Austerity? What austerity?

Discussion in 'Economy' started by Wiseacre, May 21, 2012.

  1. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Lots of talk about the European countries moving away from austerity and instead stressing economic growth and more jobs. Well hooray for that, but raising taxes and spending more money growing the public sector ain't going to further those ends. I believe most of the austerity measures thus far have been much more along the lines of tax increases anyway, with not much in the way of spending cuts. Which is mostly limiting the amount of additional spending in the future rather than actually spending less money.

    So, a french guy has to retire at 62 instead of 60? Geez, life's a bitch. Don't get a 35 hour work week and 8 weeks of paid vacation? What inhumanity. Some call that austerity, but I call it reality. I call it living within your means. Don't know what they're going to do over there in Europe, or what we'll do here for states like California. We still got some road left to kick the proverbial can down. But I'm not seeing much change in attitudes, just more spending and more debt. But sooner or later reality will hit, and hit hard.
     
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  2. starcraftzzz
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    starcraftzzz Senior Member

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    Um so how is my taxes being raised this year mean I have the same amount of money to spend this year? Every country that tries/has tried austerity has seen it fail. But fuck history.
     
  3. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    " When Jean Chretien became prime minister in 1993, Canada faced a fiscal and economic breakdown. The government’s share of the economy had climbed to 53% in 1992, from 28% in 1960. Deficits had tripled as a percentage of gross domestic product over the prior two decades. Government debt was nearly 70% of GDP and growing rapidly. Interest payments on the debt took up 35 cents of every tax dollar.
    Mr. Chretien and his finance minister, Paul Martin, took decisive action. “Canadians have told us that they want the deficit brought down by reducing government spending, not by raising taxes, and we agree,” Mr. Martin said. The new administration slashed spending. Unemployment benefits were cut by nearly 40%. The ratio of spending cuts to tax increases was nearly 7-to-1. Federal employment was reduced by 14%. Canada’s national railway and air-traffic-control system were privatized.
    The economy rebounded. Between 1995 and 1998, a $36.6 billion deficit turned into a $3 billion surplus. Canada’s debt-to-GDP ratio was cut in half in a decade. Canada now has faster economic growth than America (3.3% in 2010, compared to 2.9% in the U.S.), a lower jobless rate (7.2% in June, when the U.S. rate was 9.2%), a deficit-to-GDP ratio that’s a quarter of ours, and a stronger dollar.
    What’s most remarkable about the Canadian turnaround: It was led by liberals. Mr. Chretien and Mr. Martin were leaders of the Liberal Party. Yet they responded to the clear wishes of Canadians and, to the surprise of the political class, shifted to the right. Or to the center, the two leaders would say. "

    Fred Barnes: How Spending Cuts—Not Higher Taxes—Saved Canada - WSJ.com
     
  4. The Infidel
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    The Infidel EVIL CONSERVATIVE

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    You need to read up and return when ya have a clue :eusa_hand:
     
  5. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    " The Germans enacted a relatively large stimulus program (the proportion of tax cuts was twice as large as for the U.S.), but were extremely sensitive about not reaching the inflection point where a marginal dollar of stimulus would decline in effectiveness (or turn negative). The focus since the early part of the year has been on reversing stimulus, enacting credible government spending cuts, and encouraging the rest of the developed world to do the same. The result (coincidental or not), has been a return to pre-recession levels of business confidence, a 2.4% annualized increase in households consumption expenditures in the second quarter, and more than a 20% annualized increase in business investment. Although growth in net exports did boost GDP in the quarter, it accounted for only 36% of German second quarter GDP growth, less than the 50% contribution from private sector consumption and investment growth (excluding inventories). Were this simply about trade flows and demand for manufactured goods, the German economy would probably resemble that of Japan, where exports were up by more than 25% (annualized) in the second quarter, but the economy remained stagnant due to contractions in consumer spending and private sector investment. "

    Round 2 on Lessons from Germany | e21 - Economic Policies for the 21st Century
     
  6. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    " First and foremost, France has yet to cut spending. In fact, to the extent that the French are frustrated by so-called budget cuts, their only real complaint is that future increases in spending will not be as large as planned. (The same can be said about the U.S. budget.)
    By contrast, Sweden has significantly cut government spending without equivalent increases in taxes. Sweden’s finance minister, Anders Borg, successfully reduced welfare spending and pursued economic stimulus through a permanent reduction in the country’s taxes, including a 20-point reduction in the top marginal income tax rate. As a result, Sweden’s economic growth has, of late, trumped every other European country’s.
    Sweden’s commitment to reform has paid off in economic growth. While the “balanced approach” may give the appearance of pursuing fiscal solvency, in practice it stagnates the possibility of growth. Real fiscal reform comes from a commitment to cut spending and from structural changes to taxation and the regulatory environment. "

    GDP Growth Rates: The Swedish Approach | Mercatus
     
  7. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    My post above on Sweden is referring to a chart depicting the growth rates for Sweden compared to France and the US. It's from the same link to the Mercatus Center.
     

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  8. DSGE
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    DSGE VIP Member

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    Sweden also engaged in extremely aggressive monetary stimulus.
     
  9. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    Do I need to do more? Look at what the Swiss did with their debt brake, they limited their spending to their revenue growth, what a concept. Or the Baltic States. You show me a country that raised taxes and spent more money and I'll show you a failed economy.
     
  10. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    When was this?
     

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