Austerity Tide

"The age of austerity will not be fleeting." -- Dan O'Brien, The Irish Times

"Uncertainty fuels doubt." -- Christine Lagarde, managing director, International Monetary Fund

"The only thing we have to fear is fear itself." -- Franklin D. Roosevelt

"No man is an island, entire of itself." -- John Donne

America is not a closed economy.

Austerity wrings funds from those who can afford it least.

   News items: Ireland faces at least two more years of austerity. The UK economic tide may be out for five years. Governments in Greece and Spain are facing bankruptcy.
   Germany is prosperous, but reluctant to bail out others in the EU, and many in Europe don't trust them anyway.

   The United States accounts for about 20 percent of the total world output, so any substantial dip in America will affect other nations, and an austerity program will send an economic tsunami to other shores. Moreover, reductions elsewhere also affect us.
   Sound frightening? It should, because it has happened before, 80 years ago. In a vain effort to protect American business, the Smoot-Hawley tariffs effectively stopped foreign-made products from entering the U.S. But it also triggered retaliation by others, building tariff walls around the world. Result: International trade hit those walls and business stopped. This protectionism, coupled with demands for a balanced federal budget, only worsened an already serious problem.

   Today, demands for austerity may lead to a balanced federal budget, but at what cost? We define austerity as tax hikes and spending cuts to reach budget goals. Thus, the public will have less money as they pay more in taxes, and employees will have less income as the government reduces spending.
   The goal may be laudable, but the method is harsh.
   In short, the time to seek a balanced budget is during prosperity, when the economy booms along without government assistance.

   The only cliff America faces is economic, not fiscal. An austerity budget when the nation is tottering can only push the entire economy off a cliff.