Sunday, November 04, 2012

The EU's budget-balancing austerity fixation

Michael Hoexter in an article devoted to outlining the economics assumptions underlying Pete Peterson's and the Peterson Foundation's advocacy for cutting benefits on Social Security and Medicare, Pete Peterson and the Deficit Hawks Teach Lawmakers Deep Fiscal Irresponsibility New Economic Perspectives 11/04/2012, also comments on the bad assumptions behind European Union fiscal austerity doctrine:

Now more than ever, the real effects of increased government spending, particularly on projects that produce public goods of high value and also increase employment, have a very high net positive value for the economy. The budgetary rule that Peterson and the so-called Center for a Responsible Federal Budget would like to impose leads American legislators exactly in the direction of the mistakes of the founders of the Euro-Zone when they agreed to limit deficit spending to 3% of GDP, not thinking that a financial crisis could hit, requiring governments to counteract a downturn in the private economy. Equally their efforts to lame the spending capacity of government so that it conforms to rules that ordinary households must use could not meet the enormous challenges of disasters such as Hurricane Sandy. The Peterson crowd would have Washington tailor government's spending to fit a self-satisfied businessman’s fantasy about government’s economic role rather than its real economic role. Thus the Center for a Responsible Federal Budget and allied organizations like the Concord Coalition preach a deep fiscal irresponsibility.
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