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richk449
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 Posted: Wed May 09, 2012 4:19 am Post subject: "Austerity" |
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http://mercatus.org/publication/fiscal-austerity-europe-doesnt-mean-large-spending-cuts
| Quote: | We are told that austerity in Europe has failed. The elections in France and Greece, for instance, are supposedly evidence of people’s opposition to severe cuts in spending. However, the growing anti-austerity backlash against Europe ignores one fundamental point: If there is austerity in Europe, in most cases it hasn’t taken the form of massive spending cuts.
Following years of large spending expansion, Spain, the United Kingdom, France, and Greece—countries widely cited for adopting austerity measures—haven’t significantly reduced spending since “austerity” supposedly started in 2008.
First, France and the U.K. have not cut spending. Second, when spending was actually reduced—between 2009-2011 in Greece, Italy, and Spain—the cuts were relatively small compared to the size of their bloated European budgets. While Italy reduced spending between 2009-2010, it also increased spending in the following year by an amount larger than the previous reduction. Most importantly, meaningful structural reforms were seldom implemented. |
More:
http://willwilkinson.net/flybottle/2012/05/07/veronique-de-rugy-on-austerity-facts/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+willwilkinson%2FVeUZ+%28The+Fly+Bottle%29
http://marginalrevolution.com/marginalrevolution/2012/05/how-savage-has-european-austerity-been.html#comments |
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aidanjt
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| Posted: Wed May 09, 2012 12:32 pm Post subject: |
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He should stick to blogging about American politics.
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| juniper wrote: | | you experience political reality dilation when travelling at american political speeds. it's in einstein's formulas. it's not their fault. |
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aCOSwt
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| Posted: Wed May 09, 2012 2:02 pm Post subject: |
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As far as France is concerned, there has actually been huge spending-cuts not so huge really.
Here is the magic trick I recently discovered our politicians use :
Budget of France is discussed & voted by the parliament on a yearly basis.
This budget includes :
- The investments planned for next year,
- The operating costs for next year.
Magic-Trick one : Possible for every infrastructure project such as motorways, airports...
The government manages to cease for a given time the business concern (together with the operating costs) of a project to a private company or any non governmental agency or any district agency...
The impact on the budget is null. NO REAL cut is made, BUT, the government will claim having cut spendings = Yearly-Operating-Costs * duration of the operating license
On infrastructure projects, this amount IS actually huge given that the duration of operating licenses are of over 50 years...
Magick-Trick two : Possible with any civil servant
Civil servants have their job and appointments guaranteed by the state over their lifetime. Let's say, as an average that they will work around 40 years and live 20 years after retiring.
If the government does not recruit N civil servants on a given year, the real impact on the budget is N * the average salary.
BUT... the government will claim having cut 60 * N * the average salary of spendings.
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richk449
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| Posted: Wed May 09, 2012 2:45 pm Post subject: |
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This sounds like the trick they are pulling in California: Take some government owned property, fully paid off, currently being used by the government. The only costs of the property are maintenance. Sell the property to a private entity, and then lease it back for use by the government. For one year, it looks like a huge cost savings (Sale price minus yearly lease price), but every year after that, it costs money.
As a complicating factor, it kinda looks like privatization, so conservatives are hesitant to criticize it. |
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pjp
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| Posted: Wed May 09, 2012 11:42 pm Post subject: |
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aCOSwt: Any news in France about Hollande possibly flip-flopping on spending promises made during the campaign?
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aCOSwt
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| Posted: Thu May 10, 2012 7:46 am Post subject: |
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1/ There are no real news about this yet. I believe he will now keep quiet as long as he is not formally in charge.
2/ I even doubt there will be any real news, any significant decision conform or not conform to what Hollande promised before mid June, that is to say next general elections.
Hollande needs a majority at the parliament and is well aware that he was not elected because of his program but because the People voted against Sarkozy.
Presidential elections in France are more a question of individuals than a real political election.
On a side note, the Brittons who know us very well, had written quite a long time ago on the BBC that the French, would never cast their vote for an individual they do not like. And the majority of the French, while acknowledging his efficiency, did not like Sarkozy !
So, until the next elections, Hollande must not frighten the Anti-Sarkozy right-wingers who voted for him or at least did not cast their vote and must not disappoint his supporters, but those will grant him some grace period...
So no real decision will be made since. Then, depending on the results of the general elections which are much more political, he will realize whether he gets from the People, the real mission and power to rigorously apply his program or... not !
Additionally
3/ French are well aware that in politics, promises engage only those who believe them... I mean... never those who make them.
4/ Hollande has many times repeated when campaining that he was carrying a dream... I mean... not that he had a real program to apply to the letter...
So... Holland flip-flopping on spending promises... that will not be a scoop if... this happens.
BTW, the real question with Hollande is not that much whether he will flip-flop or not on something but whether he will actually achieve something or not. Will he really act? Will he actually do something apart from waving hands? Contrarily to Sarkozy, he his definitely not known as a doer, even not as an enabler...
The Merkozy was a reality, I make no doubt that the Merkhollande will exist as well but could well be as a Merkholl, if not a Merkelh. 
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In theory there are no differences between theory and practice. In practice, there are.
Don't try to understand my posts. Immanuel Kant never did, he thinks that only music and laughter do not have to mean anything.
Last edited by aCOSwt on Thu May 10, 2012 9:02 am; edited 2 times in total |
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notageek
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| Posted: Thu May 10, 2012 7:51 am Post subject: |
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Hollande has not taken office yet, therefore the question of him flip-flopping doesn't arise yet.
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aCOSwt
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| Posted: Thu May 10, 2012 8:04 am Post subject: |
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| notageek wrote: | | Hollande has not taken office yet, therefore the question of him flip-flopping doesn't arise yet. |
Custard does flip-flops ! And not only when on your plate. It flip-flops in the fridge too and even in its non-opened box if you are unlucky enough to be forced to buy it ready-made.
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Don't try to understand my posts. Immanuel Kant never did, he thinks that only music and laughter do not have to mean anything. |
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notageek
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| Posted: Thu May 10, 2012 8:50 am Post subject: |
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pjp
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| Posted: Thu May 10, 2012 11:31 pm Post subject: |
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Thanks for the explanation aCOSwt.
Seems somewhat like our system. When Obama was elected with a Democrat majority, that was perceived to be a "mandate" to implement certain policies. In reality, the election was an overreaction to Bush. Hopefully Hollande turns out better for you than Obama did for us!
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Prenj
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Muso
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| Posted: Fri May 11, 2012 1:25 am Post subject: |
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Farage has been a voice of reason for years. Were I able to vote for him, I would.
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Muso
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| Posted: Sat May 12, 2012 6:50 am Post subject: Show Me the ‘Savage’ Spending Cuts in Europe, Please |
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Show Me the ‘Savage’ Spending Cuts in Europe, Please
| Quote: | Austerity is destroying Europe, we are told. In fact, this “anti-austerity” slogan was a big reason for the victory of newly elected socialist François Hollande to the presidency of France. Interviewed in The Economist a few weeks ago, Hollande’s campaign director said “We are not disciples of savage spending cuts.”
But then, I look at the data and I am asking: What “savage” spending cuts?
Graph Here
Look at this chart. It is based on Eurostat data which you can find here. Following years of large spending increases, Spain, the United Kingdom, France, and Greece — countries widely cited for adopting austerity measures — haven’t significantly reduced spending since 2008. As you can see on this chart:
* These countries still spend more than pre-recession levels
* France and the U.K. did not cut spending.
* In Greece, and Spain, when spending was actually reduced — between 2009–2011 — the cuts have been relatively small compared to what is needed. Also, meaningful structural reforms were seldom implemented.
* As for Italy, the country reduced spending between 2009 and 2010 but the data shows and uptick in spending 2011. The increase in spending represents more than the previous reduction.
The most important point to keep in mind is that whenever cuts took place, they were always overwhelmed by large counterproductive tax increases. Unfortunately, that point is often overlooked. This approach to austerity — some spending cuts with large tax increases — is what President Obama has called the “balanced approach.”
However, as I have mentioned previously, while this balanced approach may sound good and appeals to our sense of fairness and moderation, but it can be a recipe for disaster. That’s because it fails to stabilize the debt, and it is more likely to cause economic contractions.
We know what successful fiscal adjustment look like and it’s not what was implemented in Europe. Here is a reminder:
| Quote: | Now, a new book by the IMF called Chipping Away at Our Debt, edited by Paulo Mauro, looks at 66 instances of fiscal adjustments in Canada, France, the United States, Japan, Germany, and Italy. The key findings are in many ways consistent with the works highlighted above. For instance:
* Successful fiscal adjustments were grounded in structural reforms. Such reforms include welfare reforms as well as comprehensive expenditure review in the context of repositioning the role of the state (think Canada and Germany).
* Plans that avoided structural reforms failed to meet their targets.
* Successful plans were often grounded in real budget cuts.
* Expenditure cuts didn’t materialize to the extent initially envisioned.
* Revenue-based plans without well-specified tax-policy measures — a majority of the revenue-based cases — failed.
Other really interesting findings were:
* Ambitious plans tend to produce more adjustments than modest ones.
* Ambitious plans aren’t associated with more frequent changes in government (in other words, ambitious fiscal adjustment plans aren’t penalized by voters).
* In the case of successful adjustments, revenue often surpassed expectations Deviations of economic growth from initial expectations is key factor underlying a fiscal adjustment’s ability to meet its target.
* Public support is key to achieving successful fiscal adjustment. |
Here is my hope: First, I wish we would stop being surprised by what’s happening in Europe right now. Second, I wish anti-austerity critics would start acknowledging that taxes have gone up too–in most cases more than the spending has been cut. third, I wish that we would stop assuming that gigantic “savage” cuts are the source of the EU’s problems. Some spending cuts have been implemented in a few countries. Also, if this data were adjusted for inflation (which I would prefer but the data isn’t available) it would possibly show a decrease and certainly a flatter line for all countries. However, the overwhelming take away from the European experience is that a majority of governments haven’t really implemented spending cuts, large or small, and some have even continued to grow. |
More in TFA
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Amaranatha
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| Posted: Sat May 12, 2012 7:11 am Post subject: |
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We already have a thread for this. You even posted in it. 
On-topic: spending in government services has been reduced, but it's has been offset by an increase in interest and amortization from debt.
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Muso
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| Posted: Sat May 12, 2012 7:21 am Post subject: |
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Different approach, so not identical. But if a mod wishes to merge, I wouldn't object.
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energyman76b
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| Posted: Sat May 12, 2012 9:23 am Post subject: |
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| Amaranatha wrote: | We already have a thread for this. You even posted in it.
On-topic: spending in government services has been reduced, but it's has been offset by an increase in interest and amortization from debt. |
this.
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Libertardian denial of reality is wholly unimpressive and unconvincing, and simply serves to demonstrate what a bunch of delusional fools they all are.
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pjp
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| Posted: Sat May 12, 2012 3:40 pm Post subject: |
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Merged.
Apparently consensus is to increase visibility of Obama threads.
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richk449
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| Posted: Wed May 16, 2012 3:19 am Post subject: |
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http://marginalrevolution.com/marginalrevolution/2012/05/what-is-austerity.html
| Quote: | | I could imagine a definition something like this: “the net effect of all government fiscal policies on ngdp, relative to the baseline of a stabilized path for expected ngdp growth.” Or should it read: “…relative to what will happen to ngdp growth in the absence of budgetary changes”? I wonder if some Keynesians have in mind the baseline of “the expansionary policies which I think would be appropriate,” in which case doing less than the Keynesian optimum is always a form of austerity. Angus notes correctly that clear definitions of austerity are hard to come by. |
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juniper
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| Posted: Thu May 17, 2012 9:44 am Post subject: |
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| spending in the UK has been cut, just not as a percentage of the GDP because it has fallen. |
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pjp
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| Posted: Thu May 17, 2012 3:56 pm Post subject: |
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| juniper wrote: | | spending in the UK has been cut, just not as a percentage of the GDP because it has fallen. |
Because GDP fell, they didn't want to cut it on a percentage basis? That seems odd.
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aidanjt
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| Posted: Thu May 17, 2012 3:59 pm Post subject: |
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| pjp wrote: | | juniper wrote: | | spending in the UK has been cut, just not as a percentage of the GDP because it has fallen. |
Because GDP fell, they didn't want to cut it on a percentage basis? That seems odd. |
Why is that odd? Services cost in absolutes, not percentiles.
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pjp
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| Posted: Thu May 17, 2012 4:45 pm Post subject: |
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It was a question based on how he phrased it: not as a percentage of the GDP because it has fallen.
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wildhorse
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| Posted: Thu May 17, 2012 5:04 pm Post subject: |
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New indebtedness contributes to an increase of the GDP and corruption.
Debt reduction is what should matter. Everything else is organised crime. |
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