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Thread: Deficit Commission Proposals Would Cost 4 Million Jobs

  1. #1
    Havakasha is offline
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    Deficit Commission Proposals Would Cost 4 Million Jobs

    Report: Deficit Commission Proposals Would Cost 4 Million Jobs

    by James Parks, Nov 23, 2010
    The deficit reduction plan released last week by the co-chairmen of the National Commission on Fiscal Responsibility shows that this so-called budget deficit commission shows the commission has run severely off course.

    The recommendations issued by co-chairs Alan Simpson and Erskine Bowles would cost 4 million jobs over three years and reduce economic growth by 0.7 percent in 2012, 1.4 percent in 2013 and 1.9 percent in 2014, according to an analysis by the Economic Policy Institute (EPI).

    The Simpson-Bowles approach calls for job-killing budget austerity to begin in October 2011, even though most economic forecasters expect unemployment to remain as high as it is today or even increase by then.

    Simpson and Bowles also call for deep cuts in Social Security benefits, even though Social Security is not responsible for our long-term budget problem and the public is overwhelmingly opposed to benefit cuts.

    Simpson and Bowles also propose more cost-sharing in Medicare. They suggest lowering top income tax rates for the wealthiest Americans and for corporations and eliminating the Alternative Minimum Tax (AMT), while sparing Wall Street from any taxes on bonuses or financial speculation.

    Bowles collects $335,000 a year as a director of Wall Street investment bank Mor gan Stanley, and Simpson has called Social Security “a milk cow with 310 million tits.”

    AFL-CIO President Richard Trumka said Simpson and Bowles “just told working Americans to “Drop Dead.”

    Especially in these tough economic times, it is unconscionable to be proposing cuts to the critical economic lifelines for working people, Social Security and Medicare. Some people are saying this plan is just a “starting point.” Let me be clear, it is not.

    In the EPI report, economists Josh Bivens and Andrew Fieldhouse note that because the Simpson and Bowles recommendations would reduce economic growth, they would end up lowering the deficit far less than Simpson and Bowles claim.

    Bivens and Fieldhouse say the co-chairs’ proposal “threatens to increase the already unacceptably high level of unemployment and increases the possibility of the economy falling back into outright recession.”

    They argue a better path to fiscal responsibility would be to invest in job creation and growth to increase revenue in the near-term, raising revenue from new sources over the medium-term to stem the hemmoraging caused by the Bush-era tax cuts for the very well-off, and reforming the health care provision to generate long-run budgetary savings. Otherwise, Bivens and Fieldhouse say:

    In the present economic environment, the near-term austerity measures proposed by the co-chairs would be fiscally counterproductive and crippling to states, communities, and families, delaying a robust economic recovery for years.

    Eating the Irish
    Published: November 25, 2010

    What we need now is another Jonathan Swift.
    Most people know Swift as the author of “Gulliver’s Travels.” But recent events have me thinking of his 1729 essay “A Modest Proposal,” in which he observed the dire poverty of the Irish, and offered a solution: sell the children as food. “I grant this food will be somewhat dear,” he admitted, but this would make it “very proper for landlords, who, as they have already devoured most of the parents, seem to have the best title to the children.”

    O.K., these days it’s not the landlords, it’s the bankers — and they’re just impoverishing the populace, not eating it. But only a satirist — and one with a very savage pen — could do justice to what’s happening to Ireland now.

    The Irish story began with a genuine economic miracle. But eventually this gave way to a speculative frenzy driven by runaway banks and real estate developers, all in a cozy relationship with leading politicians. The frenzy was financed with huge borrowing on the part of Irish banks, largely from banks in other European nations.

    Then the bubble burst, and those banks faced huge losses. You might have expected those who lent money to the banks to share in the losses. After all, they were consenting adults, and if they failed to understand the risks they were taking that was nobody’s fault but their own. But, no, the Irish government stepped in to guarantee the banks’ debt, turning private losses into public obligations.

    Before the bank bust, Ireland had little public debt. But with taxpayers suddenly on the hook for gigantic bank losses, even as revenues plunged, the nation’s creditworthiness was put in doubt. So Ireland tried to reassure the markets with a harsh program of spending cuts.

    Step back for a minute and think about that. These debts were incurred, not to pay for public programs, but by private wheeler-dealers seeking nothing but their own profit. Yet ordinary Irish citizens are now bearing the burden of those debts.

    Or to be more accurate, they’re bearing a burden much larger than the debt — because those spending cuts have caused a severe recession so that in addition to taking on the banks’ debts, the Irish are suffering from plunging incomes and high unemployment.

    But there is no alternative, say the serious people: all of this is necessary to restore confidence.

    Strange to say, however, confidence is not improving. On the contrary: investors have noticed that all those austerity measures are depressing the Irish economy — and are fleeing Irish debt because of that economic weakness.

    Now what? Last weekend Ireland and its neighbors put together what has been widely described as a “bailout.” But what really happened was that the Irish government promised to impose even more pain, in return for a credit line — a credit line that would presumably give Ireland more time to, um, restore confidence. Markets, understandably, were not impressed: interest rates on Irish bonds have risen even further.

    Does it really have to be this way?

    In early 2009, a joke was making the rounds: “What’s the difference between Iceland and Ireland? Answer: One letter and about six months.” This was supposed to be gallows humor. No matter how bad the Irish situation, it couldn’t be compared with the utter disaster that was Iceland.

    But at this point Iceland seems, if anything, to be doing better than its near-namesake. Its economic slump was no deeper than Ireland’s, its job losses were less severe and it seems better positioned for recovery. In fact, investors now appear to consider Iceland’s debt safer than Ireland’s. How is that possible?

    Part of the answer is that Iceland let foreign lenders to its runaway banks pay the price of their poor judgment, rather than putting its own taxpayers on the line to guarantee bad private debts. As the International Monetary Fund notes — approvingly! — “private sector bankruptcies have led to a marked decline in external debt.” Meanwhile, Iceland helped avoid a financial panic in part by imposing temporary capital controls — that is, by limiting the ability of residents to pull funds out of the country.

    And Iceland has also benefited from the fact that, unlike Ireland, it still has its own currency; devaluation of the krona, which has made Iceland’s exports more competitive, has been an important factor in limiting the depth of Iceland’s slump.

    None of these heterodox options are available to Ireland, say the wise heads. Ireland, they say, must continue to inflict pain on its citizens — because to do anything else would fatally undermine confidence.

    But Ireland is now in its third year of austerity, and confidence just keeps draining away. And you have to wonder what it will take for serious people to realize that punishing the populace for the bankers’ sins is worse than a crime; it’s a mistake.
    Last edited by Havakasha; 11-26-2010 at 11:03 AM.

  2. #2
    Havakasha is offline
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    We need to have a REAl discussion of the commissions proposals before we
    do knee jerk budget cutting and austerity.

    Fiscal commissioners’ proposal would cost millions of jobs
    Josh Bivens Andrew Fieldhouse
    November 16, 2010
    The Co-Chairs of the National Commission on Fiscal Responsibility and Reform, Alan Simpson and Erksine Bowles, released a preliminary plan for reducing the budget deficit last week that provides strong evidence that the commission has run severely off track. In particular, the Co-Chairs’ proposal threatens to increase the already unacceptably high level of unemployment and increases the possibility of the economy falling back into outright recession by prematurely enacting sizeable austerity measures. Ironically, this hasty embrace of austerity does not just harm the overall economy (bad enough in itself); it also means that their plan would produce far less budgetary savings than they assume, as the cyclical effects of depressed economic activity on the budget will largely defray the savings from spending cuts and tax increases.

    One of the guiding principles of the Co-Chairs’ plan reads “Don’t Disrupt a Fragile Economic Recovery,” but the details make clear that this is nothing but lip service to the persistent economic challenges this country will face for years. Rather than budgeting for more desperately needed fiscal stimulus in the near-term, their sole acknowledgement of the Great Recession and the painfully slow recovery since it ended over a year ago is to “start gradually; begin cuts in FY2012.” When FY2012 begins in under a year, most private sector forecasters assume that unemployment will be roughly the same (or even a bit higher) than it is today. Premature implementation of austerity policies and slowing economic growth would mean two things: more job losses and less deficit reduction.

    We calculate that the savings path outlined in the Co-Chairs’ proposal would decrease GDP by $114.0 billion in 2012, $227.7 billion in 2013, and $345.0 billion in 2014 (using fiscal multipliers from CBO’s Estimated Impact of the American Recovery and Reinvestment Act on Employment and Economic Output). Relative to CBO’s economic projections, these proposals would reduce nominal GDP by 0.7% in 2012, 1.4% in 2013, and 1.9% in 2014. Using the rule of thumb that a 1% increase in GDP increases payroll employment by 1 million jobs, we estimate that Co-Chairs’ Proposal would thus reduce payroll employment by roughly 723,000 jobs in 2012, 1.4 million jobs in 2013, and 1.9 million jobs in 2014. Over the three fiscal years, employment would cumulatively fall by 4.0 million jobs-years (a standard measure of job creation representing one year of employment), relative to their current policy baseline for fiscal policy.

    Using the historical trend that “each dollar increase in actual gross domestic product (GDP) relative to potential GDP has been associated with a $0.37 reduction in budget deficits” (Bivens and Edwards 2010), we also calculate the countercyclical impact of the reduction in output to the budget deficit. Depressed economic activity stemming from their plan would by itself increase the budget deficit by $42.2 billion in 2012, $84.3 billion in 2013, and $127.6 billion in 2014. Adjusting for these business cycle effects, we estimate that the Co-Chairs’ proposal would hence generate actual savings of only $26.8 billion in 2012, $73.7 billion in 2013, and $127.4 billion. Savings over three years would be reduced from $482.0 billion to $227.9 billion; adjusting budgetary savings for cyclical effects (the move further away from potential GDP) cuts the near-term savings from this set of proposals by more than 50%.

    A better path to fiscal responsibility would be investing in job creation and growth to broaden the revenue base in the near-term, raising revenue from new sources over the medium-term to stem the hemmoraging caused by the Bush-era tax cuts for the very well-off, and reforming health care provision to generate long-run budgetary savings. In the present economic environment, the near-term austerity measures proposed by the Co-Chairs would be fiscally counterproductive and crippling to states, communities, and families, delaying a robust economic recovery for years.
    Last edited by Havakasha; 11-26-2010 at 11:03 AM.

  3. #3
    Atypical is offline
    There is almost nothing of value in the group's report and when you consider the two idiots that announced it - well, start over and ignore them forever.

    Alan Simpson Calls Seniors "Greediest Generation"

    I almost spit up my coffee. Per TPM:

    "We had the greatest generation," Simpson said. "I think this is the greediest generation."

    Where to begin.

    Simpson doesn't apparently understand the program that it has been his life's mission to destroy. Collecting Social Security isn't a gift. You pay into it all your life, and then when you get old, you get your turn to collect. But his perspective indicates something even more vile: a belief that people's sole source of income, their very livelyhood, is some sort of mass generosity. It isn't. Social Security is a deal. A new sort of deal that didn't exist before FDR created it. Instead of working all your life and then spending your elder years destitute, why not take care of the old people now and then when you get old, you'll get yours. It's a deal, not a handout.

    I don't see how you can reach consensus with someone like this. There is no middle ground between people who think Social Security is a government handout and reality. To malign people who have worked their entire lives and kept their end of the bargain, he says to them, essentially "you're beat." You cant negotiate with a guy like that. He doesn't believe in keeping his end of the deal. In fact, there is a word for people who take money and then don't hold up their end of a bargain: a thief. I say it is that person who is truly greedy.

    From a link provided by Scarce:

    Simpson said he's spent about $25,000 of his own money on travel and hotel expenses on behalf of the debt commission -- an expense he said he doesn't mind paying.

    Simpson might appear cynical about politics these days. But he said he hasn't lost heart.

    "I really believe that there are more patriots in America than selfish, selfish people," he said.

    Can you believe this guy? He's got 25 grand to throw around to go cut your social security, but he says YOU are selfish. Hey Alan, how about you pay some higher tax on all that wealth you have? Then the problem Social Security has 27 years from now will be put off for another 75 years.
    Last edited by Atypical; 11-26-2010 at 12:45 PM.

  4. #4
    SiriuslyLong is offline
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    Thank God it's only a proposal and they have time to get it right!

    In regards to Ireland, just read an interesting article on Yahoo. The fact that Ireland has no control of monetary policy is a key factor. The fact remains that they are near defaulting. Now what should an "entity" facing default do? Borrow more at a higher interest rate to spend more? The case of Ireland (and others) cannot be used as an example of what to do here in America.

  5. #5
    Havakasha is offline
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    I dont like blanket statements like "the case of Ireland (and others) cannot be used as an example of what to do here in America".
    ESPECIALLY from people like you S&L who have in the past done just that.

    There are obviously things we can learn from European countries experiences, though that in no way implies that we can take everything from there and apply it here.
    Last edited by Havakasha; 11-27-2010 at 01:29 AM.

  6. #6
    Atypical is offline

    Are You Really Interested In Ireland? Okay, Read This.

    Quote Originally Posted by SiriuslyLong View Post
    Thank God it's only a proposal and they have time to get it right!

    In regards to Ireland, just read an interesting article on Yahoo. The fact that Ireland has no control of monetary policy is a key factor. The fact remains that they are near defaulting. Now what should an "entity" facing default do? Borrow more at a higher interest rate to spend more? The case of Ireland (and others) cannot be used as an example of what to do here in America.
    Right-Wing Think Tank Praised Ireland's 'Economic Freedom' ... and Then Its Economy Crashed
    Any time the Heritage Foundation holds up any country as an economic example, it should set off alarm bells.
    November 26, 2010 | Blog for Our Future / By Terrance Heath

    It hasn't even been a year since the Heritage Foundation placed Ireland among the top ten countries on its Economic Freedom Index. I wasn't intending to write about Ireland at the time, but any time the Heritage Foundation holds up any country as an economic example attention must be paid. It's an invaluable opportunity to learn what not to do, in terms of economic policy.

    Even way back then, in April of this year, Ireland's economic crisis was serious enough to make it a real head-scratcher that anyone would place it on top ten list and hold it as an example of economic success, as the Heritage Foundation's Index is intended to do. Ireland is indeed an example. It's nearly a textbook example of the epic failure of conservative economics to grow an economy and austerity to spark a recovery.

    At the time, Heritage glossed over Ireland's economic trouble with a short paragraph.

    Despite the crisis, Ireland’s overall levels of economic freedom remain high, sustained by such institutional strengths as strong protection of property rights, a low level of corruption, efficient business regulations, and competitive tax rates. These strengths provide solid foundations on which to build recovery and curb long-term unemployment.

    That short paragraph is actually loaded with irony. The very "institutional strengths" that Heritage highlights effectively neutered the "Celtic Tiger" that the Irish economy was suppose to be. Just a year before it was written, Ireland became the first Euro zone country to fall into a recession. A month after Heritage published its index, Ireland's recession evolved into a depression. As in the U.S., Ireland's economic boom was driven by a housing bubble that took the economy down with it when it burst, with shrinking economic output and spiraling unemployment following in its wake. The bursting of that bubble was made even more devastating by the effect of conservative policies on the Irish economy.

    On top of the housing bubble, Ireland's economy largely relied on exports, 90% of which were made by foreign-owned multinationals, attracted by the corporate tax rate that was among the lowest in Europe. The tax rate was sweetened by more lucrative concessions designed to attract multinationals. Indeed, when tax-cutting advocate Charlie McCreevy became Labour Finance Minister in 1997, he soon implemented what some deemed were unnecessary property-tax incentives, along with a 20% cut in capital gains tax for property investment. Banking on permanent prosperity, essentially, led to tax cuts that have deprived the country of much-needed reserves, and left it stuck choosing between severe budget cuts in service of the national debt, or investing in programs to keep people working and stimulate the economy.

    The "competitive tax rate" for which Heritage rated Ireland so highly turned out to be catastrophic not just to Ireland but to its neighbors too. Ireland's deficit was caused by an incredibly low corporate tax rate the benefited the corporations that came to Ireland more than it did the country itself.

    Ireland's "excellent tax climate for businesses," praised by conservatives came in the form of a 12.5% corporate tax rate that turned Ireland into a tax haven for corporations without profiting the Irish economy much at all.

    Ireland’s problems are, sadly, far deeper than the need for simple fiscal austerity. The Celtic tiger’s impressive reported growth over the past decades was in part based on its aggressive attempts to help major corporations in the United States reduce their tax bills. The Irish government set corporate taxes at just 12.5 percent of profits, thus attracting all sorts of businesses — from computer services such as Google and Yahoo, to drug companies such as Forest Labs — that set up corporate bases and washed profits through Ireland to keep them out of the hands of the Internal Revenue Service.

    The remarkable success of this tax haven means that roughly 20 percent of Irish gross domestic product (G.D.P.) is actually “profit transfers” that raise little tax for Ireland and are owned by foreign companies. Since most of these profits are subject to the tax code, they are accounted for in Ireland where they are lightly taxed; they should not be counted as part of Ireland’s potential tax base.

    Corporate profits were essentially funneled through Ireland, and money funneled through a country's economy doesn't get reinvested in that economy in any meaningful way for the middle and working class who provide labor for those multinationals. It did considerable damage to with what Polly Toynbee called "tax piracy" in The Guardian this week, lowering not only its own tax base with a corporate tax rate that not only failed to enrich Ireland, but beggared its neighbors by attracting corporations to move their headquarters and thus their profits to Ireland.

    The "efficient business regulations," for which Heritage rated Ireland so highly were non-existent. In a review of Fintan Toole's book Ship of Fools: How Stupidity and Corruption Sank the Celtic Tiger, Henry Farrell cites lax regulation and bad business judgment as factors in Irelands economic crisis, and relates that in one instance in which the Irish Central Bank failed to discipline Ansbacher Bank for running a tax evasion scheme for prominent individuals.

    Banks suffered no consequences for behavior that ruined the economy and destabilize the public finances. Regulators abdicated their authority to discipline financial institutions, and the result was akin to 50-foot toddlers running amok. Even a major tax evasion scam warranted no consequences. What else went on while the regulatory lights were out, the culprits have largely escaped under the cover of austerity.

    Meanwhile, the economic pain even more spectacular than the failure of Ireland's "efficient business regulations" and "competitive tax rates" is the failure of its austerity measures in what seems like record time. Not only did Ireland become the first Euro zone country to enter recession, it also became the first to test its status as a petri dish for conservative policy by becoming the first country to respond to the economic critics by enacting severe austerity measures.

    The government's 2008 emergency budget was the kind of economic medicine that even now conservatives are clamoring for here in the U.S. — a package of cuts in social programs from education to medical care, combined with a bailout of the country's banks. The idea was that making such severe cuts would increase confidence and produce growth by assuring investors that Ireland was serious about its economic problems.

    Ireland's austerity measures were an "epic fail" on two fronts. The country was rewarded with shrinking economy, and a sharper downturn than if the government had spent more to keep people working. The suffering that austerity measures brought the Irish people sparked a series of public demonstrations in 2008, 2009, and 2010.
    Last edited by Atypical; 11-26-2010 at 12:49 PM.

  7. #7
    Atypical is offline


    But austerity did not inspire confidence nor deliver the growth its proponents promised. Fiscal austerity failed to reassure the markets, and Ireland's credit rating was lowered. Most recently, the country found itself in need of a bailout from the E.U. to make up for the economic grown not delivered by earlier austerity measures. The size of the bailout keeps growing, but recent reports said that it may amount to €85 billion ($145 billion).

    The Irish people were left alone in a way that laid bare the cost of austerity in Ireland, exacted from the working and middle class taxpayers made to finance the bank bailout.

    Psychiatrists tell us that grief comes in four distinct stages: denial, anger, bargaining and depression, before finally the goal of acceptance may be reached. In the last year, the country has staggered its way through that grim quartet of emotions. We made ourselves believe that the boom would last forever, denying the facts when it became clear that it wouldn't. We then told ourselves the fallout wouldn't be as vicious as some predicted, even as the dole queues lengthened and businesses collapsed, and every single one of us had a family member or colleague who lost a job or couldn't pay the mortgage any more. Then followed the grotesque period of passivity and botched action, which the historians of 21st-century Ireland will ultimately remember as the doom of a country's self-image.

    When we needed sane leadership, we got evasions and platitudes. The goodwill that people had for the taoiseach, Brian Cowen, a demonstrably decent man, was squandered. His administration came to be widely mistrusted and – I hate to use the word – loathed. We were told that we were all in it together, even as the millionaire speculators were subsidized by the taxpayer, their lavish pensions and remuneration packages guaranteed. About 300 people in Ireland continue to live like rock stars, while 4 million of us foot the bill. We have socialism for bankers, the ferocities of the market for everyone else. We are cheated and lied to, and every family is now paying. The poor pay more than most.

    I was young in the 1980s. I know what a recession is. But I cannot remember the boiling anger that now exists here, the sense of betrayal and injustice. A teacher told me recently that he could think of no reason to stay living in Ireland. Many politicians of all parties are despised. The radio phone-in shows have stories that would break a stone's heart. People have been appearing in court pleading for their homes not to be repossessed. Businesses are closing. Thousands are emigrating.

    The difference between Ireland and America is that the Irish get it. They understand that austerity holds no promise for them except more pain, and that the benefit will no more "trickle" down to them than prosperity has trickled down to the rest of us from the rich enjoying their tax cuts.
    There are depths of economic desperation from which people do not rise, mainly because it is not intended for them to do so. Austerity is a locked gate to upward mobility. The economic message is that most people will have to get used to a far lower standard of living. And permanently, for the recipe of spending cuts and tax cuts for the top 1% has yet to yield anything but increased inequality — prosperity for those at the top, and penury for the rest of us. Given the insistence on destructive policy when all the evidence shows it to be just that, it can only be assumed that more pain, more inequality, and no remedy for either is the desired outcome. The result will probably be greater economic inequality that cements into economic injustice passed from generation to generation.

    ...Of course it is better to have more money, even if only a little more. But poverty is also about the quality of the local school, access to good health services and the fear of crime. Tackling poverty is clearly about money, but it is also about ensuring access to the services that promote a better quality of life, and wider life chances.

    As well as being too narrow, this approach is too static. Social mobility is what characterises a fair society, rather than a particular level of income equality. Inequalities become injustices when they are fixed; passed on, generation to generation. That's when societies become closed, stratified and divided.

    Austerity is another word for abandonment in the context of economic crisis. It means that the most vulnerable and the most in need will be abandoned to their fates by politicians and political parties as public money is used to bail out the very entities whose activities caused the crisis in the first place. No one wants to join or celebrates joining the ranks of the undeserving poor, but in the context of the "new normal" that's what we are, or what we are is a paycheck or two away from becoming. Those of us who feel comfortable in our middle class status know somewhere in our hearts and are often wakened in the middle of the night by anxious thoughts of how close we are to tumbling permanently down that ladder — permanently, because the ladder is being pulled away, or sawed off at the bottom.

    Ireland's government may yet just douse that ladder with gasoline and set it aflame. The price of the bailout set by the IMF and Ireland's partners in the E.U. has turned out to be more austerity — a four year plan that heap more economic pain on the Irish people, but leaves the most destructive elements of the Irish economy untouched.

    The budget calls for cuts of nearly 15 percent in Ireland’s social welfare budget, one of Europe’s most generous, saving 3 billion euros a year. Some 24,750 public jobs — a huge number in a country of about 4 million people — would be eliminated, cutting state payrolls down to about what they were in 2006 and saving about 1.2 billion euros a year. Child benefits other social welfare payments would be reduced, and the nation’s minimum wage, now 8.65 euros ($11.59) an hour, would be cut by 1 euro in the hope of promoting job creation.

    The country’s tax net would be widened to take in some low-income workers who currently pay no tax, and a series of new taxes would be imposed on certain residential properties, as well as on 120,000 people who receive public sector pensions.

    But the budget plan does not touch Ireland’s very low corporate tax rate of 12.5 percent, which has helped to lured companies like Microsoft, Intel and Pfizer to set up operations in the country. Though the country’s political parties are bitterly divided over many aspects of economic policy, they all agree that the low corporate tax rate is one of the few pillars that can allow Ireland to return to economic health. Multinational companies employ about 1 out of 7 working people in Ireland, and their businesses are stoking export growth, even as the latest austerity program is expected to depress consumer demand and touch off a wave of retrenchment and job losses.

    For Ireland, the potential cost of austerity may be a hollowed out society; in which a discredited political elite holds power, while an angry, abandoned and increasingly poor population chase a shrinking number of jobs. In other words, a somewhat new twist on an old socio-economic model.
    According to Friedrich von Hayek, the development of welfare socialism after World War II undermined freedom and would lead western democracies inexorably to some form of state-run serfdom.

    Hayek had the sign and the destination right but was entirely wrong about the mechanism. Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialized countries are at risk, but it’s the euro zone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.

    As a result of the continuing euro crisis, European Central Bank (ECB) now finds itself buying up the debt of all the weaker euro zone governments, making it the – perhaps unwittingly – feudal boss of Europe. In the coming years, it will be the ECB and the European Union who dictate policy. The policy elite who run these structures – along with their allies in the private sector – are the new overlords.

    We can argue about who exactly are the peasants, the vassals, and the lords under this model – and what services exactly will end up being exchanged. But there is no question we are seeing a sea change in the post-war system of property, power, and prosperity across Western Europe, just as Hayek feared. An overwhelming debt burden will bring down even the proudest people.

    Ireland's plight illustrates the lie of the austerity cheerleaders. Austerity does not lead to growth and recovery anymore than the cronyism, deregulation and free-market fundamentalism typical of conservative failure in the realm of economic policy. Austerity means that the "tough" decisions politicos and pundits tell us must be made are invariably toughest on the people already having the toughest time.

    Austerity's epic fail has turned the Irish Tiger into a Tiger skin rug for banks and bondholders to trod upon. A similar fate will be the likely reward of any country threat that looks to austerity for growth.

  8. #8
    Havakasha is offline
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    Thanks Atypical. I remember distinctly how S&L was very quick to compare the U.S. to Greece and all the other so called "socialist" countries going thru difficult economic times. Now he doesnt like the idea of looking at other examples around the world. Another major bit of HYPOCRISY.

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