The first step toward getting out a hole: Stop digging.
But as the U.S. digs ever deeper into debt, some experts are warning against belt-tightening, citing Europe’s current economic woes as a lesson in its perils. And when the public, here or in Europe, ponders even merely proposed reductions of benefits they receive from government programs, austerity becomes an even tougher sell.
However, before buying the canard that major cuts in government spending undermine hopes of prosperity, consider the alternative of the unsustainable status quo.
Unfortunately, the insidious cycle of over-dependence on government is often reflected at the ballot box. On May 6, French voters replaced President Nicolas Sarkozy, a conservative who had pushed through significant spending cuts, with Socialist Francois Hollande.
Greek voters sent a similar, anti-austerity message on the same day in parliamentary elections, casting fresh doubts on the European Union’s massive bailout of that debt-ridden nation.
And German Chancellor Angela Merkel, who has led the EU’s push for fiscal responsibility in Greece and beyond, suffered a political setback Sunday as voters in North Rhine-Westphalia turned against her Christian Democratic party.
Meanwhile, more than 70,000 protesters turned out in Madrid and Barcelona Sunday to decry Spain’s spending cuts.
Such reactions are predictable. Few folks are inclined to give up government benefits. Yet as entitlement systems in Greece, Spain and other nations (including ours) become increasingly unsustainable, serious spending reductions are necessary.
As Greek Deputy Prime Minister Theodoros Pangalos told the London Sunday Telegraph of his nation’s recent elections: “The majority of the people voted for a very strange mental construction. We want to be in the EU and the euro, but we don’t want to pay anything for the past.”
Mr. Pangalos added that if Greece reneges on the EU debt-relief deal, “We will be in wild bankruptcy, out-of-control bankruptcy. The state will not be able to pay salaries and pensions. This is not recognized by the citizens. We have got until June before we run out of money.”
The U.S. has much longer to resolve its debt mess.
But how much longer? We need not look across the Atlantic to see the potential devastation from an unchecked flood of red ink. We need look only westward to California, where Gov. Jerry Brown announced Saturday that the state’s budget shortfall, pegged at $9 billion early this year, has soared to $16 billion. That steep deficit growth stems in part from many businesses fleeing high-tax California to states with lower taxes.
Gov. Brown announced additional austerity measures of his own Monday. Still, he’s also pushing for even higher taxes, failing to recognize that when rates climb too far they are likely to produce not more but less revenue.
Yes, austerity, if administered in excessive doses, can be counterproductive.
But the U.S., like Europe, didn’t get this deeply in debt by spending too little. We got there by spending too much.
We are now bound for our fourth straight federal deficit of at least $1.2 trillion — each of them nearly three times bigger than the record before this streak began. Our record national debt was $15.72 trillion and climbing as of Monday.
So don’t fear austerity. Fear the lack of it.