A question for people who think Austerity doesn't work

When the United States has a negative interest rate, they can't lose by borrowing more. Simple.

The Eurozone isn't nearly as solid as America; it has Germany and France (America-strength economies) being dragged down by uncontrolled and wasteful spending in Greece and other countries. There, austerity needs to be part of the package, but so does cancelling debts.

Even in the eurozone, austerity is crippling more than its helping.

If you cut government spending during an economic recession, where the hell are the jobs coming from? The busineses that are cutting workers and investing in new capital that allows them to need less workers?

Well, in places like Greece, the government has no choice but austerity, because there's a limit to how deep anyone's willing to reach into their pocketbooks.

Of course, in Greece, it isn't just the Greek government and their people that have a dog in the fight, which complicates things. From Germany's viewpoint, the question is not "how do we help the Greek people recover," it's "how do we salvage this situation with the least damage to our economy?"

Greece and its ilk doesn't need austerity at all, it needs better and more thorough tax collection practices and substantially higher taxes on the upper class, as well as a generalized reformation of its business practices in the banking and investment sector.

Greece, in particular, also needs to substantially cut its military budget, which is the largest, proportionally, in Europe, for little practical reason (the real reason being that the guns they buy are all German, of course).

"Can ye fathom the ocean, dark and deep, where the mighty waves and the grandeur sweep?"

I suspect the long-term antagonism with Turkey has a lot to do with it, frankly. Which is stupid for both nations, neither of whom is actually going to go to all-out war with the other.

One criticism I have heard a lot is that a lot of Greek public-sector jobs are not producing much of value — I'm not sure how true that is, but I hear it said a lot.

A brighter future for a darker age.

I hear that said a lot as well, but I need to point out that it's never anyone from Greece saying that... It's always someone from another EU country...

@ Derelict:

As Morven said, the reason is Greece's long-running rivalry with Turkey.

Keep Rolling On

Yes, but that's not a practical reason, because the other European powers wouldn't let Turkey and Greece go to war even if they wanted to.

"Can ye fathom the ocean, dark and deep, where the mighty waves and the grandeur sweep?"

It may not be practical or entirely logical, but it is the reason. If you want to know the extent of the rivalry — since Turkey was buying AEW&C aircraft, Greece also brought (albeit cheaper) AEW&C aircraft.

There have also been a few clashes between Turkey & Greece, and aircraft have been shot down. It's never got to war, though.

Keep Rolling On

Also, unlike Northern European economies (like Britain, France, and Germany) laws and taxes are generally obeyed. There's no deeply-ingrained idea of dodging taxes or light-touch regulation of the population, there. Greece's austerity needs to be met with a fundamental societal change. But that isn't going to happen overnight.

Anyway, matters have moved way beyond Governments: Barclays bank chairman Marcus Agius to resign

If you're wondering why he's resigning, it's about the fixing of inter-bank lending rates — and it's one of the first results of a Worldwide Investigation (Britain, Europe, Asia, Japan and the US) into rate fixing.

Keep Rolling On

So lemme get this straight. This bank fixing may have contributed to the destruction of entire national economies. His bank is fined less than a thousandth of what this crisis has caused, and he only has to resign. Mostly, he has to resign because he's not going to stand up to Bob Diamond, Barclays CEO (or President? What's Diamond's position anyways?).

Are there no consequences for white-collar crime?

Share it so that people can get into this conversation, 'cause we're not the only ones who think like this.

The answer to all three of your questions; yes.

Diamond is Chief Executive, a position he only recently gained, having previously run only Barclays Capital (the wing responsible for this, now folded into the main Barclays brand, along with Barclays Wealth and Corporate). Until recently I actually worked for that area of Barclays, albeit in a much more clandestine area of the firm.

My name is Addy. Please call me that instead of my username.

It's another one of these threads!

• Social spending is required to expand the economy.

Do you know how many businesses grow from start-up status? Burn money for 10 years straight. The reason is that to produce a product you need to set up infrastructure, you need engineers, you need to grow your product line. (Or even when times are good, notice Google went against shareholders and gave everyone a 10% raise during the worst year of the recession because, and they were correct, if they didn't they'd start losing their top engineers to competitors)

For a country, a government's objectives (of its many objectives) is to grow the economy. The primary way it does so is through social spending. So if you're going to cut social spending, how might you expect the economy to grow? At that point you're just praying to the gods it will, and maybe it will. Most people hope for more guaranteed results.

• Austerity and Correct Spending Levels Are Not Equivalent

Stop thinking that Austerity is the same thing as Smart Spending. They aren't and never were. Correctly targetted spending will grow the economy and lower your deficit. Simply slashing government funding will kill services, increase bureaucratic bloat (due to lack of efficiency) and make your tax dollars do less in a vicious cycle of uselessness.

• Tax Dollar Efficiency

What your tax dollars are doing matters. Americans need to start caring about that instead of a pie chart of "gov spending/not gov spending". It doesn't f—king matter who is spending the money as long as it is spent well.

Stop caring about ideological labels and start thinking about effectiveness.

edited 1st Jul '12 5:06:14 PM by breadloaf

People who think austerity is a good idea tend to be people who think government debt is in any way comparable to household debt. It isn't, except in that both involve owing money to people. Households generally have a fixed income and, random incidents aside, budgeting can be done extremely accurately. The level of gross income often isn't particularly easy to raise, especially if it's low originally, so net income must be raised by reducing expenditure. Cutting out non-essential items, going for Brand X food rather than that fancy shit your wife likes, etc.

Governments have much, much, much more varying income and expenditure. They also have more ways of influencing both, though these often have far reaching and unpredictable consequences. Even if everything or nothing is done, the figures will change in such a way that can only with great difficulty, and never with certainty, be measured.

To assume each can be dealt with by just cutting basic overheads is laughably ridiculous, as even the above oversimplification indicates.

My name is Addy. Please call me that instead of my username.

On a note about point 3, also, just because you personally dont think a specific slice of the pie is something worth spending on doesnt mean you have the expertise to actually make that decision.

edited 1st Jul '12 5:29:47 PM by Midgetsnowman

Fucking H&K and their price gouging, it's why I don't buy their guns.

Anyway, austerity isn't necessarily bad, there are places where we could make cuts, and there are places where we need to increase funding. The biggest I've problem seen as someone who has worked for the US Govt his entire adult life is that we compartmentalize our budget in really shitty ways. Government agencies often see overfunding in one section, and underfunding in another. There is very little wiggle room in terms of a department tweaking its own budget. Lets take my base for example, my unit has been really struggling with an absolutely shitty equipment budget for almost 4 years, but our sexual assault response program has bought everything it needs for the year, budgeted in all the planned events and expenditures for the rest of the year that aren't supply related, and still is tens of thousands of dollars in surplus. That money can only be spent on things that are in that program. That's fucking balls out retarded. We're up to our eyeballs in pens, stress balls, and hand sanitizer bottles that all have the SARC program hotline for sexual assault numbers on them(I have like 5, they are my ticket writing pens) but we don't have enough batons and riot shields to properly outfit our unit in the event of a civil disturbance.(Which we could probably do with a paltry 1500 bucks honestly.)

Although austerity measures really aren't that effective compared to what would happen if we went back to the tax levels of decades past on the upper class. There are billionaires out there who pay 11 percent taxes, while the average citizen pays around 30-35 percent much of the time. That shit needs to end.

Austerity measures used intelligently could help, but it'd be such a small slice of the pie compared to fair taxes. And I'm not trying to say a flat tax is the only way, it's one method compared to several others such as our current system of taxation being actually enforced and loopholes being closed.

@ Midget

You mean like voters getting angry over spending in a particular area that is actually very effective but they disagree with it?

@broadloaf

pretty much. I notice it a lot with my conservative friends in that if a political program is "liberal", it doesnt mattter what studies say about it. Its wasteful

Ah, yes, that's how I view austerity as well. It has nothing to do with anything. It's just an ideology based on zero-deficit, typically a stance taken by conservatives.

I mean, when it comes to spending and trying to reduce costs take for instance Canada's pilot "insite" program. It's a place in Vancouver where drug addicts can get high without legal repercussions. RCMP hated it. They commissioned a study and asked them to find data to show it was bad. After the study found it beneficial in every single way (massive drop in crime, massive drop in OD deaths, massive drop in policing costs and so on) they tried to bury the study. Then the Federal Tories launched a lawsuit to have it closed down. Estimates about each dollar spent went from saving three bucks to ten bucks because of the reduced impact on healthcare and policing costs. What was there to shut down except a perception of liberal ideology?

To be fair I guess it could be said that it isn't really a good thing for the federal government to almost look like it's sanctioning drug use. I don't see too much harm in it, but I'm just playing devils advocate I suppose.

One thing to be careful about though, don't assume that every single penny of social spending is worth it. There is a such thing as shitty programs, and there are overbloated budgets. Just as there are really great programs and really thin budgets that need to be beefed up.

Just seems like some people assume every penny spent on social shit is automatically well spent. It's not.

^ And what I think people should focus on is "how do I make the spending more effective?"

Take welfare for instance. Most people just want it blanket cut if they're right-wing. The correct question to ask is, is food stamps better than just giving money? Is giving money better than doing some other social program? Etc

That's pretty much why I'm supporting the healthcare stuff. Pragmatically speaking, just having everything paid for out of taxes would cost less than we're already paying for bloated private stuff that gets denied all the time and having to pay for all these emergency cases because our preventative care sucks. I mean regardless of your views on entitlement etc., it's way the fuck cheaper for everyone.

edited 2nd Jul '12 1:47:54 AM by Pykrete

One thing that plagues budget allocation everywhere is the "economy rewarded with budget cuts" mentality linked to the compartmentalization problem Barkey spoke of. It leads to departments wasting money for fear of not having enough the next year.

"And as long as a sack of shit is not a good thing to be, chivalry will never die."