I’ve been busy today, trying to convince congressmen that cutting the International Affairs Budget is a No Good Very Bad Idea for market growth and national security, so I will let Krugman debunk some silly things people said yesterday. I will also try to debunk silly insinuations that Obama made yesterday later on. So, Krugman:
Again, let me focus first on this passage:
Ryan: Just take a look at what’s happening to Greece, Ireland, the United Kingdom and other nations in Europe. They didn’t act soon enough; and now their governments have been forced to impose painful austerity measures: large benefit cuts to seniors and huge tax increases on everybody.Imagine yourself in Ryan’s position. You’ve been chosen by one of America’s two great political parties to respond to the president of the United States. That’s a fairly awesome responsibility. And you’re going to make some blanket assertions about world events. Wouldn’t you make at least some effort to check whether those assertions are right?
Actually, if your whole public act is based on your supposed knowledge of the importance of fiscal responsibility, wouldn’t you long ago have made sure that you actually know something about the fiscal crises now taking place in Europe?
But no. I suspect that Ryan is honestly unaware that Ireland, far from being a spendthrift, was seen as a fiscal role model before the crisis. And that’s not hyperbole: in 2006 George Osborne, now Britain’s Chancellor of the Exchequer, declared that
Osborne: Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.
And I also suspect that Ryan is honestly unaware that the UK has not, in fact, experienced a debt crisis.
Greece indeed didn’t act soon enough to stop its fiscal collapse, partly with the help of Goldman Sachs which literally made up exchange rates to help hide Greece’s deficits. Both Greece and Goldman Sachs knew what they were doing, and it was legal. Another interesting part about Greece was its tax rates were so low and its benefits were high; income taxes were optional and it was said only the ignorant and unconnected paid full tax rates. (That should sound familiar).
Indeed Greece didn’t raise taxes and solidify their tax system when they could have to avoid fiscal collapse. Cutting budgets by 25% were not inevitable in Greece, and cutting $100 billion in spending this year is not in America. We could and should continue to run deficits until job growth is higher or else, we risk Britain’s fate.
The UK is enacting steep cuts while not in any crisis, and because they are raising taxes and cutting spending in a time of minimal recovery, the British economy shrank in the last quarter with the start of their budget-cutting policies.