Fiscal austerity is undermining growth – the evidence is mounting

[Joanne98]

Remember what we were told a few months ago – that business and households were so terrified of higher future tax burdens associated with the budget deficits that they were not investing or spending and so governments were killing economic growth? This led to the deficit terrorists arguing (shouting) that the fiscal stimulus that governments had implemented to save their economies from the threat of a depression were actually undermining growth and that fiscal austerity was the key to growth. Accordingly, governments have increasingly been implementing or promising to implement so-called fiscal consolidation strategies because they have fallen prey to the austerity proponents. As the fiscal stimulus has waned across the world growth is slowing and there is now a real danger of a double-dip recession. In nations that have introduced formal austerity programs the evidence is now mounting … it damages growth and undermines business and household confidence. It has exactly the opposite effect to that predicted by the deficit terrorists which is no news to anyone who understands anything about how the economy works. The victims – the poor and disadvantaged …. AGAIN!

Recall the coverage I gave the CEO of the Dallas Federal Reserve Bank, Richard W. Fisher in this blog – The old line back to free market ideology still intact. Fisher gave a speech gave a speech entitled – Random Refereeing: How Uncertainty Hinders Economic Growth in July where he perpetuated the view that the deficit terrorists are now vehemently pursuing that government policy is making the recession worse and things would be better if the government cut its deficit and allowed the private markets to resume spending and growth.

Fisher provided the representative conservative viewpoint when he said that:

I have ascribed the economy’s slow growth pathology to what I call “random refereeing” – the current predilection of government to rewrite the rules in the middle of the game of recovery. Businesses and consumers are being confronted with so many potential changes in the taxes and regulations that govern their behavior that they are uncertain about how to proceed downfield.

At the time I wrote that much of the “uncertainty” is being driven by the fact that the government stimulus is now being withdrawn and austerity programs which are cutting peoples’ incomes and pensions are now being pursued with vigour.

http://bilbo.economicoutlook.net/blog/?p=11260

[pscot]

1. Evidence??

We don' got no evidence! We don'need no stinking evidence!! Blam!!!

[Crazy Dave]

2. My uncertainness is genuine

I can't (won't) buy a new car, take a vacation or do some needed home repairs because I never know if I'm going to be laid off next month, or the month after, or the month after that, etc. so all I can do now is just save, save, save.

[girl gone mad]

3. k & r