I have mostly accepted the claims of many media and political pundits about the failure of austerity programs in Europe. Many of these same pundits have then been using these claims as a basis for recommending that America further ramp up its borrowing and spending to help speed the healing of our economy and create jobs.
These calls for increased borrowing and the consequent saddling of future Americans with even more debt are usually tempered by the phrase "until the economy recovers." To which I respond: What if it doesn't recover? What if the twin forces of automation and the low cost of labor in less developed nations continue to result for the foreseeable future in fewer available jobs in all developed nations, including America?
Lately, I have begun to question my almost automatic acceptance of the notion that austerity is causing harm in Europe. It seems to me that to claim austerity is failing in a country is about as valid as claiming that it is painful for a family to cut back on spending it can no longer afford. Duh! Has austerity caused some pain for many Europeans? Undoubtedly! However, on the positive side, it has certainly also slowed down the continuing accumulation of debt, a problem all of these countries have in common with America. I also think it's very likely that the pain austerity may cause for current citizens will help reduce economic pain for future generations. In most developed nations, the bottom of the hole for deep debt and joblessness wasn't reached overnight, so climbing out of that hole will require shared sacrifice over many years, perhaps even decades.
America went through a severe and long-lasting depression beginning in 1929, and full recovery didn't happen until the end of WW II. Clearly, the immense spending to support the war helped to restore our economy. However, we must also remember that the manufacturing capacity of other developed nations had been mostly destroyed by the war. As a result, America had major competitive advantages from the late forties until the early 70s. These advantages fueled what became the golden age of America for the middle class.
Parents of my generation grew up during the great depression. Most had personal experience with deprivation and hardship. But, they also seemed to take great pride in having the self-reliance to survive. It affected the way most depression-era folks lived for the rest of their lives. They never forgot their deprivations, always saved for rainy days, and only bought what they needed and could afford--not everything they wanted.
Sadly, the lessons the depression-era generation and their leaders learned were quickly forgotten by succeeding generations. Since the 1970s, many of our citizens and most U.S. government leaders, along with those throughout Europe, failed to apply the lessons learned by the depression-era generation. They failed to save for rainy days and bought too much on credit. Worse, our elected politicians learned they could ensure staying in power by spending our tax dollars in ways that mainly favored the powerful special interests. Then, to cap their incredible foolishness and greed, they also found they could leverage the entire process by borrowing, thereby leaving future generations of American citizens and their leaders to deal with the aftermath.
I do not know of a single rational head of a family or business who, after spending himself into a deep hole, would decide the best solution was to just keep adding debt. Sooner or later the piper has to be paid. At best, the payback time frame for additional borrowing will only be slightly delayed...but the total size of the debt will only be more painful to manage in the future.
So, is austerity really failing in Europe? It is, if the main objective is to spare current citizens from any and all pain caused by continuous overspending. Austerity is also failing for elected officials desperate to stay in power, since the voters now clearly understand their failures. Hopefully, the worst case for these failed politicians is that they will be fired.
Will most American citizens face suffering similar to Europeans? It's already happening to millions of them, and I'm afraid the numbers will only increase. Perhaps for a few generations, many Americans will once again learn to live more prudent lives by saving for a rainy day and never overspending resources they don't have. Hopefully, they will also insist their politicians do the same.
The most important question to be answered is, Do we honestly trust our leaders to spend additional borrowed money wisely? Really..., Do we also believe in fairy tales?
I think we should all demand that our elected leaders prove they can focus on massively reducing wasteful spending, before we even think about supporting even more borrowing. The Simpson-Bowles plan would be a great place to start. Do you ever wonder why this logical and non-partisan plan is so difficult to implement? Hint. Hint. The special interests and politicians don't want the gravy train to slow down!
These are my opinions. What do you think?