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Author Topic:   Austerity measures have they ever saved an economy?
DC85
Member (Idle past 192 days)
Posts: 854
From: Richmond, Virginia USA
Joined: 05-06-2003


Message 1 of 168 (648606)
01-16-2012 9:02 PM


So we continue to hear how Europe is getting worse as far as economics especially Greece after the massive cuts to people, services and "entitlements" . Are Austerity measures during a crisis all that effective in curbing debt? Are there any examples of this actually working? To me it seems like cutting your arm off to get rid of a deep gash in your arm.

Here in the United States I constantly hear

"We have a spending problem not a revenue problem. "

Is this true or have the incomes of people decreased so much that there just simply is not much revenue brought in?

Edited by DC85, : No reason given.

Edited by DC85, : No reason given.


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caffeine
Member (Idle past 110 days)
Posts: 872
From: Prague, Czech Republic
Joined: 10-22-2008


Message 2 of 168 (648623)
01-17-2012 4:22 AM
Reply to: Message 1 by DC85
01-16-2012 9:02 PM


I'm very dubious about the 'logic' behind austerity. We're hovering in and out of recession, at the moment and the solution to get out of recession, if I understand things correctly, is for people to spend more.

So what does the government do? It cuts spending. Austerity cuts mean companies that rely on cushy government contracts losing out. It means those self-employed dealing with a reduced income, and it means larger companies having to lay off staff or abandon plans at expansion. These people with less money, and others scared by the layoffs or by government pronouncements that we all have to chip in and do our bit in harsh times, will tend to spend less, thinking, rightly or wrongly, that they can't afford luxuries at times like these.

This, in turn, hits the income of those who provide said luxuries, exacerbating the problem further. It seems that austerity cuts are one surefire way of hurrying us into recession, not a way of saving the economy.

Paradoxically, some cuts could increase government spending elsewhere, as people who used to be indirectly supported by the government through their wages, are now entitled to various forms of government support through being out of work.

Of course, I don't really understand economics, but then I strongly suspect that nor do the politicians and talking-heads advocating these measures. It's an ideological response to the crisis from the right.

Edited by caffeine, : abuse of the innocent comma, plus the extra bit about unemployment benefits.


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Larni
Member
Posts: 3745
From: UK
Joined: 09-16-2005


Message 3 of 168 (648624)
01-17-2012 4:27 AM
Reply to: Message 1 by DC85
01-16-2012 9:02 PM


I'm not a scientist but: (always wanted to say that!)

It seems that the UK Asterity is the Torries pulling the ladders up behind them and heaping the pain on the lower orders.

It is no suprise to me that we get the Torries in power and we get riots in the streets.

But the Labour boom and bust was not exactly a winner, either. It seems that austeity combined with judicious spending to boost growth would be the best choice, but like I say: I'm not a economic scientist.


The above ontological example models the zero premise to BB theory. It does so by applying the relative uniformity assumption that the alleged zero event eventually ontologically progressed from the compressed alleged sub-microscopic chaos to bloom/expand into all of the present observable order, more than it models the Biblical record evidence for the existence of Jehovah, the maximal Biblical god designer.
-Attributed to Buzsaw Message 53

The explain to them any scientific investigation that explains the existence of things qualifies as science and as an explanation
-Attributed to Dawn Bertot Message 286

Well, Larni, let's say I much better know what I don't want to say than how exactly say what I do.


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frako
Member
Posts: 2402
From: slovenija
Joined: 09-04-2010


Message 4 of 168 (648629)
01-17-2012 7:02 AM
Reply to: Message 1 by DC85
01-16-2012 9:02 PM


Thing about greece is that they have a huge spending problem.

A school with 10 students has 40 teachers, so that they all have something to do they teach poorly so students haveto catch up on their learning so that the other teachers have something to do, by teaching them in the afternoon. Douring their spare time most of the teachers also drive a cab. This is just one example of over employment in government jobs.

Then you have the security of a government job, you cant loose your job no matter how hard you try.

And a whole tone of shit like this. Basicly Greece is a deep black hole that sucks up money.

The added problem is that no one wants reforms because they like it the way it is.


Christianity, One woman's lie about an affair that got seriously out of hand

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caffeine
Member (Idle past 110 days)
Posts: 872
From: Prague, Czech Republic
Joined: 10-22-2008


Message 5 of 168 (648639)
01-17-2012 9:02 AM
Reply to: Message 4 by frako
01-17-2012 7:02 AM


A school with 10 students has 40 teachers, so that they all have something to do they teach poorly so students haveto catch up on their learning so that the other teachers have something to do, by teaching them in the afternoon.

Of course, that's not actually true. Greece has about 10 students per teacher. Now, if you want to make an argument that this is too many, that's another issue - but ludicrous hyperbole isn't helpful. You're trying to make it sound like the situation in Greece schools is some unique and special case when, in fact, they simply have a similar pupil-teacher ratio to Portugal, Sweden, Norway, Russia, Croatia, Georgia, Lebanon and several other countries.


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jar
Member
Posts: 24664
From: Texas!!
Joined: 04-20-2004
Member Rating: 2.1


(1)
Message 6 of 168 (648642)
01-17-2012 9:30 AM
Reply to: Message 5 by caffeine
01-17-2012 9:02 AM


And then there is the US
Only one US state has a student teacher ratio near 10, and the average Elementary student teacher ratio in the US is over 20. source

And we hope to compete in the world.


Anyone so limited that they can only spell a word one way is severely handicapped!

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frako
Member
Posts: 2402
From: slovenija
Joined: 09-04-2010


Message 7 of 168 (648644)
01-17-2012 9:46 AM
Reply to: Message 5 by caffeine
01-17-2012 9:02 AM


Greece has about 10 students per teacher.

Yea on average but the school in Agios Efstratios has 10 students and 40 teachers.

and tones of other stuff wrong with the country

http://voices.washingtonpost.com/...bailout_concessions.html

Edited by frako, : No reason given.


Christianity, One woman's lie about an affair that got seriously out of hand

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NoNukes
Member
Posts: 5273
From: Central NC USA
Joined: 08-13-2010
Member Rating: 1.7


(2)
Message 8 of 168 (648649)
01-17-2012 10:44 AM
Reply to: Message 2 by caffeine
01-17-2012 4:22 AM


Contract with rich folks...
The logic seems to be that if we stop giving rich people's money to poor people, and teach poor people janitorial skills in elementary school, the indigent can aspire to someday own their own cleaning businesses.

Because the drag on the economy is caused by retail establishments with dirty windows.

Edited by NoNukes, : No reason given.


Under a government which imprisons any unjustly, the true place for a just man is also in prison. The proper place to-day, the only place which Massachusetts has provided for her freer and less desponding spirits, is in her prisons, to be put out and locked out of the State by her own act, as they have already put themselves out by their principles. Thoreau: Civil Disobedience (1846)

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Jon
Member
Posts: 4003
From: Minnesota, U.S.A.
Joined: 12-29-2005
Member Rating: 1.2


(5)
Message 9 of 168 (648652)
01-17-2012 11:24 AM
Reply to: Message 1 by DC85
01-16-2012 9:02 PM


Over Consumption and Unequal Distribution
Here in the United States I constantly hear

"We have a spending problem not a revenue problem. "

People who say that are usually talking about the government and try to use it as an excuse to avoid raising taxes on the wealthy and closing corporate tax loopholes.

The U.S. government has, primarily, a revenue problem; it is giving up billions of dollars a year in potential revenue by way of taxes that it could easily collect and that those it would collect it from could easily pay. The U.S. government also has a spending problem, known as the Department of Defense. But that is really the only spending problem them U.S. has. The U.S. nation, as a result of the failures of the U.S. government, has a distribution problem.

Individuals, on the other hand, do have a spending problem. Folks like Crashfrog will try to tell you that we need to keep people spending money, but without detailing who needs to be spending their money, there can be no real discussion.

For example, a good amount of people do not even meet their basic needs in terms of what they have the ability to buy. But that is always the case with the poor; that's why we call them poor. The easiest way to solve their problem is to give them more money, and that is done to some extent (rental assistance, food stamps, etc.). The poor also don't have the luxury of converting any saved money into tangible assets because they simply don't have the cash to purchase such assets that would not appreciate in value enough when they needed the cash back by selling them. In other words, they are forced to save their money for those rainy days.

The rich are causing the government revenue problem; they actually need to be keeping less than they are keeping now. The easiest way to solve that problem is to increase taxes in the upper brackets.

Then we come to the middle class.

quote:
Wikipedia on Conspicuous Consumption:

With the significant improvement of living standards and the emergence of the middle class in the 20th century, the term is now broadly applied to individuals and households with expendable incomes whose consumption patterns are driven by the utility of goods to display social status rather than any intrinsic utility of such goods.


Members of the middle class have enough income to support themselves and save leftover income. By and large, however, thy do not save their leftover income, but pour it into the consumption of unproductive status goods (all classes are guilty of this to some degree):

quote:
Wikipedia on Conspicuous Consumption:

With the significant improvement of living standards and the emergence of the middle class in the 20th century, the term is now broadly applied to individuals and households with expendable incomes whose consumption patterns are driven by the utility of goods to display social status rather than any intrinsic utility of such goods. In the 1920s, economists such as Paul Nystrom theorized that lifestyle changes brought on by the industrial age were inducing a "philosophy of futility" in the masses, which would increase fashionable consumption. Thus, the concept of conspicuous consumption has been discussed in the context of addictive or narcissistic behaviors induced by consumerism, the desire for immediate gratification, and hedonic expectations.


This is largely the individual 'spending' problem in the U.S. and other industrialized nations at the moment: large amounts of capital are being directed toward the production and consumption of things that do not provide an adequate return compared to the resources they consume. One way we can see this is by looking at the environmental effects of over consumption:

quote:
Wikipedia on Consumerism:

According to figures presented by Rees at the annual meeting of the Ecological Society of America, human society is in a "global overshoot", consuming 30% more material than is sustainable from the world's resources. Rees went on to state that at present, 85 countries are exceeding their domestic "bio-capacities", and compensate for their lack of local material by depleting the stocks of other countries, which have a material surplus due to their lower consumption.

Not all anti-consumerists oppose consumption in itself, but they argue against increasing the consumption of resources beyond what is environmentally sustainable. Jonathan Porritt writes that consumers are often unaware of the negative environmental impacts of producing many modern goods and services, and that the extensive advertising industry only serves to reinforce increasing consumption. Likewise, other ecological economists such as Herman Daly recognize the inherent conflict between consumer-driven consumption and planet-wide ecological degradation.


We simply aren't getting back what we're taking out with the consumption of status goods. I won't say too much more on this for now, because I feel I have already posted enough to incite a few lengthy posts in which I am called an idiot and belittled for the fact that I have actually taken an economics class or two in my day instead of trying to pull everything from my ass.

So let's go back to the issue of revenue vs. spending: in the U.S., our government has a revenue problem; we have a sufficient number of people who are not properly provided for and a sufficient number of people who could provide for them, but the iron fist of the government has failed to ensure the redistribution of this wealth. But that's where the revenue problem stops, really. The system as a whole is sitting pretty good; it's just the distribution of the wealth inside the system that needs work. We really don't need to be spending more as a nation, we just need to be spending smarter.

I also have a thread started here on a similar topic: Replacing Consumerism.

Jon


Love your enemies!

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Jon
Member
Posts: 4003
From: Minnesota, U.S.A.
Joined: 12-29-2005
Member Rating: 1.2


Message 10 of 168 (648653)
01-17-2012 11:38 AM
Reply to: Message 6 by jar
01-17-2012 9:30 AM


Re: And then there is the US
Only one US state has a student teacher ratio near 10, and the average Elementary student teacher ratio in the US is over 20

I wonder if that takes into account classroom assistants.

I don't think we need a low ratio in terms of officially trained teachers, especially at the elementary level, where a single trained teacher with the aid of a couple of assistants can easily and effectively minister to all students' needs.

Jon


Love your enemies!

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caffeine
Member (Idle past 110 days)
Posts: 872
From: Prague, Czech Republic
Joined: 10-22-2008


Message 11 of 168 (648736)
01-18-2012 4:39 AM
Reply to: Message 7 by frako
01-17-2012 9:46 AM


Yea on average but the school in Agios Efstratios has 10 students and 40 teachers.

This seems unlikely. I've been trying to find some account of it online, but it's not mentioned anywhere in English-speaking media. The only times it comes up is in enraged rants in comments sections. Given that, to be true, it would require a significant portion of the island to be employed as teachers (the population is only a couple of hundred), it sounds like a dubious rumour to me.

Greek government spending isn't that different to most other countries in the EU. I think we need to be very wary about tabloid stories of Greek profligacy, because I fear we're getting caught up in the rhetoric of an ideologically-driven movement which is taking advantage of the crisis to push through their 'small government' vision, which could turn out to be very risky.


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ramoss
Member
Posts: 2800
Joined: 08-11-2004
Member Rating: 3.2


Message 12 of 168 (648751)
01-18-2012 8:58 AM
Reply to: Message 1 by DC85
01-16-2012 9:02 PM


Well, it is both a spending problem and a revenue problem. The issue is that in 2000, Bush did massive tax cuts, particularly for the rich. .. and we also had two wars to deal with in 2002. That increased the rate of debt drastically. We are currently at the lowest rate of taxes since before the depression.

We need to get rid of the Bush tax cuts.. and also cut spending.


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NoNukes
Member
Posts: 5273
From: Central NC USA
Joined: 08-13-2010
Member Rating: 1.7


Message 13 of 168 (648753)
01-18-2012 9:47 AM
Reply to: Message 12 by ramoss
01-18-2012 8:58 AM


Cutting spending and raising taxes
I understand why this bit of wisdom is appealing, but I'd welcome an explanation of how this policy is going to help get the economy out of the doldrums.

In your view, what role does the deficit play in preventing job growth and eroding consumer confidence? Currently banks have access to money at extremely low interest rates yet that doesn't translate into wanting to loan money. What is it about reduced spending and increased taxes that will change that?

On the other hand, it is easy to see how increased spending on infrastructure and pork might actually be helpful.


Under a government which imprisons any unjustly, the true place for a just man is also in prison. The proper place to-day, the only place which Massachusetts has provided for her freer and less desponding spirits, is in her prisons, to be put out and locked out of the State by her own act, as they have already put themselves out by their principles. Thoreau: Civil Disobedience (1846)

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crashfrog
Inactive Member


Message 14 of 168 (648761)
01-18-2012 10:35 AM
Reply to: Message 12 by ramoss
01-18-2012 8:58 AM


We need to get rid of the Bush tax cuts.. and also cut spending.

Public spending is private income, so how does cutting public spending help the economy? Please be specific.


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Jon
Member
Posts: 4003
From: Minnesota, U.S.A.
Joined: 12-29-2005
Member Rating: 1.2


(1)
Message 15 of 168 (648774)
01-18-2012 11:46 AM
Reply to: Message 13 by NoNukes
01-18-2012 9:47 AM


Re: Cutting spending and raising taxes
In your view, what role does the deficit play in preventing job growth and eroding consumer confidence?

I think a good question is: Do we need job growth? I don't mean to make a statement here, but I'd like to raise an issue.

If the goal of efficiency is to increase output from the same amount of input, and labor hours are input, then as efficiency is increased, hours worked can be decreased while still providing the same outputthat is, while still providing the same standards of living provided under the less efficient higher-hours system.

From this, it is not a huge leap to think that a system can actually reach the point where every able-bodied worker simply doesn't have to put in a full-time set of labor hours (40 hours/week) in order for the system to provide the standard of living it provided before. This would suggest that the solution to a high rate of unemployment is to either limit the hours already worked by some and hire the unemployed to fill those open hours, or to leave the unemployed unemployed and simply pay them a salary to maintain a certain standard of living. In either approach, of course, the massive amounts of wealth currently kept by the upper-management class would have to be redistributed to the lower classes of the business in order to ensure that cutting hours doesn't decrease standard of living. In other words, everyone will work fewer hours and still be guaranteed a minimum salary, or the unemployed stay unemployed and only they get the minimum salary (the employed, presumably, already earning past the minimum).

Do I think this is a problem with the current system? Not so much; there are plenty of places where work needs to be done, particularly in researching more environmentally-sustainable methods of living (power, waste disposal, etc.), infrastructure repair, education, and so on. But I can see this becoming a problem to some extent in an economy that is accounting for all avenues of potential production, and I can certainly see this becoming a problem within the production spheres of certain products, where increasing production is simply unworkable (for example, the company already produces more than the public will buy).

Perhaps I can go investigate some numbers...

Jon


Love your enemies!

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