Monday, May 7, 2012

Say Au Revoir To Austerity

There have been some big deaths over the past year, with some big announcements to go with them. But no death announcement was quite as big as the one that came out of the European Union this past weekend.

The economic theory of austerity - the same theory currently being championed by the Republican Party in the U.S. - can basically be declared dead after two years of proven failure in the E.U., and by the results of elections in both France and Greece.

In France, voters dumped President Nicholas Sarkozy, a man sometimes called the French 'Bush lite,' in favor of Francois Hollande, a progressive, left-leaning politician. Hollande made it clear in his victory speech that he knew why French voters, in a strong turnout, choose him in a close but decisive way. "Europe is watching us," said Hollande. "Austerity can no longer be the only option."

Hollande is pushing for an agenda that is highly likely to get passed, for several reasons. One large reason is the upcoming parliamentary elections, where it's almost a given that the new parliament will make it easier for Hollande to put his plans into action.

Hollande's agenda includes raising taxes on big corporations, adding penalties for those corporations that attempt to leave the country before paying their taxes, and increasing taxes on the wealthiest French citizens. With all the extra revenue, Hollande is planning to raise the minimum wage, hire (and rehire) more than 60,000 teachers and other public workers, and even lower the retirement age for workers whose jobs involve heavy physical labor.

In Greece, the people annihilated the two major ruling parties at the poll, both of whom had supported continued extreme austerity measures for Greek citizens. The leader of the Left Coalition, Alexis Tsipras, also made it clear that the European Union's austerity policies - lead by German Chancellor Angela Merkel - would no longer be accepted by the Greek people.

Anyone who even has a cursory understanding of macroeconomics, microeconomics, and Keynesian theory, could have seen this coming a long time ago.

In fact, Nobel prize-winning economist Paul Krugman did.

Over the weekend, Krugman reiterated the fact that the policies Germany used to move its economy forward over the last dozen years couldn't have been directly implemented by the other E.U. nations. In fact, those policies were mostly possible for Germany only because the economies in other E.U. nations contracted, due to austerity.

Krugman's not the only one who has pointed out that government austerity - cutting government jobs, cutting tax collection, and cutting government spending - is a completely predictable failure when faced with a recession. Christina Romer, Robert Reich, and even to a limited degree, conservative-leaning economists, like Charles Kadlec of Forbes, have all echoed Krugman's warning. The lessons of Keynesian economics that all of these experts continue to point out - and that modern American Republican politicians think of as the scary monster from the deep - keep proving that austerity doesn't work.

In short, the only economic policy that the modern Republican Party in America has to offer, has now been proven an utter and complete failure over two years of use in Europe.

We can't say we also didn't pass on these warnings to Americans. We did - more than once. Even though we're not economists, the concept has always been pretty simple to us.

If anyone tells you they're looking to cut government spending deeply, and lower your taxes, but then they claim to be dedicated to funding education more, ask them where they're going to get the money. If they can't answer you with specifics - and they have no credible plans for raising revenue - then they're lying to you.

As the French might say, "Ce n'est pas la science de fusée."

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