate of less than 1 percent.

And serious analysts now argue that fiscal austerity in a depressed economy is probably self-defeating: by shrinking the economy and hurting long-term revenue, austerity probably makes the debt outlook worse rather than better.

But while the confidence fairy appears to be well and truly buried, deficit scare stories remain popular. Indeed, defenders of British policies dismiss any call for a rethinking of these policies, despite their evident failure to deliver, on the grounds that any relaxation of austerity would cause borrowing costs to soar.

So we’re now living in a world of zombie economic policies — policies that should have been killed by the evidence that all of their premises are wrong, but which keep shambling along nonetheless. And it’s anyone’s guess when this reign of error will end.

http://www.nytimes.com/2012/04/27/opinion/krugman-death-of-a-fairy-tale.html?hp

[StephanieVanbryce]

Joseph Stiglitz — 23.04.2012

Austerity policies are driving us towards a double-dip recession, warns US economist Joseph Stiglitz. He sat
down with Martin Eiermann to discuss new economic thinking and the influence of money in politics.

http://theeuropean-magazine.com/633-stiglitz-joseph/634-austerity-and-a-new-recession

[StephanieVanbryce]

Breaking the eurozone's self-defeating cycle of austerity

While a beleaguered IMF and ECB try to hold the line, voters all over Europe are rebelling against their punitive fiscal orthodoxy


A man plays an accordion in the doorway of a closed down bank in Madrid, Spain – where the youth
unemployment rate has reached 52%. Photograph: Sergio Perez/Reuters

Mark Weisbrot Friday 27 April 2012 17.10 EDT

It has become a ritual: every six months, I debate the IMF at their annual meetings, the last two times represented by their deputy director for Europe. It takes place in the same room of that giant greenhouse-looking World Bank building on 19th Street in Washington, DC. And each time, the IMF's defense of its policies in the eurozone does not get any stronger.

Maybe, it's because most economists at the IMF don't really believe in what they are doing. The fund is, after all, the subordinate partner of the so-called "troika" – with the European Commission and the European Central Bank (ECB) – calling the shots. And most fund economists know their basic national income accounting: fiscal tightening is going to make these economies worse, as it has been doing. Those that have tightened their budgets the most – for example, Greece and Ireland – have shrunk the most, as would be predicted.

The Spanish government, which on Friday announced a 52% unemployment rate among its youth, has projected that the planned budget tightening for this year would by itself take 2.6 percentage points off of 2012 growth. With the eurozone and now even the UK in recession, with the German economy shrinking and France barely growing, the rebellion against the self-inflicted harm of austerity is spreading to the richer northern countries.

In the Netherlands, which is also in recession, the government fell this week after failing to get its austerity package through parliament. The irony of this happening to one of the most pro-austerity governments in Europe was not lost on the continent.

In France, parties described by much of the media as "extremes of the left and right" captured a record 30% of the vote. In reality, the Left Front candidate, Jean-Luc Mélenchon was not extreme by any rational measure. On the contrary, he won 11% of the vote because he opposed the extremism of the "mainstream", which pledges to plunge France into recession and vastly increase unemployment by attempting to balance its budget in the next few years. Mostly likely, he could have won much more, if not for the fear among left-of-center voters of giving incumbent Nicolas Sarkozy a boost by winning the first round.

As for the far-right National Front's record showing of 19%, they are, indeed, extreme in their hostility to immigrants. However appalling their strength, though, one should not assume that this was the main issue in the minds of all of their voters. One poll of their voters showed 78% wanted a return to the French franc. The party's candidate, Marine Le Pen, also campaigned against the euro and against European integration.

This is another irony that many liberals and even much of the left do not wish to acknowledge: by implementing a monetary union that is based on neoliberal principles and rules, the eurozone may have undermined European solidarity and even the potential for further integration. The current structure and leadership of the eurozone seeks to adjust the imbalances brought on by the run-up to the world financial crisis and the 2009 recession by putting the burden of adjustment on those who can least afford it.

This has huge social costs. It is also attempting to accomplish something that is painful and probably not possible – an "internal devaluation" in Spain, Portugal, Greece, Ireland and Italy; and "growth through austerity" in France. One result is not only the backlash against immigrants, which is often an ugly side-effect of recessions and prolonged unemployment, especially when politicians fan the flames, but also a greater friction between countries than we have seen for some time in Europe.

On the economic front, Europe faces two immediate problems. The first is the possibility of an acute financial meltdown, of the type that followed the collapse of Lehman Brothers in 2008. The ECB under Mario Draghi, who took over in November 2011, has seemed to want to avoid the near-death experiences of last year. By pumping more than 1tn euros into the banking system since December, the ECB has reduced the probability of an acute banking crisis.

The second crisis is the recession itself. And as the recession drags on, and the European economy worsens, the possibility of a more severe financial crisis increases. Draghi was unusually pessimistic this week: he noted that the eurozone was "probably in the most difficult phases" of a process in which fiscal austerity was "starting to reverberate its contractionary effects".

From Draghi's remarks this week, it seems that he, too, may not believe in what the European authorities are doing. But the European Central Bank is not willing to do what would end the crisis most immediately. The ECB has the ability to buy the bonds of troubled eurozone countries, and can create the money to do so – just as, in the US, the Fed has created some $2.3tn since 2008 and used it to buy long-term US treasury obligations.

The ECB could thereby put an end to the threat of an acute crisis in Europe, and remove countries like Spain from the self-defeating cycle of cutting spending and shrinking their economies in a futile attempt to lower their debt burden. (Indeed, the credit-rating agency S&P just lowered Spain's bond rating, and it appears that it did so because of the damage that it expects Spain's economy to suffer from the budget cuts that are, ironically, supposedly intended to mollify the bond markets.)

The ECB could put a ceiling on the interest rates of Italian and Spanish bonds (the countries whose debt is too-big-to-fail) by simply committing to buy these bonds whenever yields are above, say, 2.5%. By doing this, they would cut off the possibility of these countries' interest burdens spiraling to unsustainable levels, and ending up like Greece's.

Of course, the European authorities would also have to change direction and support counter-cyclical policies in the countries that are already under IMF agreements – Greece, Portugal and Ireland – as well as the rest of Europe. But all of this is quite feasible – with the co-operation of the ECB.

There are some who say that the ECB doesn't have the legal authority to do this, but there are few legal restrictions on them. As Draghi noted last year, maintaining "price stability" includes intervening against the threat of deflation, as well as inflation. That is enough of a rationale to resolve Europe's financial crisis through the obvious means available.

It is only the political will that is lacking. In the meantime, the opposition of ordinary Europeans throughout the eurozone will be all that stands between the European authorities and a worsening economic mess.


http://www.guardian.co.uk/commentisfree/cifamerica/2012/apr/27/breaking-eurozone-self-defeating-cycle-austerity

[StephanieVanbryce]

It’s Official: Austerity Economics Doesn’t Work

by John Cassidy December 7, 2012



With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work.

In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit [ http://www.breakingnews.ie/world/squeeze-on-as-osborne-misses-target-576793.html ] that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating.

One of the frustrations of economics is that it is hard to carry out scientific experiments and prove things beyond reasonable doubt. But not in this case. Thanks to Osborne’s stubborn refusal to change course—“Turning back would be a disaster,” [ http://www.nytimes.com/2012/12/06/business/global/austerity-in-britain-will-stretch-to-2018-osborne-says.html ] —what has been happening in Britain amounts to a “natural experiment” to test the efficacy of austerity economics. For the sixty-odd million inhabitants of the U.K., living through it hasn’t been a pleasant experience—no university institutional-review board would have allowed this kind of brutal human experimentation. But from a historical and scientific perspective, it is an invaluable case study.

At every stage of the experiment, critics (myself included) [ http://www.newyorker.com/online/blogs/johncassidy/2011/03/austerity-britain-lesson-for-the-us.html ] have warned that Osborne’s austerity policies would prove self-defeating. Any decent economics textbook will tell you that, other things being equal, cutting government spending causes the economy’s overall output to fall, tax revenues to decrease, and spending on benefits to increase. Almost invariably, the end result is slower growth (or a recession) and high budget deficits. Osborne, relying on arguments about restoring the confidence of investors and businessmen that his forebears at the U.K. Treasury used during the early nineteen-thirties against Keynes, insisted (and continues to insist) otherwise, but he has been proven wrong.

With Republicans in Congress still intent on pursuing a strategy similar to the failed one adopted by the Brits, this is a story that needs trumpeting. Austerity policies are self-defeating: they cripple growth and reduce tax revenues. The only way to bring down the U.S. government’s deficit in a sustainable manner, and put the nation’s finances on a firmer footing, is to keep the economy growing. Spending cuts and tax increases can also play a role, but they need to be introduced gradually.

Before the last election there, which took place in May, 2010, the U.K.’s economy appeared to be slowly recovering from the deep slump of 2008-09 that followed the housing bust and global financial crisis. Just like the Bush Administration (2008) and the Obama Administration (2009), Gordon Brown’s Labour government had introduced a fiscal stimulus to help turn the economy around. G.D.P. was growing at an annual rate of about 2.5 per cent. Once Osborne’s cuts in spending started to be felt, however, things changed dramatically. In the fourth quarter of 2010, growth turned negative and a double-dip recession began. So far, it has lasted two years. While G.D.P. did expand in the third quarter of this year, the Office of Budget Responsibility, an independent economic agency that Osborne set up, has said that it expects another decline [ in the current quarter. For 2013, the O.B.R. is forecasting G.D.P. growth of just 1.3 per cent. With the economy so weak, the O.B.R. says that the unemployment rate will tick up from eight per cent to 8.2 per cent next year.

That austerity has led to recession is undeniable. Despite the Bank of England slashing interest rates and adopting a policy of quantitative easing, consumer and investment spending have remained depressed. Osborne places much of the blame on continental Europe, Britain’s biggest trading partner, but that’s a lame excuse. It was perfectly clear back in 2010 that Europe was headed for trouble. The proper reaction to a negative external shock is to loosen fiscal policy, not tighten it, much less tighten it violently. But Osborne was determined to go ahead with his grisly exercise in pre-Keynesian economics.

If all the pain he has inflicted had transformed Britain’s fiscal position, his policies could perhaps be defended. But that hasn’t happened. Back in 2009, the O.B.R. predicted that by the end of 2013-2014, the deficit would have fallen to 3.5 per cent of G.D.P. Now, the O.B.R. says that the actual figure will be 6.1 per cent. And since most of its forecasts have proved too optimistic, this might well be another underestimate. Even by Osborne’s preferred measure, which adjusts the headline figure for the state of the economy and doesn’t count capital spending, the deficit won’t be eliminated before 2016-17 at the earliest. The debt-to-G.D.P. ratio, which Osborne originally said would peak at about seventy per cent, has now hit seventy-five per cent, and it is forecast to come close to eighty per cent in 2015-2016. It was supposed to start falling next year. Now, it is set to keep climbing until at least 2017-2018.

A comparison with what has happened on this side of the Atlantic is illuminating. For the purposes of the natural experiment, the U.S. can be thought of as the control. In adopting a fiscal stimulus of gradually declining magnitude over the past four years, the Obama Administration has administered what was, until recently, the standard medicine for a sick economy.

As one would have expected on the basis of the textbooks, the American economy, while hardly racing ahead, has fared considerably better than its British counterpart. Between 2010 and 2012, G.D.P. growth here has averaged about 2.1 per cent. For the U.K., the figure is 0.9 per cent What may be more surprising—at least to those of you who have been listening to the deficit hawks—is that the United States, while sticking with Keynesian stimulus policies, has also managed to bring down the size of its deficit, relative to G.D.P., almost as rapidly as hairshirt Britain has. Back in 2009, at the depths of the recession, both countries had double-digit deficits. Today, the U.S. deficit stands at about seven per cent [ http://www.nytimes.com/2012/10/13/business/federal-deficit-for-2012-fiscal-year-falls-to-1-1-trillion.html?adxnnl=1&adxnnlx=1355072635-BmbdQ1N92vUWXRLt65JkEg ] of G.D.P., and the British deficit is about five per cent of G.D.P. But with the U.S. growing faster than the U.K,. the gap is set to close. Next year, according to the latest forecasts from the Congressional Budget Office [ http://www.cbo.gov/publication/43539 ] and the O.B.R., the U.S. deficit will be considerably smaller than the U.K. deficit: four per cent of G.D.P. compared to six per cent.

Let’s go over that one more time. Having adopted the policies of Keynes in response to a calamitous recession, the United States has grown more than twice as fast during the past three years as Britain, which adopted the economics of Hoover (and Paul Ryan). Meanwhile, the gaping hole in the two countries’ budgets has declined at roughly the same rate, and next year the U.S. will be in better fiscal shape than its old ally.

Q.E.D.

http://www.newyorker.com/online/blogs/comment/2012/12/austerity-economics-doesnt-work.html#ixzz2EZkAzBZv