In Ireland, a Picture of the High Cost of Austerity

[Hosnon]

Source: New York Times

DUBLIN — As Europe’s major economies focus on belt-tightening, they are following the path of Ireland. But the once thriving nation is struggling, with no sign of a rapid turnaround in sight.

Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.

“When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow,” said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. “A lot of the argument was, ‘Let’s get this over with quickly.’ ”

Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.

http://www.nytimes.com/2010/06/29/business/global/29austerity.html

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This is real-world evidence (as opposed to theoretical musings) that reducing government spending in a severe downturn makes the problem worse.

[Gold Metal Flake]

1. On whom did they raise taxes?

Wondering if their tax structure is so geared to benefit the rich as ours is.

[brentspeak]

2. When the Irish housing bubble was inflating, free market economists were celebrating

the "magic" of the "free market".

Now that it has burst, those same tools have become strangely silent.

[tjwash]

3. Wait...didn't some idiot spam this board a couple months ago with some BS article...

...about how much we suck-ass in the U.S. and how everything in Europe is so utopian and perfect, and how they have no problems whatsoever? It threw out a bunch of strawmen about how people in a 3rd world Philippine villages are better off than your average New York City urban dweller?

Some stupid crap like that? Anyone remember that?

[liberal N proud]

4. Why is this so difficult to see?

Ireland is a perfect example and if I recall, Japan had a similar problem several years ago, they cut the stimulus and dipped right back into a deep recession.

People are blind if they don't see the benefits of government stimulus.

[Hosnon]

5. I firmly believe that government spending should be counter-cyclical:

High in lean times, low in boom times.

What we desperately need right now is for the federal government to use its credit to build a bridge over the gap in the real economy. Once we come out the other side, they can cut back and pay down the deficit.

[liberal N proud]

6. They could start by building more bridges.

Bridges, roads, high speed rail (oh, that should help the economy and energy dependence), infrastructure in general.

The government needs to rekindle the CCC from the 30's and put people back to work.

[Hosnon]

7. x 1.

Wait...

[murray hill farm]

9. agree!

If the gulf states could begin now to replace the oil drilling platforms with wind energy platforms (4000 or so), it would give employment to thousands and thousands and thousands of people...and begin the process of change that would save our environment. I don't know how this could be done by the gov't, but I believe it could be done by some sort of emergency action by the President.

[kenfrequed]

8. This austerity crap is pure Shock Doctrine

Seriously!

[OHdem10]

10. Many European Countries hung a right turn a few years back.

All this belt-tightening when the Recovery is so tight can
only bring about Herbert Hoover Results. 1929 and the
Great Depression. Going by the Conservative "principles"
Hoover tightened the belt right into the great Depression.

If other European countries follow the belt tightening
rules, they could pull us down into a double dip or another
Great Depression.

Keep your fingers crossed and encourage Obama to hang tight
--no belt tightening until the Economy is stronger.