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How the Case for Austerity Has Crumbled

austrianecon said:
Because wage increase leads to price inflation in item production. If you increase the amount of money chasing few goods it causes inflation. Production would have to increase with wages. So output would have to increase by 50% as well.
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Wage increases would only lead to price inflation if the quantity of goods being produced was fixed. It isn't.

Is there any reason that businesses can't increase production right now? I know that I could double production in a matter of weeks. It's not like we are having a labor shortage, I turn away job applicants every day, but even if we were, you don't think that China and the like would be willing to sell us more goods?
 
imagep said:
Is there any reason that businesses can't increase production right now? I know that I could double production in a matter of weeks. It's not like we are having a labor shortage, I turn away job applicants every day, but even if we were, you don't think that China and the like would be willing to sell us more goods?
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Matching current unproductive labor with employment opportunities is the issue. We need policies to address that without government taking on the entire reponsibility...
 
AlabamaPaul said:
Matching current unproductive labor with employment opportunities is the issue. We need policies to address that without government taking on the entire reponsibility...
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I don't disagree, but can you provide some examples of such policies?

I'm thinking that if we had a significant increase in demand, just reducing unemployment benefits and welfare would serve to motivate our unproductive to become productive. Starvation, or at least the fear of it, is a great motivator to work.

Edit: Of course simply higher wages themselves can be a motivation to work.
 
imagep said:
I don't disagree, but can you provide some examples of such policies?

I'm thinking that if we had a significant increase in demand, just reducing unemployment benefits and welfare would serve to motivate our unproductive to become productive. Starvation, or at least the fear of it, is a great motivator to work.
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Think energy independence and low, to no, taxation for manufacturing for a good start...
 
AlabamaPaul said:
Think energy independence and low, to no, taxation for manufacturing for a good start...
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I'm all for energy independence and low taxes, but are you suggesting that the 0% tax rate that many companies like GE pays is too high of a rate?

I don't really see how we could cut the taxes of producers that much, or how reducing their taxes would really motivate them to produce more goods whether or not the demand for those goods existed. I mean that regardless of what our current corporate tax rate is, companies are already producing all the goods that they can sell. And if demand for those goods increased, they would increase their production, regardless of what the tax rate is. Everyone wants to make as much money as they can, pretty much without regard to the tax rate.

Thats why I keep chanting that increasing demand is the key, not the supply side.
 
imagep said:
I'm all for energy independence and low taxes, but are you suggesting that the 0% tax rate that many companies like GE pays is too high of a rate? I don't really see how we could cut the taxes of producers that much, or how reducing their taxes would really motivate them to produce more goods whether or not the demand for those goods existed. I mean that regardless of what our current corporate tax rate is, companies are already producing all the goods that they can sell. And if demand for those goods increased, they would increase their production, regardless of what the tax rate is. Everyone wants to make as much money as they can, pretty much without regard to the tax rate.

Thats why I keep chanting that increasing demand is the key, not the supply side.
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GE's tax rate is a consequence of tax loss carry forwards from its financial operations. When I say low,to no, taxes on manufacturing businesses, it's those who would be attracted to start up or relocate to the country...
 
AlabamaPaul said:
GE's tax rate is a consequence of tax loss carry forwards from its financial operations. When I say low,to no, taxes on manufacturing businesses, it's those who would be attracted to start up or relocate to the country...
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AP ... thanks for posting this quote by Hill ... love it -

"I am for gay marriage because it ticks off Jesus freaks and social conservatives. Gays are also good voters because the vote for my side so I fight next to them."
 
windowdressing said:
AP ... thanks for posting this quote by Hill ... love it -

"I am for gay marriage because it ticks off Jesus freaks and social conservatives. Gays are also good voters because the vote for my side so I fight next to them."
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No problem. Feel free to use it as you see fit. The original is linked...
 
cpwill said:
:doh: you may want to take a sharper look at the graph you presented, and ask yourself if it really argues what you claim.


Two hints:
1. Cutting a structural deficit while increasing spending isn't austerity and
2. Cutting a deficit through tax increases is not cutting government spending

Heck, a third: it is easier to project deficit reductions than it is to actually enact them.
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The positive numbers means more austerity, says so in the graph key. Not sure what you think you are seeing.
 
JP Hochbaum said:
The positive numbers means more austerity, says so in the graph key. Not sure what you think you are seeing.
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I'm seeing a failure to distinguish between "reduction in a structural deficit" and "reductions in spending". All that has happened in Europe "Austerity" wise is that they have raised taxes. Astonishingly, it turned out poorly, but here you are treating a tax increase and a spending reduction as somehow interchangeable.
 
imagep said:
Wage increases would only lead to price inflation if the quantity of goods being produced was fixed. It isn't.
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The only way to keep out wage increases out of price inflation is to match the output (productivity) with wage increase. So if you raise wages 10%, your productivity would have to raise 10% as well. If it doesn't it leads to Wage push inflation.

imagep said:
Is there any reason that businesses can't increase production right now? I know that I could double production in a matter of weeks. It's not like we are having a labor shortage, I turn away job applicants every day, but even if we were, you don't think that China and the like would be willing to sell us more goods?
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Lot's of things limiting increased productivity in the short term. Some government, some retooling issues, to even lack of space. While you could double production in a matter of weeks, your wage increase is up front so you would have to increase prices in the short term or would be killing your bottom line (eating the cost). And this is what I am pointing out to you..

With no such thing as a labor shortage wages should be falling as there is more supply then demand in the labor market.
 
JP Hochbaum said:
The positive numbers means more austerity, says so in the graph key. Not sure what you think you are seeing.
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No, it doesn't. It can also mean higher taxes. All of those countries have raised taxes. Every one of those countries have a right to run a 3% deficit per year. So at what point is their austerity? Because they aren't growing their deficit by 5 to 10% per year? They are still spending more then they did the year before. Thus no austerity.
 
cpwill said:
I'm seeing a failure to distinguish between "reduction in a structural deficit" and "reductions in spending". All that has happened in Europe "Austerity" wise is that they have raised taxes. Astonishingly, it turned out poorly, but here you are treating a tax increase and a spending reduction as somehow interchangeable.
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So do you watch the news or read anything in regards to Europe?

Have you heard the news about massive government layoffs?

Things like this have been going on for years now and continues to happen:

EU, Greek government plan more mass layoffs, privatisations - World Socialist Web Site
 
austrianecon said:
No, it doesn't. It can also mean higher taxes. All of those countries have raised taxes. Every one of those countries have a right to run a 3% deficit per year. So at what point is their austerity? Because they aren't growing their deficit by 5 to 10% per year? They are still spending more then they did the year before. Thus no austerity.
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Read my response to CPWILL above.
 
Here is an article listing the countries that slashed budgets in 2010:

Budget Cut Fever Sweeps Europe - Businessweek

" Let's go over to Rome to hear the vote of the Italian jury. "€26bn in cuts over two years, including savage reductions in health spending and road building."

And now it is over to Spain. "Good evening, Madrid. €15bn in spending cuts over two years? Thank you Madrid."

Paris? "€5bn in cuts over two years." Does that really complete the voting of the French jury? Oui (although no one much in France believes the figures).

Athens? A punishing €30bn over three years, on top of previous cuts.

Good evening to London, where a new coalition jury has just gathered. "£6.2bn of cuts in the present tax year with much, much more to come."
 
JP Hochbaum said:
So do you watch the news or read anything in regards to Europe?

Have you heard the news about massive government layoffs?

Things like this have been going on for years now and continues to happen:

EU, Greek government plan more mass layoffs, privatisations - World Socialist Web Site
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Spain, the United Kingdom, France, and Greece — countries widely cited for adopting austerity measures — haven’t significantly reduced spending since 2008.
...those countries “still spend more than pre-recession levels,” with France and Britain making no cuts, and Italy increasing spending in 2011 “more than the previous reduction” between 2009 and 2010. Without significant, substantial cuts, tax increases alone don’t amount to austerity. Yglesias is correct that tax hikes can contribute to austerity. What tax hikes cannot do, however, is be austerity. Tax hikes are neither necessary nor sufficient for an austerity program....
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Most countries in Europe are spending more today than they did before the 2008 crash, according to financial reports from the European Commission, the European Union's executive arm.

...Many European nations have embraced the so-called "balanced approach" strategy, meaning a combination of tax increases and spending cuts. Unfortunately, that approach has disappointed. Those nations that have followed a purer course of spending restraint, like Estonia, have seen superior growth. On the other hand, while countries like Greece and Italy have cut some spending, they've undermined their progress by raising taxes at the same time...
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Average government spending by EU nations today stands at about 49.2% of GDP — vs. 44.8% in 2000.

...On its own website, the EU itself ridicules the notion of government austerity as a "myth."

"National budgets are NOT decreasing their spending, they are increasing it," the EU says, noting that in 2011, 23 of the 27 nations in the EU increased spending. This year, 24 of 27 will do so. Did that decade-long spending increase boost GDP growth? No. During the 2000s, average annual GDP growth in the EU fell to 1.2% from 2.2% in the 1990s....
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Europe hasn't cut spending. "Austerity" is suppose to mean reduced spending to "austere" levels". Growing government a little slower is not "austerity". All Europe has done is proven that increasing government spending and increasing taxes is really, really, really dumb in a weak economy.
 
Yes spending increase because austerity measure makes deficits rise!

Notice why I used structural deficits, deficits that measure spending cuts. Because they actually measure austerity measures. In recessions deficits will increase because tax revenues decrease as well as an increase in automatic stabalizers like UE and welfare, which won't be cut because it literally causes starvation, riots, and civil wars.

But it figures that when austerity occurs, that the proponents of austerity would deny that it ever occurred because it was shown to be faulty and harmful.

It is time to fess up to mistakes and fall on your swords, the facts are in and austerity has failed and in fact kills.

also there was not a single report, or a single number listed in any article you posted, why is that?

Is it perhaps because they use spending as a percentage of GDP? Which is a faulty measurement!

Show me numbers, show me the data break it down for me!
 
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cpwill said:
Spain, the United Kingdom, France, and Greece — countries widely cited for adopting austerity measures — haven’t significantly reduced spending since 2008.
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I call bull**** on this one. Ever heard about inflation? Why is it that especially American right wingers always ignore inflation? Plus the numbers debunk this bigtime. Greece spending without compensating for inflation has gone down in real numbers. The Spanish real numbers are basically flat over the last 4 years, which means inflation compensated there is a rather large cut. Same goes for Italy.

Most countries in Europe are spending more today than they did before the 2008 crash, according to financial reports from the European Commission, the European Union's executive arm.
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Again.. ever heard of inflation?

Average government spending by EU nations today stands at about 49.2% of GDP — vs. 44.8% in 2000.
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Hmm interesting... or not. Not only is investors.com a known right wing hack site, but why 2000 before the boom years? Why not from just before the crisis period? Oh yea because that would debunk the whole ****ing story. Government expenditure in % of GDP in 2009 in the Euro area was 51,2% (and yes it was higher the year before). In the whole EU it was 51.1% in 2009 and 49.4 in 2012.

So yes I call bull**** yet again.

Also the article is so biased and unscientific that it is beyond idiotic. For one, GDP fell massively in 2008-2010, which of course means the % vs GDP increases.

Europe hasn't cut spending. "Austerity" is suppose to mean reduced spending to "austere" levels". Growing government a little slower is not "austerity". All Europe has done is proven that increasing government spending and increasing taxes is really, really, really dumb in a weak economy.
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Europe has cut spending. I see it every day here. The problem has been that unemployment expenditures have increased as well, and you dont cut those unless you want to implode an economy. It means that all the cuts in spending have been weighed up by increased costs for unemployment benefits. When the costs for unemployment goes down, then you watch the deficits go into surpluses rather fast.

Plus when spending is frozen or does not increase as much as inflation, that is cutting spending. Let me do the math for you..

2000 you earn 100 bucks. You use 60 bucks to buy food and shelter.
2012 you still earn 100 bucks or even got a small raise to 110 bucks, but food and shelter now costs 90 bucks...

Are you better off..do you now have less to spend? Are you struggling?

But I agree increasing taxes in a weak economy is a stupid thing to do, but guess what... that was the requirement of the American right wing economic austerity theorists. Cut and increase revenue... go figure that this did not work.
 
JP Hochbaum said:
Which indicates nothing for austerity. If GDP decreases and debt levels stay the same, then the debt to GDP ration increases.
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Greece before the recession was at 120%.
 
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