6 ms·

If these tax-less spend-less austerity morons were right about their ideology, you'd think it might have worked once in a while. But it never has, nor will it

by beedogs 13y ago

If these tax-less spend-less austerity morons were right about their ideology, you'd think it might have worked once in a while. But it never has, nor will it ever. Instead they've taken to punishing the nations that prove them wrong. Same thing is going on now in Australia.

noonespecial 13y ago
I suspect austerity does work but has an inflection point. It can (theoretically) be used to cut outright government waste. On a personal level, you might stop paying for your cable TV when money gets tight and have it make you better off. Not paying for your car and finding yourself unable to get to work would make you worse off despite the "savings". The trouble with politics and austerity is they always seem to end up missing the car payments and keeping the cable on.
- gaius 13y ago
  Term you are looking for is Laffer Curve. http://en.wikipedia.org/wiki/Laffer_curve http://en.wikipedia.org/wiki/Laffer_curve
  - noonespecial 13y ago
    The Laffer Curve suggests that there is a maximum level of taxation beyond which increases in the tax rate do not generate additional revenue. (Also sometimes called the "Sheriff of Nottingham paradox": raising taxes on people with nothing does not yield more money) I was suggesting that there are certain government programs that incur a cost to operate incur a greater cost to cease operating. They generate a net positive on the money spent. Cutting them for "austerity" is foolish.
    - np422 13y ago
      One must remember that the Laffer curve is a theoretical discussion that can help to explain economic phenomenons. It's not a law of nature. Laffer curve may point us towards the general direction, but real world observation have showed that there is no simple, smooth curve that predicts tax income versus tax rate - human behaviour is far to much stochastic for that.
      - prostoalex 13y ago
        Not that theoretical http://www.objectobot.com/wp-content/uploads/2012/12/ADavies-marginal-income-tax-rates-5-PDF.jpg http://www.objectobot.com/wp-content/uploads/2012/12/ADavies...
- freshhawk 13y ago
  > I suspect austerity does work but has an inflection point. It can (theoretically) be used to cut outright government waste. So that makes intuitive sense, but a lot of things in economics (and everything else complex) make intuitive sense but turn out to be completely wrong. The problem is that while we both "suspect" that this is true or close to true, all that really means is that our gut says it must be and we're smart enough to know about a mechanism like inflection points that can be used to rationalize it.
  - noonespecial 13y ago
    Or, since we have an intuitive hunch and we know about things like inflection points, we might go and investigate more carefully doing our best to find out how it works in the wild. Until then, I'll admit, it is much fun to "Gladwell" it over drinks, no?
    - rhizome 13y ago
      I suspect people are less likely to investigate things that make intuitive sense, due to confirmation bias.
    - freshhawk 13y ago
      More fun? Definitely, especially with someone who just used the phrase "to Gladwell it", which I love and really hope I remember to start using regularly to describe this kind of thing.
- gohrt 13y ago
  wasted spending is not a social problem in itself -- it just moves wealth around, but doesn't destroy wealth. Wasted production -- on stuff no one wants (like wartime destruction), is a problem. Opportunity cost is wasted production (paying people to lay bricks instead of building efficient brick-building machines, say), and that's the motivation for "free market instead of central planning", but that's what austerity means. Austerity means cutting government spending to raise the government's bottom line -- but the government's bottom line isn't like yours. If the country owes its own citizens money, it won't go bankrupt -- that's just taxation under a different name
- api 13y ago
  If Austerity cut waste, it would probably work. The problem is that in government waste usually stems from bureaucratic calcification and corruption. Calcified and corrupt bureaucracies are highly resistant to change and have the system "wired" to defeat it, so they don't generally get hit much. Austerity's cuts fall disproportionately upon social safety nets and productive activities, hence the result. I've been of the impression for a while that government waste and corruption grows without bound until it destroys the host, resulting in a revolution or some other kind of "reboot," and then repeat. There appears to be no way of actually cutting it without setting fire to the entire thing. Few things in nature are as tenacious as a parasite.
  - rhizome 13y ago
    See: http://en.wikipedia.org/wiki/Iron_law_of_oligarchy http://en.wikipedia.org/wiki/Iron_law_of_oligarchy
- moocowduckquack 13y ago
  State austerity during a market recession makes no sense because the state is one of the few participants who is still able to borrow at reasonable rates. The borrowing will still have to occur, because people need to eat, however it is paid back at Wonga rates of six squillion APR, rather than at the government bond level.
daniel-cussen 13y ago
They did it in Chile after the coup (1973) and it worked...so...well. Overnight, we went from masses of public servants endlessly on strike, 400% inflation, and halfway-to-Cuba socialism to tons of public servants getting fired (none of this furlough with back pay business) and the remainder shutting up and doing their work. There was a small downtick in the economy, shortly, not unlike the downtick in US after WWI that ushered in the roaring twenties. Naturally, the economy changed drastically because of the dictatorship and foreign loans make it slightly harder to analyze, and in 1982 the economy got hit badly for pegging the currency, which is a different story. But they cut spending, lowered taxes, and it worked fantastically. Ultimately, if, as a country, you're thinking of going down the tax-less spend-more road, you have to amass enough power in the hands of the people that will carry it out (in this case a dictator) that the public sector can't go on an endless tirade of strikes and sabotage. If not, guess what'll happen? The essentials from among the things the government provides will be the first to go in an attempt to rile the public up. But how many cushy do-nothing bureaucrats will get fired? That's where government spending is, in its vast majority—in the salaries of government employees. If you want to tax less and spend more, keep in mind that you'll be going toe-to-toe with the people that run government (more-so than politicians) and that it's a serious political battle for the country to take on. So in that sense you're right--expecting to politically shift over to tax-less spend-less policy may be fruitless and unrealistic, if only because the people one is trying to lay off will always sabotage the effort.
- AlexanderDhoore 13y ago
  You need some serious balls to defend Pinochet and his criminal gang. "Immediately after the coup the junta moved to crush their left-wing opposition. In addition to pursuing armed revolutionary groups it embarked on a campaign against opponents and perceived leftists in the country. As a result, according to the Rettig Commission, approximately 3,000 people are known to have been killed, 27,000[1] were incarcerated and in a great many cases tortured." [1] Reading "The Shock doctrine" by Naomi Klein opened my eyes. She would disagree with you on the "halfway-to-Cuba socialism": "As for the argument that Friedmanite policies are the reason Chileans live in "houses of brick" instead of "straw", it's clear that Stephens knows nothing of pre-coup Chile. The Chile of the 1960s had the best health and education systems on the continent, as well as a vibrant industrial sector and a rapidly expanding middle class." [2] [1] http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973) http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973... [2] http://www.theguardian.com/commentisfree/cifamerica/2010/mar/03/chile-earthquake http://www.theguardian.com/commentisfree/cifamerica/2010/mar...
raverbashing 13y ago
Because spending more than you earn is such a good idea, no? That's the real problem, and it's going to stop working eventually (even for the US) Yes, pushing an agenda through ratings is bad. (But even worse is the mandatory obedience to ratings).
- svachalek 13y ago
  To put this on topic for HN, how many startups strive to spend less than they earn? Governments are not lemonade stands either.
- nhaehnle 13y ago
  You're attempting to transfer your intuitive, everyday understanding of the situation of an individual household to the situation of an entire country or its government. In doing so, you are making a mistake, especially when you apply it to the US. Think about it: Why is spending more than you earn bad for a household? Because according to the rules of society you will eventually not be able to spend anymore. The rules of society are different for the US government, and therefore your conclusion about spending vs. earning does not apply.
JRobertson 13y ago
This reply should be downvoted into gray. It includes a direct insult, and strong claims with no proof behind them. There is no logic in this post, only pure bitter emotion. I believe in the principles involved in austerity, but would argue that those using that word in government are "doing it wrong". - Do you believe the government is inefficient with its money? ( public school system) - Do you believe that the government has its hands in too many pies and should be doing less? (NSA) - Do you approve of the cost of the ACA website? What about the value we're getting for our money? - How about Mr Presidents Million dollar golf trips while he shuts down the White House? - How much good could be done with the $420 billion in interest payment we paid last year alone on our debt [1]? There are many reasons to try to be more efficient/austere with our money. I personally strive to be debt free and self sufficient, and I would like my country to be the same. I don't think the power our foreign lenders have over us is a good thing. [1] - http://www.pewresearch.org/fact-tank/2013/10/09/5-facts-about-the-national-debt-what-you-should-know/ http://www.pewresearch.org/fact-tank/2013/10/09/5-facts-abou...
- nhaehnle 13y ago
  I gave you an upvote even though you're factually wrong/misguided, because you don't deserve to be in the gray. > I personally strive to be debt free and self sufficient, and I would like my country to be the same. First of all, you are conflating country and government. Most of a government's debt is typically held by the country's citizen, so government debt is in fact private wealth. Second, think about why you strive to be debt free and self sufficient, and then think about whether the same logic applies to a government that issues its own currency and is indebted only in that currency. A government that is monetarily sovereign is subject to different rules than private households and must therefore follow different strategies. If you transfer the guidelines you have developed for your own personal dealings directly onto the government, you're making a mistake. It may feel good and morally right, but it's still wrong from a logical and rational perspective.
enraged_camel 13y ago
Austerity is the pinnacle of FYGM (fuck you, got mine) politics. It is almost always lobbied for and driven by the financial elite, and their reasoning behind it is that if government spends less, it needs less taxes, which means rich people get to keep more of their wealth to themselves. Those poor people over there though? Fuck 'em. If they worked hard like us they would be rich, too! Of course, this wouldn't be politically correct to say outright. So instead, they disguise it under things like "fiscal responsibility." But underneath the rhetoric you can almost taste the hatred and contempt they feel towards poor people.
jacques_chester 13y ago
Australia is a good example of the fruits of fiscal discipline. The Howard government paid off our long term debt entirely, allowing the Rudd and Gillard governments enormous scope for borrowing. We'd be borrowing at a much higher interest rate otherwise. Of course, as in many cases, there are confounding factors. Australia's is being a major supplier of iron ore and coal.

by beedogs 13y ago

noonespecial 13y ago

I suspect austerity does work but has an inflection point. It can (theoretically) be used to cut outright government waste. On a personal level, you might stop paying for your cable TV when money gets tight and have it make you better off. Not paying for your car and finding yourself unable to get to work would make you worse off despite the "savings". The trouble with politics and austerity is they always seem to end up missing the car payments and keeping the cable on.

gaius 13y ago
Term you are looking for is Laffer Curve. http://en.wikipedia.org/wiki/Laffer_curve http://en.wikipedia.org/wiki/Laffer_curve
- noonespecial 13y ago
  The Laffer Curve suggests that there is a maximum level of taxation beyond which increases in the tax rate do not generate additional revenue. (Also sometimes called the "Sheriff of Nottingham paradox": raising taxes on people with nothing does not yield more money) I was suggesting that there are certain government programs that incur a cost to operate incur a greater cost to cease operating. They generate a net positive on the money spent. Cutting them for "austerity" is foolish.
  - np422 13y ago
    One must remember that the Laffer curve is a theoretical discussion that can help to explain economic phenomenons. It's not a law of nature. Laffer curve may point us towards the general direction, but real world observation have showed that there is no simple, smooth curve that predicts tax income versus tax rate - human behaviour is far to much stochastic for that.
    - prostoalex 13y ago
      Not that theoretical http://www.objectobot.com/wp-content/uploads/2012/12/ADavies-marginal-income-tax-rates-5-PDF.jpg http://www.objectobot.com/wp-content/uploads/2012/12/ADavies...
freshhawk 13y ago
> I suspect austerity does work but has an inflection point. It can (theoretically) be used to cut outright government waste. So that makes intuitive sense, but a lot of things in economics (and everything else complex) make intuitive sense but turn out to be completely wrong. The problem is that while we both "suspect" that this is true or close to true, all that really means is that our gut says it must be and we're smart enough to know about a mechanism like inflection points that can be used to rationalize it.
- noonespecial 13y ago
  Or, since we have an intuitive hunch and we know about things like inflection points, we might go and investigate more carefully doing our best to find out how it works in the wild. Until then, I'll admit, it is much fun to "Gladwell" it over drinks, no?
  - rhizome 13y ago
    I suspect people are less likely to investigate things that make intuitive sense, due to confirmation bias.
  - freshhawk 13y ago
    More fun? Definitely, especially with someone who just used the phrase "to Gladwell it", which I love and really hope I remember to start using regularly to describe this kind of thing.
gohrt 13y ago
wasted spending is not a social problem in itself -- it just moves wealth around, but doesn't destroy wealth. Wasted production -- on stuff no one wants (like wartime destruction), is a problem. Opportunity cost is wasted production (paying people to lay bricks instead of building efficient brick-building machines, say), and that's the motivation for "free market instead of central planning", but that's what austerity means. Austerity means cutting government spending to raise the government's bottom line -- but the government's bottom line isn't like yours. If the country owes its own citizens money, it won't go bankrupt -- that's just taxation under a different name
api 13y ago
If Austerity cut waste, it would probably work. The problem is that in government waste usually stems from bureaucratic calcification and corruption. Calcified and corrupt bureaucracies are highly resistant to change and have the system "wired" to defeat it, so they don't generally get hit much. Austerity's cuts fall disproportionately upon social safety nets and productive activities, hence the result. I've been of the impression for a while that government waste and corruption grows without bound until it destroys the host, resulting in a revolution or some other kind of "reboot," and then repeat. There appears to be no way of actually cutting it without setting fire to the entire thing. Few things in nature are as tenacious as a parasite.
- rhizome 13y ago
  See: http://en.wikipedia.org/wiki/Iron_law_of_oligarchy http://en.wikipedia.org/wiki/Iron_law_of_oligarchy
moocowduckquack 13y ago
State austerity during a market recession makes no sense because the state is one of the few participants who is still able to borrow at reasonable rates. The borrowing will still have to occur, because people need to eat, however it is paid back at Wonga rates of six squillion APR, rather than at the government bond level.

daniel-cussen 13y ago

They did it in Chile after the coup (1973) and it worked...so...well. Overnight, we went from masses of public servants endlessly on strike, 400% inflation, and halfway-to-Cuba socialism to tons of public servants getting fired (none of this furlough with back pay business) and the remainder shutting up and doing their work. There was a small downtick in the economy, shortly, not unlike the downtick in US after WWI that ushered in the roaring twenties. Naturally, the economy changed drastically because of the dictatorship and foreign loans make it slightly harder to analyze, and in 1982 the economy got hit badly for pegging the currency, which is a different story. But they cut spending, lowered taxes, and it worked fantastically. Ultimately, if, as a country, you're thinking of going down the tax-less spend-more road, you have to amass enough power in the hands of the people that will carry it out (in this case a dictator) that the public sector can't go on an endless tirade of strikes and sabotage. If not, guess what'll happen? The essentials from among the things the government provides will be the first to go in an attempt to rile the public up. But how many cushy do-nothing bureaucrats will get fired? That's where government spending is, in its vast majority—in the salaries of government employees. If you want to tax less and spend more, keep in mind that you'll be going toe-to-toe with the people that run government (more-so than politicians) and that it's a serious political battle for the country to take on. So in that sense you're right--expecting to politically shift over to tax-less spend-less policy may be fruitless and unrealistic, if only because the people one is trying to lay off will always sabotage the effort.

AlexanderDhoore 13y ago
You need some serious balls to defend Pinochet and his criminal gang. "Immediately after the coup the junta moved to crush their left-wing opposition. In addition to pursuing armed revolutionary groups it embarked on a campaign against opponents and perceived leftists in the country. As a result, according to the Rettig Commission, approximately 3,000 people are known to have been killed, 27,000[1] were incarcerated and in a great many cases tortured." [1] Reading "The Shock doctrine" by Naomi Klein opened my eyes. She would disagree with you on the "halfway-to-Cuba socialism": "As for the argument that Friedmanite policies are the reason Chileans live in "houses of brick" instead of "straw", it's clear that Stephens knows nothing of pre-coup Chile. The Chile of the 1960s had the best health and education systems on the continent, as well as a vibrant industrial sector and a rapidly expanding middle class." [2] [1] http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973) http://en.wikipedia.org/wiki/Government_Junta_of_Chile_(1973... [2] http://www.theguardian.com/commentisfree/cifamerica/2010/mar/03/chile-earthquake http://www.theguardian.com/commentisfree/cifamerica/2010/mar...

raverbashing 13y ago

Because spending more than you earn is such a good idea, no? That's the real problem, and it's going to stop working eventually (even for the US) Yes, pushing an agenda through ratings is bad. (But even worse is the mandatory obedience to ratings).

svachalek 13y ago
To put this on topic for HN, how many startups strive to spend less than they earn? Governments are not lemonade stands either.
nhaehnle 13y ago
You're attempting to transfer your intuitive, everyday understanding of the situation of an individual household to the situation of an entire country or its government. In doing so, you are making a mistake, especially when you apply it to the US. Think about it: Why is spending more than you earn bad for a household? Because according to the rules of society you will eventually not be able to spend anymore. The rules of society are different for the US government, and therefore your conclusion about spending vs. earning does not apply.

JRobertson 13y ago

This reply should be downvoted into gray. It includes a direct insult, and strong claims with no proof behind them. There is no logic in this post, only pure bitter emotion. I believe in the principles involved in austerity, but would argue that those using that word in government are "doing it wrong". - Do you believe the government is inefficient with its money? ( public school system) - Do you believe that the government has its hands in too many pies and should be doing less? (NSA) - Do you approve of the cost of the ACA website? What about the value we're getting for our money? - How about Mr Presidents Million dollar golf trips while he shuts down the White House? - How much good could be done with the $420 billion in interest payment we paid last year alone on our debt [1]? There are many reasons to try to be more efficient/austere with our money. I personally strive to be debt free and self sufficient, and I would like my country to be the same. I don't think the power our foreign lenders have over us is a good thing. [1] - http://www.pewresearch.org/fact-tank/2013/10/09/5-facts-about-the-national-debt-what-you-should-know/ http://www.pewresearch.org/fact-tank/2013/10/09/5-facts-abou...

nhaehnle 13y ago
I gave you an upvote even though you're factually wrong/misguided, because you don't deserve to be in the gray. > I personally strive to be debt free and self sufficient, and I would like my country to be the same. First of all, you are conflating country and government. Most of a government's debt is typically held by the country's citizen, so government debt is in fact private wealth. Second, think about why you strive to be debt free and self sufficient, and then think about whether the same logic applies to a government that issues its own currency and is indebted only in that currency. A government that is monetarily sovereign is subject to different rules than private households and must therefore follow different strategies. If you transfer the guidelines you have developed for your own personal dealings directly onto the government, you're making a mistake. It may feel good and morally right, but it's still wrong from a logical and rational perspective.

enraged_camel 13y ago

Austerity is the pinnacle of FYGM (fuck you, got mine) politics. It is almost always lobbied for and driven by the financial elite, and their reasoning behind it is that if government spends less, it needs less taxes, which means rich people get to keep more of their wealth to themselves. Those poor people over there though? Fuck 'em. If they worked hard like us they would be rich, too! Of course, this wouldn't be politically correct to say outright. So instead, they disguise it under things like "fiscal responsibility." But underneath the rhetoric you can almost taste the hatred and contempt they feel towards poor people.

jacques_chester 13y ago

Australia is a good example of the fruits of fiscal discipline. The Howard government paid off our long term debt entirely, allowing the Rudd and Gillard governments enormous scope for borrowing. We'd be borrowing at a much higher interest rate otherwise. Of course, as in many cases, there are confounding factors. Australia's is being a major supplier of iron ore and coal.