Guest Post: What Austerity?
Submitted by Bill Wilson, President of Americans for Limited Government.
By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe.
There is only one problem. It is a lie.
First off, austerity was never really tried. Not really.
In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before.
Real “austere”. The French spent more, and they borrowed more.
The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero.
Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.”
This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.
If not France, then where?
In Italy and Spain, which have been dependent on tens of billions of cash infusions from the European Central Bank (ECB) to refinance their debts, cuts are hardly anywhere to be found either. In Spain, spending was cut by just €11 billion in 2011, a mere 2.3 percent reduction. In Italy, spending actually increased by €4.3 billion.
Both countries borrowed an additional €117 billion last year alone, raising their combined debts to €1.939 trillion. So, no austerity there. Just debt slaves.
Hollande might have been referring to the budgets of debt-strapped Ireland, Greece, and Portugal that have depended on over €290 billion of refinance loans from the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF).
But even there, the cuts are rather miniscule. In Greece, spending was cut by just €6.3 billion from 2010 levels. In Portugal, just €4.8 billion. Ireland only trimmed €2.2 billion off its 2009 levels, discounting its massive bank recapitalization in 2010 that blew up its budget by €25.7 billion.
The real point is that none of them even came close to balancing their budgets, with over €47 billion of combined deficits for 2011. More debt slaves.
Yet that is not stopping pundits like New York Times columnist and economist Paul Krugman from claiming otherwise, who said recently, “All this austerity is actually self-defeating. We’re seeing countries slash spending and drive their economies into a ditch.”
What austerity? These countries are all debt addicts. They’re not addressing the root of the problem. So, what should they do? Just borrow more?
Where’s the growth?
Oh, contraire. Although all of this government largesse and excessive borrowing is supposed to be economic stimulus by Krugman’s account, these European economies are still stuck in a ditch. We tried the same thing here.
More than $3 trillion in fiscal and monetary stimulus since the financial crisis began — all to no avail. Well, some things did happen. We lost our AAA credit rating. And the debt is now larger than the entire economy.
But leaving that aside, based on analyses like Krugman’s, one might get the idea that the sovereign debt crisis in Europe was caused not by too much borrowing, but by not enough of it.
No, Krugman, Hollande, et al., this really is a debt crisis. The government’s demand for borrowing is so voracious that it far exceeds even the financial system’s capacity to lend. The crisis has reached such critical proportions these countries cannot find a way to grow their way out of it.
Hollande’s idea of “growth” is just more government spending and waste in a new wrapper — more education funding, more pensions, more health care, and other soft socialist programs. Because the illness is being misdiagnosed, the solutions being proposed only threaten to exacerbate the symptoms.
If France and other European countries were truly interested in growth, they’d be cutting taxes on business. Yet, Hollande wants a 75 percent levy on the “rich” and to increase social spending. Socialists like Hollande and their ilk do not wish to save the private sector — they want to soak it. Very well.
But this is a true delusion. There is no painless way to solve the systemic imbalances caused by bloated political promises made to dependent classes of citizens. The rich are not rich enough to pay for the level of government we have.
There is no easier, softer way to stop the bleeding. Spending must be cut, budgets balanced, and debts paid down. Europe is nowhere near that right now. Nobody is.
But that’s not all that must be done. To alleviate the painful transition — and make no mistake it will be painful — real fiscal reform must be accompanied by pro-growth policies.
Here in the U.S., systemic unemployment and slow growth in the private sector could be addressed on the supply side. Capital gains and corporate taxes could be eliminated to encourage investment in U.S. companies. Environmental regulations that increase the cost of energy and of doing business here could be rescinded.
We could let banks fail when they make bad investments, and restore a sound money system to ensure price stability and an end to “too big to fail”. Instead, we have outsourced our nation’s monetary policy to an international bank cartel that does not share our national interests, threatens inflation on working families, and actually endangers our future prosperity.
We are all Icelanders now
The question before us is not growth versus austerity. That is a false choice being promoted by the state-controlled media.
The real question is whether the West will submit to this established order — represented by the bank cartel and entrenched political parties — or reject it.
What the elections in Europe actually show is the absolute disgust on both the left and the right that the people have for the establishment. In France, the conservative incumbent president who represented the status quo was deposed. In Greece, both of the two major parties including the ruling Socialists were crushed, garnering just 32 percent of the popular vote.
Instead, 68 percent voted for lesser known, more radical parties that rejected the European bailout of banks that bet poorly on sovereign debt. And it’s not just in Greece and France.
When Spanish citizens wave Icelandic flags at rallies, we have a movement. In April 2011, Icelanders defeated via referendum a bailout of British and Dutch investors who had lost funds in Icesave bank in 2008.
It was a remarkable rejection of this debt slavery that is dragging down our societies. Little noticed by mainstream media, the example set by the people of Iceland resonates more with each passing day. The voters of Europe on May 6 cast their vote like Icelanders, rejecting the status quo, rejecting the dictates and threats of the banking and political elites. In a very real sense, the Iceland example has become a modern-day Lexington and Concord, a shot heard around the world fired against an encroaching tyranny.
We are not immune here in the U.S. In fact, we are leading the movement. From Tea Party in 2009 and 2010 to Occupy in 2011 to May 8’s overwhelming defeat of a senior establishment figure like Richard Lugar in Indiana, the people are rejecting the rotting corpse of the established order.
Some folks like their rebellion with a leftwing taste and others with a rightwing taste. Regardless, it is still rebellion, a refusal to accept the same old tired slogans and threats.
Mouthpieces for the establishment have dubbed this trend rejectionism; an attempt at a slur. But for tens of millions of Americans and hundreds of millions world-wide it is not a slur but a badge of honor. It is a rejectionism of the welfare statism of the post-war period, a rejectionism of the loss of soveregnity, a rejectionism of debt slavery, a rejectionism of working to pay for others to do nothing, and a rejectionism of the purposeful destruction of national identities and culture.
Make no mistake. No less than the very sovereignty and liberty of free peoples everywhere depends on rejection of the international order that has evolved since the end of World War II. The central banking cartel and their willing political accomplices are pushing us into an international tyranny — run on debt.
The real story of the European elections is the rise and assertiveness of rejectionism, the refusal to accept the so-called solutions from the self-appointed “experts.” That story, no matter how hard the mainstream media and spin-doctors try to cover it up, is the one that will continue to play out around the globe, including the U.S., in the coming months.
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