tag:blogger.com,1999:blog-1194375569044391746.post1684328673287773492..comments2024-03-29T11:06:28.120-04:00Comments on Corporate Justice Blog: Eurozone Meltdown (Redux) and the Failure of AusteritySteven Ramirezhttp://www.blogger.com/profile/16741346526253732489noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-1194375569044391746.post-58326655884340027682012-05-17T01:31:09.294-04:002012-05-17T01:31:09.294-04:00First, there is no question that fiscal contractio...First, there is no question that fiscal contraction in boom times, within reason, can be sensible. We should have balanced the budget after the recession of 2001, not enacted historically low levels of tax, particularly during wartime.<br /><br />Second, during the Eisenhower administration the nation spent money on the Marshall Plan, the GI Bill, the Interstate Highway System, unprecedented high levels of peacetime defense, and the first foray into federal funding for secondary education. Yet, debt/gdp went from 100% to 60% in eight years. Eight years!<br /><br />How? 91% top marginal tax rates.Steven Ramirezhttps://www.blogger.com/profile/16741346526253732489noreply@blogger.comtag:blogger.com,1999:blog-1194375569044391746.post-57463804752042315152012-05-16T18:38:11.364-04:002012-05-16T18:38:11.364-04:00"We often hear that big cuts in government sp...<i>"We often hear that big cuts in government spending over a short time are a bad idea. The case against big cuts, typically made by Keynesian economists, is twofold. First, large cuts in government spending, with no offsetting tax cuts, would lead to a large drop in aggregate demand for goods and services, thus causing a recession or even a depression. Second, with a major shift in demand (fewer government goods and services and more private ones), the economy will experience a wrenching readjustment, during which people will be unemployed and the economy will slow."</i><br /><br /><i>"Yet, this scenario has already occurred in the United States, and <i><b>the result was an astonishing boom.</b></i> <b>In the four years from peak World War II spending in 1944 to 1948, the U.S. government cut spending by $72 billion—a 75-percent reduction.It brought federal spending down from a peak of 44 percent of gross national product (GNP) in 1944 to only 8.9 percent in 1948, a drop of over 35 percentage points of GNP."</b></i> -- <a href="http://mercatus.org/sites/default/files/publication/U.S.%20Postwar%20Miracle.Henderson.11.4.10.pdf" rel="nofollow">David R. Henderson, Stanford University, Mercatus Center Publishing</a>Che is deadhttps://www.blogger.com/profile/04988202144185675100noreply@blogger.comtag:blogger.com,1999:blog-1194375569044391746.post-3625508673713541082012-05-16T18:25:45.823-04:002012-05-16T18:25:45.823-04:00Great Britain has been Paul Krugman's "po...Great Britain has been Paul Krugman's "poster boy" for his arguments against the supposed evils of austerity:<br /><br /><i>"Let’s look at Britain, which just entered into a double dip recession because of, according to Paul Krugman, “the evident failure” of austerity policies. If we look at spending levels in the UK both in nominal and real terms, we can clearly see that despite the announcement of deep cuts, government spending continues to rise ... If we look at total government spending as a percentage of the economy, Britain reached a peak in 2009 at 51.5%, and that came down to 49.9% in 2011. Can anyone seriously argue that Britain is in a recession because of that tiny drop in spending as a share of the economy? ... the tax increases already took place (the VAT rate went up from 17.5% to 20%, for example). But as we can see, spending cuts haven’t taken place at all. Thus, austerity in Britain consists only of tax increases."</i> -- <a href="http://www.cato-at-liberty.org/looking-at-austerity-in-britain/#utm_source=feedburner%26utm_medium=feed%26utm_campaign=Feed:+Cato-at-liberty+%28Cato+at+Liberty%29" rel="nofollow">The CATO Institute</a><br /><br />So, the absolute level of spending <i>increased</i>, while spending, as a percent of GDP, fell only marginally. How is that austerity? What has actually happened in the UK, as in other European countries, is that the government has raised taxes. So, in order to be accurate, your post should read that tax increases have <i>"failed miserably to resolve the Eurozone crisis"</i>.<br /><br />I know that Krugman would probably argue that Greece is more representative of what he means with regard to the effect of austerity measures, but Greece is really evidence of the effects of spending beyond ones means for an extended period of time. Greece's profligacy has left it with no options. The size of it's accumulated debts has made it prohibitively expensive to borrow. Austerity is not a strategy, it's a necessity. The troubles that have ensued are not the result of spending less, they are the resulting of having spent too much in the past.<br /><br />No nation has ever spent its way out of a debt crisis. Ever.Che is deadhttps://www.blogger.com/profile/04988202144185675100noreply@blogger.comtag:blogger.com,1999:blog-1194375569044391746.post-35168250523064946522012-05-16T18:10:08.949-04:002012-05-16T18:10:08.949-04:00"Austerity is destroying Europe, we are told....<i>"Austerity is destroying Europe, we are told. In fact, this “anti-austerity” slogan was a big reason for the victory of newly elected socialist François Hollande to the presidency of France. Interviewed in The Economist a few weeks ago, Hollande’s campaign director said “We are not disciples of savage spending cuts.”</i><br /><br /><i>But then, I look at the data and I am asking: What “savage” spending cuts? ...</i> <b><a href="http://mercatus.org/sites/default/files/May14Chart1original.jpg" rel="nofollow">Graph of European Spending</a></b><br /> <br /><i>The most important point to keep in mind is that <b>whenever cuts took place, they were always overwhelmed by large counterproductive tax increases.</b> Unfortunately, that point is often overlooked. <b>This approach to austerity — some spending cuts with large tax increases — is what President Obama has called the “balanced approach.”</b></i><br /> <br /><i>However, as I have mentioned previously, <b>while this balanced approach may sound good and appeals to our sense of fairness and moderation, but it can be a recipe for disaster. That’s because it fails to stabilize the debt, and it is more likely to cause economic contractions.</b> -- <a href="http://www.nationalreview.com/corner/299233/show-me-savage-spending-cuts-europe-please-veronique-de-rugy" rel="nofollow">Veronique de Rugy, Mercatus Center, George Mason University</a></i>Che is deadhttps://www.blogger.com/profile/04988202144185675100noreply@blogger.com