How’s that austerity thing working out for you? Part 3

Long story short- Samuelson Economics is science.  It’s predictive and the predictions are confirmed by observation.

Voodoo Economics is just that.  A bunch of rattle shaking shamen dancing around you shouting and chanting in tongues motivated by vanity, greed, and the academic desire for novelty.

Let’s start with Bloomberg shall we?

Conservative Austerity Idea Is Failing: David G. Blanchflower

By David Blanchflower, Bloomberg News

Jan 27, 2011 10:15 PM ET

Fiscal austerity has already been started in Greece, Ireland, Spain and Portugal, and this seems to be pushing all of them back into recession. Over the last four quarters, growth in Greece was negative and falling, and bond investors are once more demanding sky-high returns to compensate their risk. The excuse in these countries was that they have little choice because they are stuck in the European monetary union and don’t have the ability to depreciate their exchange rate.

The U.K. may be a purer case of the harm austerity at the wrong time can inflict. Britain now looks as if it is headed back into recession on fear about the damage that will be done by massive spending cuts and tax increases, which haven’t even gone into effect yet. Government ministers with their talk of austerity have already smashed confidence.

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Despite the government’s claims that its intent was to raise confidence, consumer and business confidence tumbled right after the new government took office.

Businesses and consumers know what is coming and have cut back accordingly. Retail spending has flat-lined. The balance of trade is deteriorating. Unemployment is rising, and house prices have started to fall again.

The Great British austerity experiment

With deficit hawks poised in the US, we watch with great interest UK economic policy. It’s not looking an enviable example so far

Dean Baker, The Guardian

Tuesday 1 February 2011 21.00 GMT

The elite media and the politicians whom they promote would love to see the United States follow the austerity path of the UK’s new government. However, if this path takes the UK into dangerous economic waters, it could provide a powerful warning to the public in the United States before we make the same mistake.

The British economy looks like it is doing its part. The fourth-quarter GDP report showing that the economy went into reverse and shrank at a 2.0% annual rate is exactly the sort of warning that many of us here were expecting. Weather-related factors may have slowed growth some, but you would have to do some serious violence to the data to paint a positive picture. Of course, the austerity in the UK is just beginning. There will likely be much worse pain to come, with a real possibility that the country will experience a double-dip recession, or at least a prolonged period of stagnation.

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The takeaway lesson should be “austerity does not work; don’t go there.” Unfortunately, in the land of faith-based economics, evidence does not count for much. The UK may pursue a disastrous austerity path and those of us in the United States may still have to follow the same road anyhow. But we opponents of that course all appreciate the willingness of the UK to demonstrate the foolishness of this action.

McCaskill Leads Democratic Rush Toward Austerity

By: David Dayen, Firedog Lake

Wednesday February 2, 2011 11:08 am

You could simply not accomplish the cuts in this proposal without massive reductions to Social Security and Medicare. And the fact that this puts those programs “on-budget,” despite their dedicated funding source, is the real tell here. That means that it would be part of the automatic cuts from OMB.

Harry Reid opposes this bill and will fight efforts to put it into action. But it’s only one of multiple efforts where Democrats are crossing the aisle in a bid for austerity. Mark Udall pledged support for a balanced budget amendment, introducing the bill with Richard Shelby. Kent Conrad – who finds McCaskill-Corker unacceptable because it does nothing on the revenue side, which just shows you how extreme a proposal it is – has been working to revive the Bowles-Simpson cat food plan on the Senate Budget Committee. Jeanne Shaheen and Johnny Isakson’s proposal for a two-year budget cycle is perhaps the most inoffensive of these plans (I’d actually go along with that one).

The point is that, with a struggle over the new budget and the debt limit looming, and with conservative activists rallying their representatives to stand firm, you have multiple Democrats perfectly to cut and cap spending, reduce Social Security benefits, and basically drown the government in the bathtub the way that conservatives have always wanted.