Soleron said:
I did used to believe that. But if we assume that politicians are too shortsighted to actually implement it correctly, the best course of action is just to restore consumer and business confidence. This can be done with higher spending on infrastructure/regeneration, tax incentives for business development, and in general NOT cutting things. Basically fake recovery which will be followed by a real one born from confidence. If you cut, you reduce the outgoings by 10% say... but the economic impact lowers GDP by 20% and you're still behind. And in reality austerity doesn't even lower outgoings. Has Greece's or Spain's or the UK's budget decreased? No. The time for balancing the budget is GOOD times. It's not the most pressing concern vs high unemployment or prices rising faster than wages. |
The problem with that, is that line of thinking assumes people are dumb and buisnesses are dumb.
Which... they aren't. People aren't that stupid, as seen in the USA.
We've had the fake recovery, and no real one has occured since... everything stays stubborn... because nobody wants to expand or hire until the stimulus disapears because they know it has to.
That Greece, Spain and the UK's budgets haven't decreased simply shows they haven't actually used austerity.
Additionally, GDP is a poor factor to judge the health of the economy. It's more a political tool really. Ideally, GDP would not include government outlays and instead only measure the private economy.
Afterall the US could print trillions of dollars, spend trillions of dollars on a machine that burns trillions of dollars, burn those trillions of dollars used to buy the machine, and GDP would suddenly be increased multiple times over.
Non government GDP, is all that really matters.
Should austerity ideally happen during good times? Sure. Problem is, nobody will vote for it then, and as a result, you get situations like you have currently, in Spain, Greece and the UK. The problem isn't that they aren't putting off Austerity, the problem was, they didn't already have it.
Times up.
