What Austerity Really Brings

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Do you remember the great deficit bugaboo?  Where a certain party (you know, the Chicken Little one) kept screaming that the deficits would ruin America?  Which continued through the next Presidential election? The disappearing US deficit problem If you’d check my blog, I clearly stated the facts.  That the deficit only looked overwhelming because our economy was in free fall.  (As I quoted Ben Bernanke yesterday, the 2008 recession (aka ‘the Great Recession’) was far worse for the economy than the Great Depression.  And, now that our economy is recovering (although wage rates have not done so), our deficit is no longer a problem.  (Don’t even think that the “fixes” offered by Congress made a difference- they won’t kick in for a few more years, yet.)

(Oh, I know, they managed to shut the government down, costing us even more money, but, the bulk of their slash and burn tactics failed.  Their real intent was to cut the social benefits programs the US provides its citizens.)

Want to imagine what would have happened if these same Chicken Littles hadn’t failed with their intent?  Look at Europe.  It’s about to repeat the 2008 recession- maybe not all the way, but pretty darned close.  The hopes of Europe- the economies of Germany and France- are falling apart.  Which means the European Union is about to be flushed down the economic toilet.  Couple these problems with the Ukrainian and Russian political (read war) issues- which means the natural gas supply in Europe is at risk, and the situation seems dire indeed. While the US unemployment rates still suck (6.2% is not something to crow about- even with a drop from 10%), they look downright rosy compared to Europe’s, which are still over 11.5%.  And, yet, those same country leaders that have not “fixed” the problem yet are demanding more “austerity”.  (You know, the budget slashing programs the US Chicken Littles advocated.)

With the rest of Europe is still tanking, Germany (and/or France- but Germany is a bigger economy) is unable to keep the rest of the ship afloat.  After all, its economy relied upon exporting their products to the other European Union nations. And, if Germany adheres to the Russian boycott (to “punish” it for its continuing invasion of Ukraine), then its sales to Russia will continue to decline (currently down 19% this year alone).

Now, the only question left is will this European economic failure hurt the US soon…

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