Thursday, May 31, 2012

The Infantile World View Of Austerity

... just blows me away.

No matter what you read about the Euro debt crisis these days, you keep getting shocked paragraphs like this one.
What if Europe and the US converged on a set of economic policies that brought out the worst in both – European fiscal austerity combined with a declining share of total income going to workers? Given political realities on both sides of the Atlantic, it is entirely possible.

So far, the US has avoided the kind of budget cuts that have pushed much of Europe into recession.
Budget cuts? No kidding, dude. They're hugely in debt. They spent today's money yesterday. It's all gone. You're not going to be able to spend what you've already spent.

How hard is this concept to grasp? What's the disconnect here? It's like these people can't do a simple budget. They must act surprised every time they find their wallets empty, like it's supposed to be some kind of endlessly regenerating magical bag of monies. This is the world of the child, the one where mommy and daddy bring me nommy-noms from somewhere and I eat them. It's pathetic.

Robert Reich, author of the above idiocy and darling of many of my lefty friends, views the sequence of events like this:

What a scathing indictment of our culture where there's no grasp of the concept of borrowing money, even among "educated" people.


Kelly the little black dog said...

In fairness to Reich he calls for controlling deficits during the boom times, which both parties haven't done. The idea of not cutting too deep is based on the assumption that things will eventually get better and when they do you pay off the debit you incurred. It is very common for business to take out loans to bridge the tough times. Its a gamble, because if the tough times last too long, you go bankrupt.

Dean said...

Kelly, the "save during the good times" is the portion of the Keynesian equation that is conveniently ignored by most people.

K T Cat said...

Re: Saving during the good times.

If it doesn't ever actually happen, then your model is worthless. That is, if the Cleveland Browns draw up running plays that say their left tackle will run at 75MPH, they're not real plays, are they? They're just fantasies.

Why can't Reich look at the real world and change his model? Spending during down times is predicated on saving during good ones. Otherwise its just a prolonged bender. Instead, he clings to wants and ignores requirements, hence the graphic.