Contracting the Economy Doesn’t Grow It
American Conservatives have been agitating for what amounts to an austerity budget to address the debt and deficit, arguing that the economy will grow if finances are sound. They have – and will continue to – hold the country hostage to their faith-based “tax cuts will solve everything” ideology.
That’s what British Prime Minister David Cameron’s government did, and the results have been an epic disaster. British society is fraying at the edges, mass layoffs have led to strikes, services on which people depend – and for which they pay – are suffering.
The austerity budget is fraying at the edges, amid strikes and protests over layoffs and rising fees. Growth has been slowing, despite Mr. Cameron’s insistence that businesses would pick up the pace when it became clear that the government’s finances were sound. And now Britain looks to be in an unusually poor position to defend its interests in Europe.
Members of the Labour opposition lost no time exploiting what they saw as Mr. Cameron’s weakness on the issue.
“Six weeks ago, he was promising his backbenchers a handbagging for Europe, and now he’s just reduced to hand-wringing,” the Labour leader, Ed Miliband, told Parliament, as his party members whooped their approval. “The problem for Britain is that at that most important European summit for a generation, that matters hugely for businesses up and down the country, the prime minister is simply left on the sidelines.”
So maybe the whole austerity budget, abolishing Medicaid, privatizing Social Security and other Republican payoffs to their ultra-wealthy benefactors might not be what’s best to get the economy moving again.
“Contracting the economy”, or “contracting the government”?
The government cannot inject one dollar into the economy until it has first taken that dollar out of the economy (and skimmed off part for its friends and bureaucrats).
Reagan cut the top tax rate from 70 to 28% that ushered in a 25-year economic golden age. Interest rates plummeted, inflation fell from 7.6% to 3.1%, and poverty, despite massive increases in anti-poverty programs throughout the 70’s, fell from 15 to 11.3%. And during the 12 years prior to Reagan, America was creating 1.3 million jobs a year. Reaganomics produced 2 million jobs a year. (Ref: http://www.hillsdale.edu/news/imprimis/archive/issue.asp?year=2011&month=11)
In the case of Britain, SOME austerity measures are being implemented, but there needs to be consistency based on what works. In point of fact, “Government spending has skyrocketed in the United Kingdom in recent years. Spending is even increasing at about double the rate of inflation in the current fiscal year. But don’t believe me. Look on page 102 of the UK’s latest budget….Moreover, Cameron has been a disappointment on the tax issue. He left in place Gordon Brown’s election-year, 10-percentage point increase in the top income tax rate. But then he imposed an increase in the VAT rate and implemented a higher capital gains tax.” ~http://www.cato-at-liberty.org/english-riots-faux-austerity-and-krugmans-fairy-tale/, dtd April 2011
Conservative fiscal policy, when PROPERLY implemented, works every time.
Guess it’s never been PROPERLY implemented, then, despite the spin that the Cato Institute would try to sell you.
Funny how the teabaggers supposedly oppose the deficit but at the same time herald its Patron Saint, the man whose credit-card policies led to then-record deficits (until the next darling of the right put two wars on that same credit card and made things worse).
Reagan instituted the failed tinkle-down economic policies which have led to redistribution of the wealth to the top 0.1 percent and the elimination of the middle class. Some would call that a triumph.