Myths of Austerity - A Rebuttal
Today, our friend Krugman of the NY Times wrote an op-ed entitled "Myths of Austerity" (which you can read here). I'd like to post this rebuttal.
Krugman states that those arguing for austerity are "speculating" and "imagining" that the bond vigilantes will come take down America's Treasury Bonds and with it the U.S. financial system. His argument is that we are not Greece, and he goes on to state that Ireland has and even WORSE economy than the spend thrift nations.
The facts seem to be getting in the way of Krugman's arguments. In fact, one could say his article should have been called the "Myths of Keynesiests". On the list of the 20 biggest debtor nations (based on debt/GDP owed to EXTERNAL finaciers), Greece is ranked 16th, the United States is 20th (click here for the CNBC Slideshow ). Ireland is ranked #1 with a WHOPPING 1,312% of their GDP being owed to foreigners.
How convenient for Mr. Krugman to use as his example the most heavily indebted nation on the face of the planet, whose recent austerity isn't based on the mindset of the TEA Party, but rather on the REALITY that without austerity the ability to roll over their debt would be eliminated and the entire economy would collapse to the stone age.
Worse than that, Krugman FAILS to explain that austerity will cause TEMPORARY pain and hardship. Not because austerity is bad, but because you must pay for the sins of your spend thrift past. Once your financial condition is back in order your economy will once again flourish. Krugman, on the other hand, believes in fairy land, that more spending will create a vibrant economy, where we can then slow the spending and reap the rewards of more tax revenue to pay back the debt we incurred. In essence, Krugman believes you can go into great debt, have a stock market crash/correction, jack up spending and go into greater debt, and come out clean as a whistle on the other side.
The greatest advocates for huge debt LOVE to point to World War 2. Let me say, if you can guarantee we willl go to war and destroy nearly every factory that both our allies and enemies use, I too will guarantee America will have a very prosperous economy for the next 20 years. Not only do I find such a scenario a long shot with a lot of risks, I find it just a tad unethical as well.