Austerity Works

In Europe, it is supposedly "austerity" measures that are killing their economy. Now, let me ask you this, does this look like austerity to you?

No, me neither. And yet ballot after ballot in Europe is turning out those who pushed for fiscal responsibility. When you’re in a hole, especially a financial one, stop digging. Call Dave Ramsey and cut up your credit card. But experiments with socialism always sound like the Pied Piper, until the bill comes due. By then, everyone is addicted to the "freebies" and there’s no turning back.

Austerity is the answer, but liberal economists always seem to think that government spending is the answer, not the problem, and that austerity leads to all sorts of problems. Except that, when the United States tried it, against the liberal naysayers’ warnings, it worked.

This is what austerity looks like.

After the huge spending during World War II, the US got seriously austere, with regards to government spending. What happened?

Superstar economist and devout Keynesian Paul Samuelson—later to become the first American to win the Nobel Prize in economics—predicted such shock austerity would cause “the greatest period of unemployment and industrial dislocation which any economy has ever faced.” That dire, disastrous prediction was widely held by his fellow Keynesians, with one even predicting an “epidemic of violence.”

Except the doomsayers were wrong, even though Washington obviously ignored Samuelson’s call for gradual spending reductions. Despite cuts which dwarfed those seen in the EU today—not to mention those Republicans are calling for here at home—the U.S. economy thrived. There was no mass unemployment despite rapid demobilization of the armed forces.

(Yeah, another Keynesian, Nobel-prize-winning economist predicted doom. How much more of a parallel with Paul Krugman do you need?)

Don’t say that austerity won’t work, when you haven’t really tried it, and it’s worked in the past.

Filed under: Doug • Economics & Taxes • Government

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