Friday, March 25, 2011

How's that austerity thingee working for ya?

Paul Krugman looks at the results of recent economic decisions by various governments in the face of the economic crisis discovers that the "Confidence Fairy" has turned out to be just another confidence man.
Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.
Ooops! But the evidence of other countries should convince the wise solons of DC to drop auterity and tackle the real problems facing us, right?
A serious fiscal plan for America would address the long-run drivers of spending, above all health care costs, and it would almost certainly include some kind of tax increase. But we’re not serious: any talk of using Medicare funds effectively is met with shrieks of “death panels,” and the official G.O.P. position — barely challenged by Democrats — appears to be that nobody should ever pay higher taxes. Instead, all the talk is about short-run spending cuts.

In short, we have a political climate in which self-styled deficit hawks want to punish the unemployed even as they oppose any action that would address our long-run budget problems. And here’s what we know from experience abroad: The confidence fairy won’t save us from the consequences of our folly.
But the confidence man is getting rich stealing everything we have worked for.


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