S&P: Austerity is "Self-Defeating"

[BakshisMouse]

While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas

We also believe that the agreement is predicated on only a partial recognition
of the source of the crisis: that the current financial turmoil stems
primarily from fiscal profligacy at the periphery of the eurozone. In our
view, however, the financial problems facing the eurozone are as much a
consequence of rising external imbalances and divergences in competitiveness
between the EMU's core and the so-called "periphery". As such, we believe that
a reform process based on a pillar of fiscal austerity alone risks becoming
self-defeating, as domestic demand falls in line with consumers' rising
concerns about job security and disposable incomes, eroding national tax
revenues.

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

Also, yes, I caught this from Paul Krugman's blog.

 

[EdwardBaiamonte]

I assume those people would want balanced budgets in America now at whatever cost.

Not at all, they would want a firm commitment to slowly bring the budget into balance over say 5 years with more spending cuts than tax increases.

 

[kiwiman127]

While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas

We also believe that the agreement is predicated on only a partial recognition
of the source of the crisis: that the current financial turmoil stems
primarily from fiscal profligacy at the periphery of the eurozone. In our
view, however, the financial problems facing the eurozone are as much a
consequence of rising external imbalances and divergences in competitiveness
between the EMU's core and the so-called "periphery". As such, we believe that
a reform process based on a pillar of fiscal austerity alone risks becoming
self-defeating, as domestic demand falls in line with consumers' rising
concerns about job security and disposable incomes, eroding national tax
revenues.

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

Also, yes, I caught this from Paul Krugman's blog.

The UK did their austerity thing and it seriously hurt the UK economy. By slashing the government spending dramatically, it had a negative effect on the UK economy and the UK GDP. Now many economist are predicting another recession. In order to recover from a major economic slowdown, the GDP has to grow not shrink.

 

[samjones]

The UK did their austerity thing and it seriously hurt the UK economy. By slashing the government spending dramatically, it had a negative effect on the UK economy and the UK GDP. Now many economist are predicting another recession. In order to recover from a major economic slowdown, the GDP has to grow not shrink.

True - the people took to the streets.

 

[samjones]

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight.

Partisan bickering, actually "hatred" put the USA in a postion to default on its debt for the first time in our historyh.

 

[EdwardBaiamonte]

[
The UK did their austerity thing and it seriously hurt the UK economy.

of course thats absurd. When you go into rehab of course it hurts but there is no alternative except further addiction.

[

By slashing the government spending dramatically, it had a negative effect on the UK economy and the UK GDP.

of course thats absurd!! When you cut government spending the economy grows because the government does not produce real companies real products or real jobs!! When you cut liberal spending the private sector has more to produce real companies, jobs and products

[
In order to recover from a major economic slowdown, the GDP has to grow not shrink.

and of course reducing government spending is the best way to do it

 

[OohPooPahDoo]

While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas

We also believe that the agreement is predicated on only a partial recognition
of the source of the crisis: that the current financial turmoil stems
primarily from fiscal profligacy at the periphery of the eurozone. In our
view, however, the financial problems facing the eurozone are as much a
consequence of rising external imbalances and divergences in competitiveness
between the EMU's core and the so-called "periphery". As such, we believe that
a reform process based on a pillar of fiscal austerity alone risks becoming
self-defeating, as domestic demand falls in line with consumers' rising
concerns about job security and disposable incomes, eroding national tax
revenues.

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

Also, yes, I caught this from Paul Krugman's blog.

After Lehman Bros etc. I fail to see how anyone should care what the S&P has to say about anyone's credit rating

 

[kiwiman127]

[
The UK did their austerity thing and it seriously hurt the UK economy.

of course thats absurd. When you go into rehab of course it hurts but there is no alternative except further addiction.

[

By slashing the government spending dramatically, it had a negative effect on the UK economy and the UK GDP.

of course thats absurd!! When you cut government spending the economy grows because the government does not produce real companies real products or real jobs!! When you cut liberal spending the private sector has more to produce real companies, jobs and products

[
In order to recover from a major economic slowdown, the GDP has to grow not shrink.

and of course reducing government spending is the best way to do it

I used the UK as proof of my assertions,Spain and Ireland also prove my point.

How Austerity Is Killing Europe

Indeed, austerity economics has not worked in one single case in Europe in the last two years. When David Cameron’s government imposed a first round of harsh spending cuts in 2010, it utterly failed to revive the British economy as promised. To the contrary, it probably cut a budding recovery short. Unemployment and the deficit as a percent of GDP remained high. Some pro-Conservative observers I met at the time assured me that the Cameron team, led by George Osborne, the Chancellor of the Exchequer, was pragmatic and would reverse course on austerity if it wasn’t working. Yet when growth basically ground to a halt in late 2011, the Cameron team only doubled down, making further cuts. We need more of the same medicine, they told their citizens, a record number of whom are unemployed. Britian is a hair’s breadth away from outright recession only two years after its last one.

In November, meanwhile, Spaniards voted out of office a once-popular Socialist government, in part for its failed austerity program of the past year. The Socialists had earlier presided over a boom and even built a budget surplus. But then the housing and banking crises struck and private Spanish banks ran amok. In response, in 2010 the Socialists sharply reversed an earlier stimulus policy, cut spending, and raised taxes to the tune of about 5 percent of GDP. Government debt is still not high in Spain, and interest rates have not risen the way they have in Italy. But economic growth stalled after these measures were implemented, because reduced public spending weakened the demand for goods and services, pure and simple. With Spain’s official unemployment rate now 21.5 percent, the Socialists lost the election badly—paradoxically pushing voters to elect a conservative leadership that is calling for more austerity. In Spain, recession is now inevitable.

And then there is Ireland. The recent experience of this once booming country should be deeply embarrassing to those who advocate austerity economics. For six months early last year, its national income started growing again after a couple of years of dramatic collapse following its own financial crisis. Ireland guaranteed all the debt of its over-aggressive failing banks to appease investors and then paid for it by cutting social spending sharply. Ireland’s leaders said with almost religious authority that this painful self-discipline was necessary to right the economy, and officials in Ireland and across Europe hailed the country’s brief rebound in 2011 as proof that it works. But then the Irish economy plunged in the third quarter of 2011 at its fastest rate ever. The upturn in the economy proved only temporary under the restraints of austerity economics. It may yet nhttp://www.nybooks.com/blogs/nyrblog/2012/jan/06/europe-cutting-hope/eed another bailout.

Myself, I'm not against cutting wasteful spending, but as proven in Europe, the spending cuts have to be made slowly.

I rarely agree with Obama, but downsizing government by eliminating dupilcation of bureaucracy is a good start.

 

[Quantum Windbag]

While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas

We also believe that the agreement is predicated on only a partial recognition
of the source of the crisis: that the current financial turmoil stems
primarily from fiscal profligacy at the periphery of the eurozone. In our
view, however, the financial problems facing the eurozone are as much a
consequence of rising external imbalances and divergences in competitiveness
between the EMU's core and the so-called "periphery". As such, we believe that
a reform process based on a pillar of fiscal austerity alone risks becoming
self-defeating, as domestic demand falls in line with consumers' rising
concerns about job security and disposable incomes, eroding national tax
revenues.

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

Also, yes, I caught this from Paul Krugman's blog.

Umm, S&P said the reason they were downgrading the US is that the deal to cut "(F)alls short of what, in our view, would be necessary to stabilize the government's medium-term debt dynamics."

S&P downgrades U.S. credit rating from AAA - USATODAY.com

Please note that you are also misrepresenting what they actually said about the Eurozone. They, like many analysts, think the Euro will collapse unless Europe officially shares all debt between various countries. They believe Europe needs develop a strong central government than can make economic and political decisions for all its members to avoid complete failure of the Euro and each country going back to its own currency.

 

[editec]

Austerity means that even less people will be able to buy stuff/

That is NOT a formula for improve the economy.

In that sense SP is right on the money (or right on the lack of it, really)

 

[Quantum Windbag]

Austerity means that even less people will be able to buy stuff/

That is NOT a formula for improve the economy.

In that sense SP is right on the money (or right on the lack of it, really)

Austerity means the government spends only as much money as it takes in in tax revenue. A novel concept for people like you, but it leads to stable economies and prosperity.

 

[MikeK]

After Lehman Bros etc. I fail to see how anyone should care what the S&P has to say about anyone's credit rating

You are absolutely right! Anyone who might be inclined to trust any advice Standard & Poors has to offer must watch a video called, Inside Job.

Inside Job is available from NetFlix. Or there is a number of sites where it may be watched for free. Just Google Inside Job. This video contains valuable information for anyone who wishes to know what really happened to our economy. It reveals what happened, how it happened, and who did it.

 

[kiwiman127]

Austerity means that even less people will be able to buy stuff/

That is NOT a formula for improve the economy.

In that sense SP is right on the money (or right on the lack of it, really)

Austerity means the government spends only as much money as it takes in in tax revenue. A novel concept for people like you, but it leads to stable economies and prosperity.

QW, while I enjoy reading your thoughtful posts, some I agree with, others not so much, I have to disagree with you based on what austerity has done to European countries. (See my earlier post on this in this thread.)

The lesson we learn from Europe is that one doesn't cut government spending drastically during an economic downturn. We may not be in a recession period anymore, but economic growth for a majority is still very, very stagnant. It's correctly argued that one doesn't raise taxes during times like these, that also holds true regarding massive government spending cuts.

 

[expat_panama]

...caught this from Paul Krugman's blog.

--so we hope you find a cure and a speedy recovery. Remember to wash your hands next time.


Krugboy getting the Nobel Econ prize told us more about the committee than it did about Paul. Like with Obama getting the peace prize.

 

[CrusaderFrank]

While the S&P is mostly useless, they did get one thing right about the downgrading of Europe:

S&P | Credit FAQ: Factors Behind Our Rating Actions On Eurozone Sovereign Governments | Americas

We also believe that the agreement is predicated on only a partial recognition
of the source of the crisis: that the current financial turmoil stems
primarily from fiscal profligacy at the periphery of the eurozone. In our
view, however, the financial problems facing the eurozone are as much a
consequence of rising external imbalances and divergences in competitiveness
between the EMU's core and the so-called "periphery". As such, we believe that
a reform process based on a pillar of fiscal austerity alone risks becoming
self-defeating, as domestic demand falls in line with consumers' rising
concerns about job security and disposable incomes, eroding national tax
revenues.

There were posters telling me that the reason the S&P downgraded the USA was because of reckless and dangerous deficit spending with no end in sight. I assume those people would want balanced budgets in America now at whatever cost. Now the S&P is telling us that austerity alone cannot solve the problems of Europe. What would those same people say now?

Also, yes, I caught this from Paul Krugman's blog.

Krugamn?

 

[EdwardBaiamonte]

Austerity means that even less people will be able to buy stuff/

That is NOT a formula for improve the economy.

of course thats liberal and so idiotic. Austerity does not mean you burn money so it cant be spent, it merely means that those who earned it, respect it, and will spent/invest it most sustainably to grow the economy will get to keep more of their income rather than have it stolen by liberal bureaucrats who will then promptly waste it.

 

[Quantum Windbag]

Austerity means that even less people will be able to buy stuff/

That is NOT a formula for improve the economy.

In that sense SP is right on the money (or right on the lack of it, really)

Austerity means the government spends only as much money as it takes in in tax revenue. A novel concept for people like you, but it leads to stable economies and prosperity.

QW, while I enjoy reading your thoughtful posts, some I agree with, others not so much, I have to disagree with you based on what austerity has done to European countries. (See my earlier post on this in this thread.)

The lesson we learn from Europe is that one doesn't cut government spending drastically during an economic downturn. We may not be in a recession period anymore, but economic growth for a majority is still very, very stagnant. It's correctly argued that one doesn't raise taxes during times like these, that also holds true regarding massive government spending cuts.

Austerity did not cause those problems, over spending did. When that gravy train hit the inevitable fact that governments actually have to pay back the money they borrow people suffered from the need to adjust spending to reality. If, on the other hand, the government had been austere the entire time there would not have been a problem in the first place.

 

[CrusaderFrank]

Austerity means the government spends only as much money as it takes in in tax revenue. A novel concept for people like you, but it leads to stable economies and prosperity.

QW, while I enjoy reading your thoughtful posts, some I agree with, others not so much, I have to disagree with you based on what austerity has done to European countries. (See my earlier post on this in this thread.)

The lesson we learn from Europe is that one doesn't cut government spending drastically during an economic downturn. We may not be in a recession period anymore, but economic growth for a majority is still very, very stagnant. It's correctly argued that one doesn't raise taxes during times like these, that also holds true regarding massive government spending cuts.

Austerity did not cause those problems, over spending did. When that gravy train hit the inevitable fact that governments actually have to pay back the money they borrow people suffered from the need to adjust spending to reality. If, on the other hand, the government had been austere the entire time there would not have been a problem in the first place.

No, see, according to Krugman the problem is that we didn't spend an additional $2 trillion.

If you stand on your head you'll see it clearly

 

[Quantum Windbag]

QW, while I enjoy reading your thoughtful posts, some I agree with, others not so much, I have to disagree with you based on what austerity has done to European countries. (See my earlier post on this in this thread.)

The lesson we learn from Europe is that one doesn't cut government spending drastically during an economic downturn. We may not be in a recession period anymore, but economic growth for a majority is still very, very stagnant. It's correctly argued that one doesn't raise taxes during times like these, that also holds true regarding massive government spending cuts.

Austerity did not cause those problems, over spending did. When that gravy train hit the inevitable fact that governments actually have to pay back the money they borrow people suffered from the need to adjust spending to reality. If, on the other hand, the government had been austere the entire time there would not have been a problem in the first place.

No, see, according to Krugman the problem is that we didn't spend an additional $2 trillion.

If you stand on your head you'll see it clearly

I tried, the blood rushing to my brain convinced me Krugman is a complete hack, and I even discovered irrefutable proof of it. Unfortunately I forgot it when I stood up. I think it had something to do with him saying the stimulus was perfect before he said it was too small.

 

[EdwardBaiamonte]

the spending cuts have to be made slowly.

why slowly?? the faster and bigger the govt cuts, the faster and bigger that sustainable private spending will take place to end the recession.