Niall Ferguson: Austerity works but the Democrats show they still haven't learned the lessons of Europe

  • Posted by a hidden member.
    Log in to view his profile

    May 31, 2011 6:24 PM GMT
    http://www.thedailybeast.com/blogs-and-stories/2011-05-29/democrats-havent-learned-the-economic-lessons-of-europe/#

    To judge by media coverage, President Obama's whistle-stop European tour was largely recreational. In Dublin he reenacted the time-honored tradition of discovering his Irish roots. In London he took part in what felt like Royal Wedding: The Sequel.

    Meanwhile, in Washington, business went on as usual. The government continued borrowing money despite having breached its legal debt ceiling. Senate Democrats voted down Paul Ryan's plan to reduce the cost of Medicare, despite having no credible plan of their own to stabilize the debt.

    Yet Obama's travels could have been a timely opportunity to learn from Europe's fiscal mistakes. To American commentators, notably New York Times columnist Paul Krugman, the lesson is clear. "In Europe," he wrote last week, "the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer… [But] Europe's troubled debtor nations are… suffering further economic decline thanks to those austerity programs." Elsewhere, Krugman has repeatedly badmouthed the British government for trying to cut its deficit.

    It's certainly true that the economies of Greece, Ireland, and Portugal—the three countries committed to austerity programs as conditions for European and International Monetary Fund bailouts—have shrunk over the past year. The unemployment rate is above 10 percent in all three. Meanwhile, the U.K. economy is growing sluggishly. But to infer from this that the United States can postpone serious attempts at fiscal stabilization would be completely wrong—and deeply dangerous.

    The point is that Greece & Co. are in trouble because of excessive borrowing. Between 1999 and 2010, the structural deficit of the Greek government rose from 2 percent of gross domestic product to nearly 18 percent. Ireland went from surplus to minus 11 percent. Portugal was little better. The result was a debt explosion. The net government debt of Greece, the worst offender, soared from 76 percent of GDP to 142 percent last year.

    As it became clear that there was no automatic mechanism to transfer funds from the relatively frugal European core to the profligate periphery, bond investors started to fear defaults. They dumped the debt, driving up the yield on Greek 10-year bonds—and hence the interest rate on new borrowing—to 17 percent. That simply made matters worse, necessitating ever more desperate spending cuts and tax hikes to avoid national bankruptcy.
  • Webster666

    Posts: 9217

    May 31, 2011 6:38 PM GMT
    "The Democrats !?"
    Have you noticed lately that the REPUBLICANS are in charge of the House of Representatives ?
    What are they doing to create jobs and stimulate the economy ?
    Nothing ?
    Correct answer.
    Nothing.

    The economy is fueled by people spending money.
    People who don't have money can't spend money.
    The solution is to get money into the hands of the people, whether it's the Federal government bribing companies to hire more employees, or the Federal government paying people in "make work" jobs, similar to the Works Projects of the 1930's.

  • Posted by a hidden member.
    Log in to view his profile

    May 31, 2011 6:39 PM GMT
    Webster666 said"The Democrats !?"
    Have you noticed lately that the REPUBLICANS are in charge of the House of Representatives ?
    What are they doing to create jobs and stimulate the economy ?
    Nothing ?
    Correct answer.
    Nothing.

    The economy is fueled by people spending money.
    People who don't have money can't spend money.
    The solution is to get money into the hands of the people, whether it's the Federal government bribing companies to hire more employees, or the Federal government paying people in "make work" jobs, similar to the Works Projects of the 1930's.



    I'm told I'm quite unfamiliar with how the US works. Are you saying that the Republicans with control of only the House of Representatives are able to pass laws?
  • Posted by a hidden member.
    Log in to view his profile

    May 31, 2011 7:29 PM GMT
    riddler78 said
    Webster666 said"The Democrats !?"
    Have you noticed lately that the REPUBLICANS are in charge of the House of Representatives ?
    What are they doing to create jobs and stimulate the economy ?
    Nothing ?
    Correct answer.
    Nothing.

    The economy is fueled by people spending money.
    People who don't have money can't spend money.
    The solution is to get money into the hands of the people, whether it's the Federal government bribing companies to hire more employees, or the Federal government paying people in "make work" jobs, similar to the Works Projects of the 1930's.



    I'm told I'm quite unfamiliar with how the US works. Are you saying that the Republicans with control of only the House of Representatives are able to pass laws?


    On their own, no. But they can work with the Senate and the administration to find compromises that would help instead of focusing on social issues like DADT, and wasting time on repealing ACA which is a waste of their time. They campaigned on jobs being their #1 focus and they've barely mentioned them since November.
  • Posted by a hidden member.
    Log in to view his profile

    May 31, 2011 7:38 PM GMT
    You realize Niall Furguson thinks the US should be a rogue empire and actually conquering the rest of the world right?
  • Posted by a hidden member.
    Log in to view his profile

    May 31, 2011 8:29 PM GMT
    Private sector jobs, what we should really want to see increase, result from business-friendly policies, something the Republicans have pushed, but the Democrats continue to resist.
  • SFGeoNinja

    Posts: 510

    Jun 01, 2011 4:50 AM GMT
    fountains saidYou realize Niall Furguson thinks the US should be a rogue empire and actually conquering the rest of the world right?


    He probably thinks that as imperialists we're a bunch of pansies compared to the Brits, Spanish or the Romans. He might have a point (cough*Iraq*cough).