Tuesday, May 15, 2012

The California "Austerity" Trap

In a previous piece, I discussed the Krugman-esque cliams of pundits--like Eugene Robinson---about so-called austerity measures in Europe. Sarkozy's recent defeat is being attributed to a public backlash against such policies by this crowd, by and large. Robinson says:
On Sunday, French voters elected Socialist Party candidate Francois Hollande as president, ousting center-right incumbent Nicolas Sarkozy in what amounted to a referendum on Sarkozy's embrace of austerity.
Clear? Sarkozy "embraced" austerity. And in actual practice, that "embrace" amounted to what, exactly? In my previous piece, I cited evidence that shows--quite clearly--this "embrace" didn't involve a whole lot of real cuts to government spending, as this has continued to increase in France throughout the period of these so-called austerity measures. Michael Tanner at NRO--writing about pretty much the same thing as me--lays out the actual policies implemented in France, the "austerity measures":
In France, for example, the so-called austerity largely consisted of raising taxes. There was a 3 percent surtax on incomes above €500,000, an increase of one percentage point in the top marginal tax rate (from 40 to 41 percent), and an end to the automatic indexation of tax brackets for inheritance, wealth, and income taxes. There was also a 5 percent hike in the corporate income tax on businesses with revenue of more than €250 million, as well as a hike in the capital-gains tax, and closure of several corporate tax breaks. And even though most of these tax hikes were aimed at the wealthy, the middle class did not get off free. There was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol...

True, there were some entitlement reforms and spending reductions. But they haven’t actually occurred yet. For example, France will raise its retirement age from 60 to 62, but not until 2017! A cap would also be put on government health-care spending, starting next year.
So in France, austerity amounted to tax increases, limits on some spending growth, and future cuts in entitlement spending (which, of course, may or may not actually occur). That's it, there isn't anymore.

In the United States, California is once again in the news because of its budget woes. A projected $9 billion shortfall in the State's budget has mushroomed into a $16 billion shortfall in just a few months and now the Governor and legislators are being forced to actually do something about it. Governor Brown's solution:
"We are now facing a $16 billion hole, not the $9 billion we thought in January," California Gov. Jerry Brown said. "This means we will have to go much further and make cuts far greater than I asked for at the beginning of the year. But we can't fill a hole of this magnitude with cuts alone without doing severe damage to our schools. That's why I'm bypassing the gridlock and asking you, the people of California, to approve a plan that avoids cuts to schools and public safety. The plan asks high income earners to pay up to 3 percent more in their income taxes for seven years. It would increase sales taxes by one-fourth of 1 percent for four years."
Essentially, it's increase some taxes and make some cuts--but no real significant cuts-- since California's budget will remain close to $90 billion, not substantially more or less than in recent years. Now, this plan of Brown's for California sounds an awful lot like what happened in France. And as we know, these were "austerity measures" in the latter.

To be fair, Brown has been getting hammered for austerity measures by the far, Far Left--as had been his predecessor--since he took office . But you know, those two pieces from the World Socialist Web Site--separated by less than a year--coupled with the criticisms of French policies really makes one thing absolutely crystal clear: "austerity" means nothing. Or rather, it means everything. Any policy--aside from one proposing a new entitlement program--qualifies as an "austerity measure," provided there is someone or some group that doesn't like it.

Schwarzenegger's budget proposals were austere partly because--according to the WSWS--there was no attempt to increase revenue, there were just "terrible" cuts. Brown's previous budget was austere, even though tax increases were included. In fact, the WSWS declared Brown's proposals to be "far more draconian than those of his predecessor."

What does the WSWS say about the latest budget proposal from Brown, which has even more tax increases and fewer actual cuts? What else?
With an additional $7 billion of deficit to cover, Brown made clear that more savage austerity was planned.
More "savage" austerity. The attempts--each and every one--to bring some sort of fiscal sanity to the State are austerity measures, are "draconian" and "savage." Of course, this is--again--a Far Left source. But the problem is, the mainstream media--like Robinson--is using the same language by and large. And professional economists--like Krugman--are justifying such language choices on an almost daily basis.

We have to wonder, what wouldn't qualify as "austerity"? If tax increases coupled with future cuts to spending--which also happens to be what the Obama Administration is proposing--are austerity measures, what is left? Unbridled government spending? That's led Greece off of a cliff. It's threatening to destroy the EU. And it's doubled the U.S. National Debt in less than half a decade.

Yet, no one has tried to actually be austere. None of the above governments have attempted to simply not spend more than they take in on a year to year basis, to actually spend less in fact. Because that would at least be a good starting point for labeling something austere. Of course, I would just label that as being fiscally sound. But doing so would deprive pundits the use of clever words like "draconian," "slashing," and "savage." Where's the fun in that?

Cheers, all.

1 comment:

  1. Dems should be careful, because if people actually pay attention to what happened in France, it sounds an awfull lot like what the Obama admin and fellow travelers are proposing. Tax the rich -- after all, it has no impact, and make some cuts in the future.I think, if Repubs are smart, they should adopt this line of attack.