It's the Economy, stupid - Languishing & Lingering after the Great Recession

the question at the end of the post is like "when did you stop beating your wife?" it assumes--absurdly---that "government" is somehow the cause of class stratification (among other things)...which is, historically, patently ridiculous. insofar as that pesky history business is concerned, the intertwining of state with capitalist (and related) forms of economic activity have had to do with infrastructure, system stabilization and the redistribution of wealth in directions shaped by political decisions. so in the u.s. of a., the priority is military and surveillance. because that is the awesome and humane form that has been produced by people--no doubt well-meaning (maybe) operating under the lunatic assumptions particular to the still-dominant view of capitalism here.

capitalism does not produce politically, socially or ethically satisfactory outcomes. never has. if you factor in that pesky history business. everywhere it has required the action of states (typically national-level) to shape the effects of it's more-or-less continous crises into something like a coherent social form, one that is able to maintain the base-line levels of consent that any political (and economic) system requires.

the e.u. continues to labor under the idiot logic of austerity imposed largely through the out-sized influence of germany. you want a single factor to use in order to go at a complex problem, start with that.

 

Yes, we should study what the effects of 'stimulus' and reducing the value of the dollar did compared to 'austerity' and reducing the amount of work the government paid for or the amount of money the government sent to people to spend in the economy. It would be a good joint effort by the BBC and PBS to show how each worked and didn't work in the past 5 years.

 

it's already well known. austerity is the logic of herbert hoover faced with the great depression. it can be catastrophic in an economic crisis.
think, for example, of the awesome outcomes it has produced for greece and spain.

 

I ask the question in the context that presumes the reader believes that government can addresses these matters in a positive way. That as a given I then ask the reader to view the issue from a different perspective. We have had centuries of government attempting to manage class stratification. In some cases, UK, included class stratification was, perhaps is, government policy. I am interested in exploring these issues. Perhaps it is absurd, but I approach it with an open mind.
--- merged: Jul 25, 2013 at 5:51 PM ---

Austerity? Or, reversion to the mean? I can draw an upward sloping trend line from 2004 to 2012 for the UK GDP.


--- merged: Jul 25, 2013 at 5:58 PM ---

If a nation promises what it can not deliver, is that going to result in austerity? I would say no. I would call it facing reality. A reality where fewer and fewer productive people will eventually be unable to economically support more and more unproductive people. This situation is more of a problem when a nation has limited natural or other resources that can be monetized in the international market.
--- merged: Jul 25, 2013 at 6:04 PM ---

Perhaps, we need to be more specific when we talk austerity. If a nation changes policy so that the normal work week increases, is that austerity? If a nation cuts government workers who are not doing productive work, is that austerity? What are we really talking about, has the term become a cliche? And what time period do we use to measure success or failure. If a nation cuts its budget in the current year, and it takes five years to realize a healthy and vibrant economy do we say it is a failure in the first four years?

 

there is a conventionally accepted understanding of the economics of austerity.
do a search and read the wikipedia page if you need to.

 

When people discuss austerity they do it in a manner that suggests choice. Meaning a government can choose the path of austerity or some other option. If a nation does not have the resources to provide services (promises made that can not be fulfilled), what choice is there than to cut services and raise taxes. So, I am curious regarding how the term is being used here relative to alternatives.

In my view, a period of excessive spending, spending that can not be sustained followed by a period of lower spending, reverting a trend to its mean is not austerity. Or, if the period of lower spending is austerity, what do we call the period of excessive spending?
--- merged: Jul 26, 2013 at 1:02 PM ---

I believe that convention is being changed. Asking productive people to be productive is not austerity by any definition. If a country has former government employees who were promised elaborate early retirement packages that can not be paid for and are then subject to cuts is not a form of austerity. If current government employees are asked to make an increased contribution to their future retirement benefits - that is not austerity. If a a government has 4 employees who do 10 hours of actual work every week each but are paid for a full week of work are asked to do more and/or 3 face layoff - is not austerity. I would call it eliminating wasteful spending, enhancing productivity, being more efficient, facing reality, paying for past excesses.

 

This assumes a means to fund deficit spending.

If we assume a fresh start I see your point. In countries who face austerity we can not ignore their history and if there are no willing buyers of the debt or if the cost of the debt is excessively high we have to look at what lead to this condition. I continue to argue if a nation promise more than it can deliver, goes through a period of lavish and excessive spending, is it really austerity when reality sets in. In my view the answer in - no.

Not sure about the Liberal Party in Canada and the history there, but in the US under Clinton we had a booming technology sector. The peaking in terms of relative growth of the Technology Age. It was not a period of austerity in the US by anyone's realistic definition.

I agree.

I think the goal would be to use debt in a meaningful, cost effective and efficient manner.

Proper management of debt has nothing to do with austerity. If debt is incurred based on the proper use, the debt would never result in austerity. For example if debt is used to fund infrastructure projects the debt could be managed based on a resulting increase in economic activity. If the money is wasted on projects with no benefit, I would argue it an improper use of debt.

In my view debt should not be used to fund social welfare programs. Current funds and reserves set aside, based on sound actuarial modeling should be used for social welfare - this as a given austerity can be avoided.

 

But GDP isn't 'government spending like the graph you showed above. And, to be honest, it doesn't look like government spending really went down by much where there was 'austerity', but it has had a big psychological effect on how people view Europe and for the worries about future work and employing people in the hardest hit countries.

Is Economic Austerity Responsible for the Crisis in Europe? :: The Market Oracle :: Financial Markets Analysis & Forecasting Free Website

Total government expenditures:





Now the UK only has 1/5th the people that the US has now, but I seem to remember that the US defense budget is about the same about that their entire government budget is... plus we could only dream of having a 0.1 trillion dollar deficit at this point (Clinton did it, but tax cuts for the rich and two wars by the right wing causes those to go away)

The attitudes of people and how they spend/save their money when faced with a media induced panic has a big part in this too.

Usually the former government employees were forced to save a percentage of their paycheck into a group fund that would be professionally invested and allowed to grow without the individual having to do much. But, these funds have been raided and not paid back. Now we are stuck with the 401k that very few will ever know how to correctly invest it and the constant 8% returns that all the brochures predict are a nice fantasy.

Cut the military (by 60%), the DEA, customs and border patrols, harbor patrols, number of militarized police, oil subsidizes, and tax offshore bank accounts owned by Americans and companies...

 

Coppola Comment: So what about that austerity, then?
This is a better graph than the one above that I posted.


Now, the British Pound had to be converted to Euros and the devaluation probably caused the bump in 2007-2008. But, I am surprised that these numbers aren't cut by at least 25%. That is what I think of when I hear 'austerity', and the media coverage would make you think that is what was going on over there.



Here is the US one, although remember that from 2001-2008, funny accounting tricks did keep a bunch of spending 'off the books'. And there are thousands of people becoming eligible for Social Security and medicare everyday now.

Here is the military budget part of the above graph. I thought the military was too big when Clinton was in office...


And that probably doesn't include the black budget.

True Cost of US Military Spending Infographic
--- merged: Jul 27, 2013 at 10:55 AM ---


I'm not sure why it was so hard to find this graph of spending during the last few years...

I would like to see it in the 100-200 billion range though.

Then again, it is government spending math, where the government spends this money, but it trickles it's way right back to the government, so they don't see all of this money vanish into thin air, and it helps millions of Americans have stable work.

 

If we are looking at government spending and taxation resulting in an impact on the overall economy I would want to look at GDP. If austerity is bad economic policy one would expect some form of real measurable economic suffering. I am open to looking at other measures. If is clear that when government cuts spending on specific programs that benefit a portion of the population there is a resulting harm to those people. However, is it lasting? Do other sectors of the economy compensate for it? On the other side of the argument the opposite of austerity is being argued as an economic good. The same kinds of questions apply. I would argue excessive government spending in order to stimulate an economy is temporary at best.

This is a good point and good graphic. This is why I think it important to really understand what people mean when they use the term austerity.

Is

I support cuts to US defense spending. One of the first things would be closing or reducing US military bases/presence in Europe. I see it as a waste from the perspective of the US tax payer.

There is a related thread asking - Do you feel financially secure? I think there are lessons to be learned. First, we can not be passive in regard to our financial future. People need to learn how to financially plan. People need to know what it means to diversify. Any assumption that "big brother" is going to take care of it is foolish. It would not be complicated for people to set up a simple, save, diverse, portfolio for retirement.

Military spending includes line items that are not direct or current defense spending. If we restructure the budget I don't doubt we could reduce defense spending by 60%, especially in periods of undeclared war.
I think the war on drugs is very wasteful spending, I can see big cuts here and actually collecting taxes on drugs that are currently illegal if we made them legal.
Offshore corporate profits are taxed - in the countries were the money was made. The issue is when those countries have lower tax rates than in the US. In those circumstances there is less incentive to bring the money to the US.
I also agree that we should eliminate not only any oil subsidies, but all corporate subsidies.

 

ace, you clearly haven't the faintest idea what you're talking about. austerity is an approach to state financial actions. it has fuck all to do with "asking productive people to be productive."

of course, you can approach any conversation in a schizophrenic mode and insist on speaking a private language in which words mean whatever feels good for you that they mean. but in that case, you're only talking to yourself.

 

Visualize a national economy baseline output (for simplicity assuming national consumption is equal to output) 100 in period one. 75 of that is private sector out put and 25 is government output.

If government reduces out put from 25 to 12.5, all other things being equal we would expect total national output to go from 100 to 87.5.

We have actual data we can look at relative to nations reducing government spending - it is very difficult to adjust for all the other variables but what we do know is that very often a reduction in government spending does not lead to a dollar for dollar reduction in total output.

Further, if we have the 75/25 ratio and government imposes increase taxation on the 75, reducing the 75 to 65, we would expect total out put to reduce by 10. Depending on what government does with the 10.

In a scenario of reduced government spending and increased taxation we can visualize what to expect.
In a scenario of reduced government spending and lower taxation we can visualize what to expect.
In a scenario of increased government spending and increased taxation....etc.
Etc.

We have raw data, we have some real raw outcomes - not adjusted for the multitude of other variables.

I argue, that if the mix of government and private spending is consistent, there is no basis for a claim of austerity. All we have done is changed the mix of output.

Adding in one more variable of national government debt, we can go through the same process of visualizing what to expect and we can look at real raw data. We can begin to draw conclusions.

This describes my thought processes. This illustrates why I have a problem visualizing the common use of the concept of austerity. Again we we look at total output over a period of time and establish a trendline I would want to see a material change in the trend before I would support the notion of austerity.

I can not visualize nor do I understand how some of you think about this. I do not understand the basis of your conclusions. Understand what I write here is overly simplified and I can get as complex with it as you want or you can simply tell me I don't know shit and move on.
--- merged: Jul 30, 2013 at 6:08 PM ---

If government spending is at a baseline of 100 and 50 of that is made up of employee costs. And if under a austerity budget government reduces the overall budget. They can do it in basically a few ways. One would be to focus on the non-employee expenditures (services, infrastructure, etc), employee costs or a combination of both. Normally when there is a cut in employee costs there is still pressure not to reduce non-employee expenditures which results, at least initially, in asking fewer people to do more in order to reduce non-employee expenditures. Normally services to citizens suffer, often resulting long waits for government services - i.e. your local DMV office. Bet they could use some more people, if they could get budgetary approval.

Basically I am trying to understand what you are talking about and rather than elaborate on it you pretend that I have a problem. Grow up, put your big boy hat on, or as you state often - stop wasting your time!