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The Complete Failure Of Austerity, In 1 Chart

TheDemSocialist

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Some debt scolds, including the government of U.K. Chancellor of the Exchequer George Osborne, might argue that a little bit of economic pain now is worth it if you can avoid a government-debt blowup in the future. That was the gist of Harvard economists Carmen Reinhart and Kenneth Rogoff's oft-cited paper, "Growth In A Time Of Debt," which argued that government debt above 90 percent of GDP led to sharply lower economic growth. Reinhart and Rogoff followed up their paper with a series of op-ed pieces and talks to Congress to help convince governments here and in Europe to hurry up and cut government debt sooner rather than later.
The trouble is, austerity has not worked to lower government debt burdens. It has only made them worse.

Surprise, surprise: it turns out that slashing government spending and raising taxes in the midst of a recession/depression actually lowers tax revenue and raises the cost of government services for the poor and unemployed, which makes government finances even worse.


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What a tick! I thought if we did all these things which austerity calls for that the government debt will go down :doh
Austerity doesnt work. It wont work, and it will only make things worse for the rest of us and the vast majority of the population. Another way is possible.


 

ecofarm

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I presume that without austerity those lines would be more sharply inclined.
 

Fisher

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Non-Austerity would not have made the debt any lower because--brace yourself--poor people are not the ones paying the bulk of the taxes :shock:
 

Deuce

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Non-Austerity would not have made the debt any lower because--brace yourself--poor people are not the ones paying the bulk of the taxes :shock:
I'm not sure you understand exactly what austerity is.
 

Fisher

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I'm not sure you understand exactly what austerity is.
I understand what austerity is. I support it. We need more of it.
 

Kushinator

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I presume that without austerity those lines would be more sharply inclined.
Why the heroic assumption? Remember, these countries continue to flirt with negative economic growth (which is an actual driver of fiscal deficits!).
 

ecofarm

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Why the heroic assumption? Remember, these countries continue to flirt with negative economic growth (which is an actual driver of fiscal deficits!).
Because the OP makes the mistake of presuming that things could not have been worse.
 

Kushinator

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Because the OP makes the mistake of presuming that things could not have been worse.
How would "things have been worse"? Non-steralized monetary easing decouples the EU from interest rate vigilantes. Their economic/financial issues stem from poor planning and persistent nationalism.
 

Fisher

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We need to induce a recession?
No we need to reduce government spending. If recession is a byproduct of that then so be it, though it is not guaranteed to be a byproduct of it.
 

ecofarm

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How would "things have been worse"? Non-steralized monetary easing decouples the EU from interest rate vigilantes. Their economic/financial issues stem from poor planning and persistent nationalism.
Look, this is simple logic. The OP is based on a false premise. If you don't get it, whatever.
 

Fruityfact

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No we need to reduce government spending. If recession is a byproduct of that then so be it, though it is not guaranteed to be a byproduct of it.
You've got the priorities out of order.
 

Kushinator

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No we need to reduce government spending. If recession is a byproduct of that then so be it, though it is not guaranteed to be a byproduct of it.

Two points:

  1. There is a positive correlation (with causative support) between a drop in economic output and an increase in government deficits.
  2. Government spending is a component of economic output (GDP). In periods with persistently high unemployment, cutting government spending must decrease economic output (GDP) without a dollar-for-dollar increase for both consumption and private investment. In other words, the relationship between government spending and consumption/private investment is inelastic.

Essentially you are claiming that recessions are caused by an increase in government spending...:lol:
 

Kushinator

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Look, this is simple logic. The OP is based on a false premise. If you don't get it, whatever.
Ehhh. The OP has made a valid point. One that invokes cogitative dissonance due to political inconvenience. You may leave.
 

ecofarm

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Ehhh. The OP has made a valid point. One that invokes cogitative dissonance due to political inconvenience. You may leave.
The OP is full of crap by way of logical fallacy. Expecting better from Huffington is foolish.

Good day.
 

Kushinator

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The OP is full of crap by way of logical fallacy. Expecting better from Huffington is foolish.

Good day.
The conclusions one should draw from the data provided cannot involve an alternative universe. Presuming debt as a percentage of economic growth (that is the kicker!) would be higher IF austerity measures were not enacted is foolish. The Eurozone has been in recession for what, 6 quarters? :2wave:
 

ecofarm

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I said good day.
 

Kushinator

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No need to. We already have one.
Nope!

The recession ended more than 4 years ago. The recovery has been sluggish, but that is to be expected following a severe financial crisis.
 

Kushinator

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He may have YOUR priorities out of order.
So inducing a recession would be a good thing? I do not expect more than a 15 word response. None the less, give it your best!
 

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Nope!

The recession ended more than 4 years ago. The recovery has been sluggish, but that is to be expected following a severe financial crisis.
Like I said, we already have one.
 
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