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The proper time for austerity is when things are good. When things are bad, juice it up, especially if you can borrow at rates that are negative when inflation
by jhugg 11y ago
The proper time for austerity is when things are good. When things are bad, juice it up, especially if you can borrow at rates that are negative when inflation adjusted.
The problem with austerity now to make the long term better is that it's not a zero sum game. Austerity lowers GDP growth, which can offset any move toward solvency. You spend less and surprise, you also take in less. Eventually you recover, but poorer than if you had juiced things a bit and no less in debt.
- dageshi 11y agoHad the government in the UK run a surplus prior to the financial crisis I suspect the case for a larger Keynesian response from the UK public would have been better received. That is afterall what Keynes originally proposed. Modern Keynesians have disproved it's necessity and yet... public opinion ultimately drives policy, perhaps Keynes requirement of running a surplus in the good times in order to run a deficit in the bad was more about satisfying the psychology of the general public than anything else.
- sjg007 11y agoThe UK will have a big problem in 10 years when there are still no jobs for young adults.
- pbreit 11y agoAusterity in good times? Good luck with that!
- MaysonL 11y agoEspecially with presidents like W – remember the Clinton surpluses? They were austerity in good times.
- dragonwriter 11y ago> The proper time for austerity is when things are good. Arguably, government fiscal restraint in strong economic times isn't "austerity" in any meaningful sense, but I'd agree that that countercyclical approach is right -- you want the government spending less (as a share of GDP) when the private sector economy is strong, and more when it is weak.