Perils in Philosophy of Austerity in the U.S. – NYTimes.com

The US proves resilient but at what long term cost? Is austerity the end of major GDP grown?

But few countries can match the speed with which the United States has embraced fiscal austerity. In 2013, the federal deficit shrank at its fastest pace in more than four decades, dropping to 3.9 percent of the nation’s gross domestic product, from 6.8 percent the year before, according to the Congressional Budget Office.According to the International Monetary Fund, the general government deficit of the United States, which includes states and municipalities, will fall by about two-thirds as a share of G.D.P. from 2009 to 2014. Most of the decline will come from reductions in spending.Not even Britain has trimmed its budget as steeply. Only Greece, Ireland and Portugal — cornered into austerity by creditors in Berlin and in Brussels demanding a cleanup from past excesses — have shrunk government spending more sharply.Yet for all the cuts already in the bag, calls in Washington for further retrenchment remain strong. “None of us can be proud of the way we spend the money,” the Oklahoma Republican Tom Coburn said the other day from the Senate floor.

via Perils in Philosophy of Austerity in the U.S. – NYTimes.com.

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7 thoughts on “Perils in Philosophy of Austerity in the U.S. – NYTimes.com

  1. trawson7 says:

    I found this article really interesting; I had never really considered this before. It is true that budget cutting while the economy is in a slump can be counterproductive; however, I think the current deficits that the country is running are outrageous. The government is too big. It would be nice if the United States could choose to increase spending and adjust taxes/entitlements/etc. to do so, but the debt is too big for most increases in spending to be considered fiscally responsible.

  2. I definitely agree with the above comment. I love hearing economic research on how the fiscal policies have affected the economy. I am impressed with the United States’ ability to cut spending without it being crippling to the economy. I wonder what the difference is, however, between the US and European economies that makes this possible? I do worry, however, that the things that I would consider most important for funding are not getting the attention that is really necessary, as the author points out. Education is often overlooked but unemployment and social security are given lots of attention. I’m not saying that the latter two aren’t important; they definitely are. However, I wish that Congress would focus more on preventative measures (better educations leads to a more skilled, more easily employed workforce [I would assume]) including a focus on educational spending and then that would help solve the problem of having to spend so much on the other stuff.

  3. Taylor Shippen says:

    To say that the government is too big or too small doesn’t really give an accurate picture of what is happening to the federal budget. Discretionary spending by the government has fallen to the lowest levels we’ve seen in decades;

    http://online.wsj.com/news/articles/SB10001424127887324761004578283742998658674

    yet politicians are determined to see even more cuts because it is politically savvy to portray yourself as a “budget cutter”, while not touching the entitlement programs that are eating up the government’s budget. As government investment in public programs dries up in education, infrastructure, and regulation enforcement, there is very little protest because the effects of such cuts are not immediately felt. That does not reduce their importance, it just means that we are cutting our future instead of the present. In yet another move by the baby boomer generation to kick the financial responsibility ball down the road for our generation, politicians have convinced the rising generation to look at fiscal austerity measures as a good thing. What they don’t talk about is how unbalanced those austerity measures are. Do we really support cutting the budget for our national parks, federal government employees, education, public transit, and foreign aid to support an unsustainable monster of government welfare spending? Because by agreeing with the current cuts, that’s what we’re agreeing to. I can’t in good conscience support a program that is blatantly short sighted and aimed to cut down the economic prospects of our generation by effectively garnishing our future wages to pay the social security checks of today.

    Government spending is not created equal. A dollar cut from discretionary spending hurts our future far more than a dollar from entitlement. Stop applauding our politicians for diverting investment in our future into the entitlement programs of today, it’s not fiscally responsible and it certainly doesn’t require political courage.

    • Taylor, you said it all. I remember some of these thoughts from an article that was posted a few weeks ago, it was titled “Sorry kids, we ate it all”. Anyway, this article discussed the same things you are saying now about cutting budgets and spending. The threat though is felt more clearly with this comment you just posted. This makes it very hard to trust politicians anymore and even believe that they know what they are doing. I do not even know why it has occurred to them to cut off any budgets from social health care and education. I think these are two of the United States’ biggest flaws so it really is a step back. Of course it all seems obvious in my perspective though, there are probably bigger things happening in Washington.

    • ianhesterly says:

      I also agree with Taylor. Simply cutting “x” amount of money from the budget isn’t as important as where that money is getting cut from. The entitlements in the country are absolutely out of control right now. From 2008-2012 food stamps went from 32 million to 48 million, a 50% increase. That’s just one blatant example of the problem.

  4. I think we too often simplify the U.S. fiscal policies into a giant version of a personal pocketbook. When it comes to government spending and budget cuts, the economic models are completely different than for, say, an individual. Add on top of that the fact that most Americans have no clue how the U.S. economy compares to others, and we have a genuine problem–tons of uninformed people making broad, bold, economic statements.

    Here is how U.S. taxes compare to other developed countries in terms of GDP:

    http://www.taxpolicycenter.org/briefing-book/background/numbers/international.cfm

    You’ll notice we are almost at the very bottom of the list, so in spite of all of the complaints we here 24/7 from Americans about “high taxes,” ours are relatively low.

    Now for spending. How high is our defense spending? U.S. spending is higher than the next ten countries combined. See:

    http://pgpf.org/Chart-Archive/0053_defense-comparison

    How about health care? Total expenditure per capita is 8,233 USD. That’s about 3,000 USD higher than 2nd place Norway, and more than DOUBLE the OECD average. See:

    I could go on, but the point is that one of our biggest issues is the extent to which we are uninformed about our own economy. Once Americans understand America, I think we’ll hear fewer comments like that of the Oklahoma senator.

  5. clintkunz says:

    I’ve read the article, which I take with a grain of salt. It sounds too Keynesian for me. Eduardo Porter says things like; the American economy remains far short from its potential, severe budget cuts are shrinking the federal government too much for it to do its necessary job, and such fiscal virtue comes at a cost (referring to austerity). I don’t buy what this guy is selling.

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