Thursday, May 10, 2012

Austerity in Western Europe?

"Socialist governments traditionally do make a financial mess. They always run out of other people's money."

 --Margaret Thatcher (1976)

Liberal E.J. Dionne at the Washington Post is apparently a disciple of Nobel-prizewinning economist Paul Krugman.  Krugman, from his lofty perch at the New York Times editorial page, has blessed America with the word “austerity”—budget cutting instead of Keynesian deficit spending to boost economic output. Now Dionne tells us:
it's conservatives who want to follow the Western European path of austerity that voters in France and Greece rejected last weekend. The Obama administration, by contrast, has chosen a distinctly American path that kept austerity at bay. As a result, the American economy has climbed out of the Great Recession more quickly than most of Europe. Had Obama accepted the right wing's assertions that cutting government is the one and only route to prosperity, we would have gone the way of Britain, which is slipping toward recession again. . . Obama's thoroughly moderate economic policies are an excellent example of a practical American exceptionalism. [emphasis added]
Setting aside his assertion--challenged  here--that Obamanomics is actually working, Dionne is going beyond Krugman to claim that Obama, like Krugman and Dionne an unabashed admirer of European democratic socialism (see Obamacare), is in fact the polar opposite of our European friends—he is an American exceptionalist! What hogwash, a Goebbles-like “big lie” except Dionne is just playfully pulling our leg.

Michael Tanner, in the conservative National Review, gives us a more objective slant on what’s actually happening in Europe. Most of the “austerity”—the budget cuts—are small, set in the future, and easily overwhelmed by tax increases on the rich and even new spending. The European record is a chronicle of the very soak-the-rich tax hikes Krugman, Dionne, and Obama so love. Country by country:

➢ Portugal . . . pumped more than €2.2 billion into [its] economy in 2009, 1.25% of its GDP. The result[:] economic growth stayed negative, while unemployment rose by roughly 3 million.

➢ France [imposed] a 3% surtax on incomes above €500,000, an increase of 1% in the top marginal tax rate (from 40% to 41%), and [halted] automatic indexation of tax brackets for inheritance, wealth, and income taxes. [It hiked] the corporate income tax on businesses with revenue of more than €250 million, . . . the capital-gains tax, and [closed] several corporate tax breaks. And [t]here was an increase in the Value Added Tax (VAT) and the excise taxes on tobacco and alcohol.

➢ Britain [hiked] the personal income tax to 50% for those earning more than £150,000 a year[, which decreased] income-tax revenues by £509 million. . . British government spending still consumes more than 49% of GDP. Government spending actually increased by £59.2 billion from 2009 to 2011.

➢ Spain imposed a “wealth tax” on citizens with €700,000 of assets, and a 7% income tax on those earning more than €300,000 per year; capital-gains taxes were also hiked.

➢ Italy imposed a “Solidarity Tax” of 3% on all taxpayers who earn more than €300,000.

➢ Greece increased taxes by nearly twice as much as it cut spending, including a 5% surtax on the wealthy.

Tanner also notes that governments boosted the infamous European VATs (value added taxes), along with fuel, alcohol, and tobacco taxes, nearly everywhere, all of which hit the average Jacques. Tanner concludes,

It should come as no surprise that all those new taxes, combined with a lack of spending restraint, has threatened to throw Europe back into a double-dip recession. Is it any wonder that French, Greek, and British voters were anxious to “throw the bums out”? 

So, setting the record straight, Europe did what Obama wants by taxing the rich, it didn’t work, and Europe responded by voting their leaders out.

No comments: