John Stossel: It is a myth that 'austerity' does not work
Europe's struggles prove that "austerity" fails!
So say the Big Spenders.
With a condescending sigh, they explain that Europe made deep cuts in government spending, and the result was today's high unemployment. "With erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far," writes Paul Krugman in The New York Times.
One problem with this conclusion: European governments didn't cut! If workers pick through garbage, cuts can't be a reason, since they didn't happen.
That doesn't stop leftists from complaining about cuts or stop Europeans from protesting announced austerity plans. But if austerity means spending less, that hasn't happened.
Some European countries tried to reduce deficits by raising taxes. England slapped a 25 percent tax increase on the wealthy, but it didn't bring in the revenues hoped for. Rich people move their assets elsewhere, or just stop working as much.
If politicians honestly want to boost their nation's economies, they should look to what happened in countries that bounced back from economic slumps.
Iceland was hit by bank collapses — but government ignored street protests and cut real spending. Iceland's budget deficit fell from 13 percent of gross domestic product to 3. Iceland's economy's is now growing.
Canada slashed spending 20 years ago and now outranks the U.S. on many economic indicators.
Around the same time, Japan went the other way, investing heavily in the public sector in an attempt to jump-start its economy, much as the U.S. did with "stimulus" under President Obama. The result? Japan's economy stagnated.
The left now claims Japan didn't stimulate "enough."
In the U.S., politicians imply spending limits would be "cruel" because vital programs are "cut to the bone." But we are nowhere near bone.
Consider this family budget:
• Annual Income: $24,500
• Annual Spending: $35,370
• New Credit Card Debt: $10,870
• Existing Debt: $167,600
When I show that to people, they laugh and say the family is "irresponsible." They are dismayed when I point out that those are really America's budget numbers, with eight zeros removed:
• Revenue: $2,450,000,000,000
• Spending: $3,537,000,000,000
• Deficit: $1,087,000,000,000
• Debt: $16,760,000,000,000
Then people say: "That's terrible! We have to balance the budget."
Actually, we don't need to "balance" it. We just need to slow spending growth to about 2 percent a year, so the economy can gain on our debt. But politicians won't do even that.
I understand why. I ask people who say they are horrified by America's debt, "What would you cut?" Most have no clue. They just stare. Some say things like, "Don't cut education!"
C'mon. Federal bureaucrats spend $3.7 trillion! But most people can't think of anything to cut?
When businesses face budget shortfalls, they can't just give speeches about how much they care about fiscal responsibility — at least not for long. They must make real cuts. When they do, they often prosper. Years back, IBM and GE each laid off 100,000 workers. People were furious. But thanks to those cuts, the companies survived.
If the politicians don't know what to cut, they should just accept Sen. Rand Paul's proposed budget. Among other things, he would cut four Cabinet-level agencies: Commerce, Housing and Urban Development, Energy and Education. Why not? We don't need a Commerce Department. Commerce just ... happens. Education is funded by the states. The Energy Department gives money to politicians' cronies.
I'd go further than Paul. Why do we need an Agriculture Department? Agriculture is done by farmers, not bureaucrats. Why do we need a Labor Department? And so on. All those things are better handled by a free market. I wish we had a real free market in America.
Government recently revised its dire forecasts about America's coming bankruptcy. The numbers are a little better than once thought.
But make no mistake: As people my age retire and demand Medicare, America will eventually go broke.
The first step toward a solution is just being honest about the deep hole we're in — giving up on the lie that governments elsewhere failed with "austere" budgets. They haven't.
John Stossel is host of "Stossel" on the Fox Business Network. He's the author of "No They Can't: Why Government Fails, but Individuals Succeed."