Monday, December 2, 2013

The Truth About Austerity

I recently came across this on the Internet:

Here in America our 47% would laboriously sound out the word “austerity” and then respond “wuzzat?”  The better educated among them might speculate that Austerity is an island in Europe that’s somehow related to Germany and is where kangaroos live.

Put simply, austerity is a reduction in spending by a government experiencing large deficits and ballooning debt.  It is a “live within your means” policy, modeled after individual families not spending more than they earn.  Here in America austerity is referred to by the more straightfoward term “spending cuts.”

The picture above was undoubtedly produced by some liberal, using a hefty dose of their infamous liberal logic. It is fundamentally a complaint that austerity includes cuts to “social spending” specifically  welfare, food stamps, and other benefits.  My goodness!  Taking food out of the mouths of orphaned babies!  How heartless can one be?

What’s the opposite of austerity?  Oh, that would be stimulus.  It stimulates the economy! You know, if the liberals are going to be this transparent with the labels they come up with why don’t they go whole hog and use the terms “Evil greedmongering vs. Kind Carebearing.” When you put it that way, the right choice is obvious!

OK, let’s strip off the emotional labels and just call it Policy A vs. Policy B.  Policy A involves a nation spending money it does not have and thus sinking deeper and deeper into debt.  This has two (hopefully unintended) consequences:
  1. An ever increasing amount of the annual budget must be spent on paying interest.  Politicians try to distract people from this reality by using the obfuscating term “servicing the debt.”  It really boils down to paying an amount of money every single year and receiving absolutely nothing in return.  How big an impact does this have? Well, thanks to the $7T Barack Obama’s regime has added to the debt, America paid $223B worth of interest in 2012.  That’s 6% of the total budget, over three times the cost of the entire Food Stamps (now known by the euphemism SNAP) program.
  2. The more debt a country has, relative to its economic output, the lower its credit rating goes. And this then increases the interest rate on borrowing money.  Which ties back into item #1.

Policy A, the “just keep spending money you don’t have and borrowing to do so” policy has a definite limit- eventually a nation will have borrowed so much money that it needs to spend 100% of tax receipts on interest payments alone. Or, more commonly, it will run out of people willing to take the risk and lend more money. By the time a country hits this point, they’re usually so hopelessly addicted to deficit spending that there’s just no chance of them living without it.  So what do they do?  Caught in the paradox of “have to get more money” and “can’t get more money” they always do the same thing:  Print money.  It’s happened recently in Argentina and Zimbabwe, North Korea, and most of the countries that used to be part of the USSR.  Less recently it’s happened in Germany, Austria, and even here in America in Colonial times. Money printing inevitably leads to hyperinflation with all its attendent horrors: Riots, starvation, a complete economic collapse, and frequently the collapse of the government followed by a period of martial law and/or outright facism.

So Policy A inevitably leads to a horrific train wreck.  When things really get tough, who do you think it is that’s dying in the riots?  Starving?  The wealthy elite with their hoards of gold, food, and ammo in fortified retreats or the “the poor?”  Policy A is just about the worst thing that could happen to anyone but history has shown clearly that it is always hardest on the people at the bottom.  The people who counted on the government for food and rent and suddenly that government vanishes in a puff of smoke.  Even before the collapse, during the hyper-inflationary period, the poor will get welfare checks of $1,000,000,000… at a time when a gallon of milk costs five million.  The pitiful few times in history when Policy A didn’t end in disaster is the when the nation, realizing what’s ahead, switches to Policy B.

Policy B is the “never spend more than you take in” policy.  It’s the “balanced budget, no deficits” policy.  Now, one would think that “live within your means” could be perpetuated forever.  There’s no ballooning interest payments, so why not?  Well, Policy B has some side-effects as well.  One of which is that you can’t increase spending without increasing revenue.  How do you increase revenue?  Well, unfortunately liberal Democrats seem to be able to think of only one way to do this: Increase tax rates.  One would think it quite strange they would perpetuate this move; Fifty years ago Democrat-darling President Kennedy, in a nationwide address, pointed out that paradoxically raising taxes reduces revenues and that decreasing rates increases them. It also hampers the economy so as to lead to greater unemployment which leads to less revenue because there’s fewer taxpayers.  This swiftly snowballs into a death spiral of Raise taxes->Kill Jobs->Reduce revenue.  Eventually a nation reaches the point where so many people are dependent on direct government that they can muster enough votes so as to get people willing to switch to Policy A regardless of the perils.

So, to summarize, Policy A (unlimited spending of borrowed money) inevitably leads to either the incredibly painful and messy end of a Nation or (best case scenario) a switch to Policy B.

Policy B (don’t spend money you don’t have) inevitably makes “social justice” (a polite euphemism for the masses voting themselves increasing amounts of “free” government money) more attractive, which then leads to a switch back to Policy A.

You hear a lot about “austerity” and “cuts” these days.  Nine-out-of-ten liberal economists will cite Maynard Keynes as they pronounce austerity “the worst thing you can do to an economy.”  Twelve-out-of-ten (the liberals commit a whole lotta voting fraud) welfare recipients will tell you it’s inhumanly cruel to expect them to get along with anything less or even worse to *gasp* expect them to get a job.  I must admit, Policy A (unlimited spending) is a really fun party… right up until the whole thing comes crashing down.  Then it’s riots, starvation, and out-of-control crime, usually followed by brutal totalitarianism.  All of which hits the poor ten times harder than anyone else.

And yet, proponents of Policy B (getting spending under control) are eternally vilified for being uncaring, unsympathetic, and greedy.  Of waging a war on “the poor.”  Meanwhile, the people willing to spend unlimited amounts of other people’s money (most of it borrowed) are lionized as social heroes and win the undying support of the very people they are dooming to unspeakable poverty or worse.

So here’s my corrected meme picture for the state of affairs:

 Not as catchy and it lacks that class-warfare “us vs. them” appeal.  But at least it’s accurate.

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