CATO notes that austerity measures in Europe have not worked up to this point, but caused a deeper recession. The reason? The austerity measures have been against private business and investment. For example a tax increase on first time home buyers implemented in Italy has simply slowed down spending and investment.
So, now Italy recognizes that they need to cut spending by the government. Their new austerity package mostly focuses on cutting their government by several billions of Euros.
Here in the USA, we have also found that austere impositions against the private sector just slows down the economy. Threat of punishment, more taxation, or regulation keeps businesses from expanding. Such also keeps over $2 Trillion of money overseas. Why did Apple pay less than 10% tax? By moving lots of its money overseas in legal loopholes.
Reality is, Medicare and Social Security are going bankrupt. It is easier to fix them now, rather than wait until they go over the brink. Do we tell 80 year olds now that they cannot have a hip replacement, or do we tell their grandchildren that we cannot afford to deliver a baby or perform a life saving operation on a young person later?
Spending more money has not fixed the economy. As insistent as Paul Krugman is, the world is not going to forever lend us money to spend on everything and anything. Of course, he possibly gave the same advice to Enron. And his advice of borrowing more and more, and entering into greater and greater debt worked until everyone found out that the Emperor had no clothes, and the collapse came swiftly afterward.
It is time we return to small government and free markets. Let’s insist our Congress and President go in this direction, or replace them.