Austerity kills

"Austerity was designed to shrink debts. Now, three years after Europe's budget-cutting began, the evidence is in: severe, indiscriminate austerity is not part of the solution, but part of the problem -- and its human costs are devastating."

Europe's public health disaster: How austerity kills

By David Stuckler and Sanjay Basu

September 9, 2013 | CNN

URL: http://edition.cnn.com/2013/09/09/business/europes-public-health-disaster-how-austerity-kills/index.html?hpt=hp_c4

Krugman: GOP plans lead to bigger deficit than Obama's

Four Fiscal Phonies

By Paul Krugman

March 1, 2012 | New York Times

Mitt Romney is very concerned about budget deficits. Or at least that's what he says; he likes to warn that President Obama's deficits are leading us toward a "Greece-style collapse."

So why is Mr. Romney offering a budget proposal that would lead to much larger debt and deficits than the corresponding proposal from the Obama administration?

Of course, Mr. Romney isn't alone in his hypocrisy. In fact, all four significant Republican presidential candidates still standing are fiscal phonies. They issue apocalyptic warnings about the dangers of government debt and, in the name of deficit reduction, demand savage cuts in programs that protect the middle class and the poor. But then they propose squandering all the money thereby saved — and much, much more — on tax cuts for the rich.

And nobody should be surprised. It has been obvious all along, to anyone paying attention, that the politicians shouting loudest about deficits are actually using deficit hysteria as a cover story for their real agenda, which is top-down class warfare. To put it in Romneyesque terms, it's all about finding an excuse to slash programs that help people who like to watch Nascar events, even while lavishing tax cuts on people who like to own Nascar teams.

O.K., let's talk about the numbers.

The nonpartisan Committee for a Responsible Federal Budget recently published an overview of the budget proposals of the four "major" Republican candidates and, in a separate report, examined the latest Obama budget. I am not, by the way, a big fan of the committee's general role in our policy discourse; I think it has been pushing premature deficit reduction and diverting attention from the more immediately urgent task of reducing unemployment. But the group is honest and technically competent, so its evaluation provides a very useful reference point.

And here's what it tells us: According to an "intermediate debt scenario," the budget proposals of Newt Gingrich, Rick Santorum, and Mitt Romney would all lead to much higher debt a decade from now than the proposals in the 2013 Obama budget. Ron Paul would do better, roughly matching Mr. Obama. But if you look at the details, it turns out that Mr. Paul is assuming trillions of dollars in unspecified and implausible spending cuts. So, in the end, he's really a spendthrift, too.

Is there any way to make the G.O.P. proposals seem fiscally responsible? Well, no — not unless you believe in magic. Sure enough, voodoo economics is making a big comeback, with Mr. Romney, in particular, asserting that his tax cuts wouldn't actually explode the deficit because they would promote faster economic growth and this would raise revenue.

And you might find this plausible if you spent the past two decades sleeping in a cave somewhere. If you didn't, you probably remember that the same people now telling us what great things tax cuts would do for growth assured us that Bill Clinton's tax increase in 1993 would lead to economic disaster, while George W. Bush's tax cuts in 2001 would create vast prosperity. Somehow, neither of those predictions worked out.

So the Republicans screaming about the evils of deficits would not, in fact, reduce the deficit — and, in fact, would do the opposite. What, then, would their policies accomplish? The answer is that they would achieve a major redistribution of income away from working-class Americans toward the very, very rich.

Another nonpartisan group, the Tax Policy Center, has analyzed Mr. Romney's tax proposal. It found that, compared with current policy, the proposal would actually raise taxes on the poorest 20 percent of Americans, while imposing drastic cuts in programs like Medicaid that provide a safety net for the less fortunate. (Although right-wingers like to portray Medicaid as a giveaway to the lazy, the bulk of its money goes to children, disabled, and the elderly.)

But the richest 1 percent would receive large tax cuts — and the richest 0.1 percent would do even better, with the average member of this elite group paying $1.1 million a year less in taxes than he or she would if the high-end Bush tax cuts are allowed to expire.

There's one more thing you should know about the Republican proposals: Not only are they fiscally irresponsible and tilted heavily against working Americans, they're also terrible policy for a nation suffering from a depressed economy in the short run even as it faces long-run budget problems.

Put it this way: Are you worried about a "Greek-style collapse"? Well, these plans would slash spending in the near term, emulating Europe's catastrophic austerity, even while locking in budget-busting tax cuts for the future.

The question now is whether someone offering this toxic combination of irresponsibility, class warfare, and hypocrisy can actually be elected president.

Krugman: Fiscal austerity is all pain, no gain

Pain Without Gain

By Paul Krugman

February 19, 2012 | New York Times

Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It's not an official recession yet, but the only real question is how deep the downturn will be.

And this downturn is hitting nations that have never recovered from the last recession. For all America's troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe's has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain's slump has now gone on longer than its slump in the 1930s.

Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.

For things didn't have to be this bad. Greece would have been in deep trouble no matter what policy decisions were taken, and the same is true, to a lesser extent, of other nations around Europe's periphery. But matters were made far worse than necessary by the way Europe's leaders, and more broadly its policy elite, substituted moralizing for analysis, fantasies for the lessons of history.

Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in "confidence," that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you're right: It does and he did.

Now the results are in — and they're exactly what three generations' worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

Furthermore, bond markets keep refusing to cooperate. Even austerity's star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

Meanwhile, countries that didn't jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

Now, not everything has gone wrong. Late last year Spanish and Italian borrowing costs shot up, threatening a general financial meltdown. Those costs have now subsided, amid general sighs of relief. But this good news was actually a triumph of anti-austerity: Mario Draghi, the new president of the European Central Bank, brushed aside the inflation-worriers and engineered a large expansion of credit, which was just what the doctor ordered.

So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?

After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama's efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

The point is that we could actually do a lot to help our economies simply by reversing the destructive austerity of the last two years. That's true even in America, which has avoided full-fledged austerity at the federal level but has seen big spending and employment cuts at the state and local level. Remember all the fuss about whether there were enough "shovel ready" projects to make large-scale stimulus feasible? Well, never mind: all the federal government needs to do to give the economy a big boost is provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers they have laid off and restart the building and maintenance projects they have canceled.

Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it's time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

EU's fanatical 'saviors' destroying Greece, EU

Cohen draws a stunning historical parallel:

"The EU's terms do not begin to match the altruism the United States showed to the defeated Germans after 1945.... Greece has invaded no one and committed no crimes against humanity. Yet the EU, which boasts that solidarity is its founding principle, is forcing it into destitution and chaos."

Is Cohen right, that mere hubris by EU officials who don't want to admit their beloved idea of a currency union was ill-conceived, is driving their insane behavior to "save" the EU by destroying its member states?

Greece is being destroyed by 'respectable' fanatics

By Nick Cohen

February 19, 2012 | Observer

Greek democracy is being destroyed. Not by soldiers marching with insane slogans on their lips about the inevitable triumph of the German master race, international proletariat or global jihad, but by moderate men and women who think themselves immune to ideological frenzy. Greece's enemies are novel, but no less frightening for that: extremists from the centre ground; the respectable running riot.

Which ever way you cut it, Greece can't win. The EU "bailout" cannot perform the first function of a rescue and save the sufferer from suffering. The Germans, with Dutch and Finnish assistance, are pushing Greece into a death spiral. The EU demands that Greece cuts 150,000 public jobs over three years – the equivalent in terms of population of our government taking 800,000 jobs from the UK public sector. Greek politicians must also accept without a quibble a 22% cut in the minimum wage and further reductions in the welfare state.

Greece is in permanent recession. The economy shrank by 7% in the three months to December 2011. Tens of thousands of family businesses have gone bust. Europe is now offering to revive Greece by impoverishing it; to heal it by harming it. As Tacitus said of the Roman legions' earlier attempt to impose a European union: "They make a desert and call it peace."

Whether Greek society can stand the pressure remains an open question. The parties of the far left and right are flourishing in the polls as the public comes to see its centrist politicians as traitors for trying to appease a hostile EU. Once the Grecian fringe was reserved for the unhinged. The last time I asked Liana Kanelli, spokeswoman for the Greek Communist party, about her country's crisis, she flew off into a rage about how the 1999 Nato intervention to stop Serb nationalists slaughtering Kosovo Muslims was an imperialist plot to extend capitalism into the Balkans. Nothing I could say could wake her from her land of make-believe and return her to the subject at hand.

Her fellow citizens no longer see Kanelli and her kind as dangerous fools, however. Because they oppose the EU, cranks from the left and racists from the right now make more sense to Greeks than their mainstream politicians. The parallels with the 1930s are too obvious to labour.

Whatever the political consequences, every sensible financial commentator understands that the Greek economy can take no more. The "bailout" will merely push it deeper into the mire. The EU's terms do not begin to match the altruism the United States showed to the defeated Germans after 1945. America did not pauperise West Germans as many in France and indeed Washington wanted. America guaranteed their security, then gave them loans from the Marshall Plan that allowed the West German economic miracle to begin. Greece has invaded no one and committed no crimes against humanity. Yet the EU, which boasts that solidarity is its founding principle, is forcing it into destitution and chaos.

The alternative to bowing to the demands of their German overlords is not noticeably better. If Greece were to leave the euro, there would be hundreds of thousands, maybe millions, of law suits, as parties argued whether contracts should be honoured in the old or new currency. Hyper-inflation might set in. The European banking system might collapse. As William Hague says, the euro is a burning building with no exits.

The EU cannot take responsibility for what it has done and be magnanimous for reasons British readers may not grasp. Raised in a Eurosceptic country, we do not understand how an absolute commitment to the European project was a mark of respectability on the continent. Like going to church and saying your prayers for previous generations, a public demonstration of commitment to the EU ensured that the world saw you as a worthy citizen. If you wanted to advance in Europe's governing parties, judiciaries, bureaucracies and culture industries, you had to subscribe to the belief that ever-greater union was self-evidently worthwhile.

Currency union is – self-evidently – a disaster. Admitting that would bring a loss of face too great for the European elites to bear. To take the most discreditable example, Germany and Holland have benefited enormously from the single currency holding down the exchange rate for their goods, while imposing effective tariff barriers on southern Europe.

Instead of saying: "We are rich because they are poor", Angela Merkel and her boorish colleagues imitate the smug, parochial, selfish Bild reader, who thinks that foreigners' problems would be solved if only they could turn themselves into him. Germany insists that the Greek crisis is the result of the corruption of Greek public life. Greek politics is undoubtedly corrupt, although I should add that the first victims of corruption are poor Greeks who cannot afford to bribe officials or hide their savings from the taxman.

But Greek corruption cannot explain why Portugal is in crisis, any more than Italian corruption can explain why Ireland and Spain are in crisis. All five countries are suffering – and France may soon be suffering – because the euro is a monumental mistake. Rather than rectify it, European leaders attack the welfare states, employment protections and public services that the best of the European centre-left fought for after 1945. In the name of saving the euro, everything must go.

As the poverty deepens and the protests swell, the EU's image will change – and not for the better. It was once seen as a haven, which offered Europeans an escape from the terrors of the past. The EU, wrote the perceptive British diplomat Robert Cooper in 2002, is at the forefront of the "postmodern world". Instead of invading each other, Europeans allowed negotiators at Brussels to settle conflicts and regulate everything "right down to beer and sausages".

The EU may have been petty and irritating. It may not have been very democratic. But its avoidance of conflict produced a pleasant, prosperous and peaceful continent.

Europe does not seem pleasant, prosperous or peaceful today. When historians write about the end of its postmodern utopia, they will note that it was not destroyed by invading armies anxious to plunder Europe's wealth or totalitarian ideologues determined to install a dictatorship, but by politicians and bureaucrats, who appeared to be pillars of respectability, but turned out to be fanatics after all.

Reuters: Who profits from Greek debt deal?

Greece's government is asking its creditors to accept a 50 percent reduction (haircut) in the principle amount owed to them.

The major creditors, mostly hedge funds, are still holding out, they won't accept Greece's offer.

It's interesting to note that the original creditors or holders of Greece's debt got out a long time ago and sold their bonds for anywhere from 20-45 cents on the euro, depending on the maturity of the bond, to these risk-loving hedge funds. So if the new owners of the debt accepted a 50 percent haircut, they would still make a profit.

It's just important to keep in mind that many of those who originally took the risk of buying Greece's debt have left the picture, and took a 55-80 percent loss just to be done with it. That is, "the market," which knows everything, has already written down the street value of Greece's debt.

Hedge Funds Are Positioning To Profit From Slashing Greek Debt

January 13, 2012 | Reuters

URL: http://www.huffingtonpost.com/2012/01/13/hedge-funds-greek-debt_n_1203867.html

Ames reveals amazing UC Davis-Greece connection

Mark Ames is on a roll. Lately he's been digging up some unbelievable connections -- and not the "six degrees of separation" kind of connections on GB's lunatic chalk board either.

This is too amazing not to read.

How UC Davis Chancellor Linda Katehi Brought Oppression Back to Greece's Universities

By Mark Ames

November 22, 2011 | The Exiled

URL: http://exiledonline.com/how-uc-davis-chancellor-linda-katehi-brought-oppression-back-to-greeces-universities/