Any Democrat who fails to remind Republicans and the general public about the costs of austerity is doing everyone a disservice.
It’s unclear why any Democrat goes along with this prescription for failure because we know that it doesn’t work. The evidence is clear that in a struggling economy, austerity will blow a whole in your plans and make a bad situation worse.
The Republicans still view austerity as the way to go and can’t wait to implement this plan. It’s the same failed plan that is destroying the economies in the UK, Greece, Spain and Portugal. Nobody is suggesting that unlimited money should be spent forever (other than the GOP on war, corporate handouts or tax cuts for the 1%) but with the cost of borrowing being so ridiculously low for governments, it’s foolish not to spend on programs to help keep up employment (and tax income) while the private sector is still soft.
To say that a stimulus is “socialist” is obscuring the fact that the plan works, as even Paul Ryan admitted when he repeatedly requested stimulus funding. On the other side of the austerity plan is failure and economic decline.
George Osborne’s drastic deficit-cutting programme will have sucked £76bn more out of the economy than he expected by 2015, according to estimates from the International Monetary Fund of the price of austerity.
Christine Lagarde, the IMF’s managing director, last week caused consternation among governments that have embarked on controversial spending cuts by arguing that the impact on economic growth may be greater than previously thought.
The independent Office for Budget Responsibility used a “fiscal multiplier” of 0.5 to estimate the impact of the coalition’s tax rises and spending cuts on the economy. That meant each pound of cuts was expected to reduce economic output by 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons the true multiplier is 0.9-1.7.
Let’s not forget that IMF chief Christine Lagarde is no lefty by any means. Before coming to the IMF Lagarde had been the Minister of Finance for the conservative French president, Nicholas Sarkozy.