Awfulsterity

As the impacts of “The Great Recession” have rippled across the world over the past half-decade, governments have responded primarily with austerity. Western Europe, Greece, Portugal, Spain, Italy and the United Kingdom have drastically cut government expenditures.   

And though the United States’ first response to the recession was a stimulus package, we’ve since pursued an austere policy of “sequestration,” across-the-board budget cuts.

One thing is clear as the dust has begun to settle. Countries that have pursued austerity have experienced worse economic outcomes, facing exploding deficits and negative social effects as a result.

As attractive as the penny-pinching politics of austerity have proven to be, they must be reconciled with a harsh record of failure in practice.

For a consumption-based economy like the United States and much of Western Europe, stimulus must come primarily through spending.

A new sort of aphorism holds true: a dollar traded is worth more — in terms of growth — than a dollar saved. The British Office of Budget Responsibility confirms that cuts to welfare hurt the economy much more than other cuts because welfare payments contribute more directly to consumption, which contributes more directly to growth.

The primary impetus for austerity is to reduce budget deficits. Again, though, this doesn’t pan out.

As the International Business Times concludes, “The combined government debt of 17 euro zone nations rose to 92.2 percent of gross domestic product — the highest in history — in the first quarter of 2013, despite stringent austerity measures deployed in the region since the beginning of the financial crisis.”

Why does austerity increase, rather than decrease, debt? As government jobs disappear, so does the tax revenue from those jobs. And as growth disappears, so does the tax revenue from that growth. So the debt explodes.

But the worst effect of austerity is its human cost. In America, transfer payments make up 20 percent of disposable income. And since 2007, “more than 60 percent of the increase in disposable income came from increases in transfer payments.”  

With stagnant wages, government money is key in helping maintain standard of living in Western countries. And there are a laundry list of disturbing trends tied to austerity.

Since these austere policies were implemented, 10,000 additional suicides in North America and Europe occurred, according to Drs. David Stuckler of Oxford and Sanjay Basu of Stanford.

About 10,000 British families have been forced into homelessness due to public housing cuts.

Following cuts in public health spending, there was a 200 percent increase in HIV in Greece. Greece has also seen a 25 percent spike in people experiencing homelessness and a 60 percent increase in suicide rates.

The evidence is clear. In the words of Drs. Basu and Stuckler, “Austerity Kills.” And with every panic about debt, the Tea Party moves us farther into its grasp.

­— shlumorg@indiana.edu
Follow columnist Luke Morgan on Twitter @shlumorg.