Where Are the Alternatives?

I heard it again yesterday.

A financial commentator on BBC radio pronounced that austerity is a bad idea. He was talking specifically about Spain, but I have heard other pundits say the same thing about Greece, Ireland and even the United States.

It’s something I have heard callers say to National Public Radio’s Talk of the Nation: “Austerity never works.” I’ve heard that exact phrase so many times from so many people that I suspect it is on a list of talking points somewhere. But it’s such a strange thing to say.

While technically accurate, the statement is basically nonsense. It is like saying that starving doesn’t work. No, it doesn’t, and who in his right mind would choose to starve?

And that is the problem with the argument that “austerity doesn’t work.” By implication, it supposes that austerity is simply one policy choice among several. But let’s be clear. No politician chooses to implement austerity, which means cutting government spending and/or raising taxes. It is something that happens because a government has no other remaining options or it is imposed by other governments or agencies outside the country. Governments resort to austerity for the same reason an individual cuts up his credit cards. The money is gone, and no one is willing to lend you more. Austerity is simply an acknowledgement that there is no point writing checks only to see them bounce.

Of course, the rules that apply to individuals don’t necessarily apply to governments. Some of this rhetoric describing austerity as something purely optional stems from the fact that governments are seen to always have options that you and I don’t. What this means is that governments have more places to try to find credit and/or gifts of money. If they control their own currency (something that is not true of Spain, Greece or Ireland), they can confiscate money from their citizens by issuing more currency (thereby reducing the value of money in the citizens’ pockets) and appropriating the excess for themselves. But this only works for so long because you can only debase a currency so much before creditors stop taking it.

I have heard Representative Paul Ryan’s proposed budget described as an austerity budget, but it can hardly qualify for this description for any thinking person. It merely slows the growth of government. It doesn’t reverse it. It fundamentally changes how Medicare works and has been roundly attacked for that. But every honest person has conceded for years that the current form of Medicare is not sustainable. If the people who say they want to “save” Social Security are sincere, why do they not propose their own solution? The answer is that there is no solution that doesn’t involve some pain, so they simply attack Ryan’s budget—for political advantage. Or they imply that higher taxes on the rich is the solution, despite the fact that even a 100-percent rate on high-income individuals would not cover the deficit. Obamacare has only made the problem worse because it cannibalizes Medicare so that its authors were able to produce on paper the fiction that it would not increase the deficit.

It is no surprise that so many politicians are choosing to criticize rather than to solve. But what surprises me is how many opinion makers in the press are playing this game as well—taking potshots at the Ryan budget and suggesting no alternative.

Is there a better solution than the Ryan budget? There could well be. But right now Ryan’s plan is the only game in town. The president’s latest budget did not get a single positive vote in the House of Representative and the Senate has not passed a budget in three years. Ryan’s budget may be doomed and may even doom Mitt Romney’s presidential campaign. But some day, in a worst case scenario, it may be looked back on as the final missed opportunity that could have kept the U.S. economy from tanking.