Just to remember how bad Republican notions that we should cut spending in the midst of a recession, this latest from the Eurozone:
The euro zone economy shrank slightly less than expected in the last three months of 2011, but five countries including Italy fell into recession as the sovereign debt crisis discouraged consumers from spending and businesses from investing. sovereign debt crisisdiscouraged consumers from spending and businesses from investing.
Growth in the 17 countries that make up the euro zone fell 0.3 percent, Eurostat, the European statistics agency said [PDF] Wednesday. But the pain was most acute among smaller countries and in southern Europe — ground zero of the debt crisis.
…“It could have been worse,” Martin van Vliet, an economist at ING Bank, said in a note to clients. The figures “clearly indicate that ‘core’ euro zone economies generally were less affected by the escalating debt crisis than peripheral economies, which seems to make sense given that the financial turmoil and austerity efforts are concentrated in the latter part of the region.” (Emphasis added.)
In case you were wondering whether even hobbled stimulus efforts matter, here’s the context with which Eurostat framed its update:
During the fourth quarter of 2011, GDP in the United States increased by 0.7% compared with the previous quarter (after +0.5% in the third quarter of 2011)…Compared with the same quarter of the previous year, GDP rose by 1.6% in the United States (after +1.5% in the previous quarter)…
There’s lots of specific issues hidden within the aggregate data, so it would be an error to overclaim. But yeah, as far as the data do go, the real world is reiterating a verdict to be read over and over in the historical record. Despite what the Republican presidential field will tell you, or Paul Ryan, or just about anyone in a leadership position over in GOP land, slashing demand in a recession is an astonishingly stupid thing to do.
Just ask these guys. Or these. Not to mention these. (Via KThug.)
Image: Gong Kai ,Emaciated Horse, before 1307
Hill Dweller
Republicans were also predicting catastrophic inflation after the stimulus was passed. That never materialized.
schrodinger's cat
Austerity in the middle of a recession makes no sense.
KG
@schrodinger’s cat: it does if your goal is to beat an incumbent president/governor in an upcoming general election.
Waldo
Yeah, you’d think that would be a problem, but for wingnuts, stupid is the new black.
schrodinger's cat
@Hill Dweller: Inflation is close to zero and so are the interest rates. I think Obama has not made a good case for deficit spending. His comparison of the economy to a household was a bit stupid. I can’t print my own money when I am in debt. Things that make sense at the micro level don’t necessarily make sense at the macro.
Linda Featheringill
The European ruling classes haven’t acted very wisely lately. I really don’t understand it. They aren’t dumb. They have a history of planning for the long term. Did the whole bunch come down with dementia all of a sudden?
schrodinger's cat
@KG: OK I meant it does not make any economic sense, it does make perfect political sense if you are the GOP.
schrodinger's cat
@Linda Featheringill: It is all about protecting the interests of the rentiers, or those who just make money by moving it around and making bets with it. The investors with elebenty munnies like RMoney.
Davis X. Machina
You can’t refute a theology.
KG
@schrodinger’s cat: oh, I know that’s what you meant. And I tend to agree, but then I’m a libertarian that believes in the idea of government as a market participant. Crazy ideas, I know.
Democratic Nihilist, Keeper Of Party Purity
@Davis X. Machina: I’m thinking this is the perfect epitaph to chisel on the headstone of the United States of America.
JPL
Tom, All this time the republicans have been allowed to preach that the President is following the European model and it’s actually them that want to introduce the European model for solving the recession.
Please feed that poor horse, also, too?
ThatLeftTurnInABQ
Tom,
Nice to see you using non-Western artwork to illustrate your (as usual) informative commentary; please keep it coming.
jl
Austerity not going too well, it looks like.
However, it is sad to see NY Times news story that, like almost all others, cannot find room to mention that the European crisis is currency crisis and a debt crisis, and that there is a stronger causal link from currency to debt than in other direction.
NobodySpecial
Hey, austerity works wonders for North Korea.
Davis X. Machina
@Democratic Nihilist, Keeper Of Party Purity: The greater the faith the greater the merit, so the most merit accrues to those who believe the absolutely impossible. I expect Tertullian of Carthage to replace Reince Priebus as GOP chair
Another Halocene Human
I don’t understand why Germany is all like “austerity failed in Greece, so let’s try MOAR AUSTERITY” instead of sending in jackbooted thugs to get everyone to start paying taxes. That would create income TO PAY OFF THE FRIGGING DEBTS.
Greece has a baaaaaad hangover from the Ottoman* days, that much is clear.
*-Nothing on the Turks, you see, but their empire was declining for 300 years. Shit got real.
rikryah
BUT this is what they wanted to happen to the USA.
bet on it.
Patricia Kayden
What makes anyone think that the Repubs wanted austerity to HELP the US economy? Wouldn’t it be better for the Repub presidential candidate if the economy is in the tank as we get nearer to the elections?
Matt
Well, if austerity is counterproductive, then it would seem that we should go the other way and spend more.
And if spending more is good, then the more we increase would seem to be better.
If fiscal reality doesn’t matter (as Cheney happened to say, BTW) why not do the opposite and issue every Earth citizen a check for $1M?
Or, is this a matter of degree? Is it that the left wants spending to increase by a small amount, and the right wants to decrease it by a small amount?
If that’s true, then what is the rational, objective way to decide where in that narrow band one should spend?
One thing I refuse to accept, however, is that if your man is in office, then unlimited blank checks are a good idea, and the opposite view is just stupid (and vice versa). That seems to be the sentiment, and all it has done is plunge us into $13T of debt.