Latvian Success in Austerity...

polifrog



These folks are a little confused and are jumping the gun in their assessment of Latvian success.  Success requires more patience and arbitrarily labeling the finish line early is unfair.  And the idea that banks benefit from austerity more than they do from bailouts is shaky in the least.

Even so, even when couched in tongue-in-cheek delivery there is a kernel of truth.  Success and growth only comes from pain and Latvia's choice to avoid the burden of Keynesian debt is already reaping health and growth.

Enjoy:






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"Austerity" Surrounds But None to be Found....

polifrog




We are endlessly berated over the failure of austerity in America when no austerity has been undertaken. The failure has been in what has been undertaken Keynesian economics.

Douglas Holtz-Eakin:

Where is this austerity? It is certainly not anywhere to be found in the federal budget. Total spending in 2011 was $3.598 billion in 2011, higher than the stimulus-bloated total in 2009, and 21 percent higher than the year of the Bush administration. Austerity?

Maybe the austerity is found in discretionary spending — the annual decisions of Congress. Mandatory spending — entitlements — continues its relentless march to the (red) sea, up to $2.215 billion in 2011 or 24 percent above 2008 levels. But discretionary spending in 2011 was $1.346 billion, an entire $1 billion lower than in 2010. One billion dollars. To be sure, the new Congress put the brakes on the discretionary-spending binge, but austerity it is not.

Or, perhaps the austerity stems from the draconian Budget Control Act of 2011 — the so-called debt limit deal. The BCA “cut” $917 billion from discretionary spending over the next 10 years. Sort of. Actually those “cuts” are promises that a future administration and Congress in, say, 2018 will spend less that it would otherwise (honest, really and truly, cross our hearts). Hopeful thinking, yes. But austerity?

Maybe the austerity is sneaking in at the sub-federal level. Mr. Krugman is fond of making this claim. But the data don’t really bear that out. In the National Income and Product Accounts state and local spending has risen the last three straight years and is back to 2008 levels. And recall that 2008 spending was bloated by bubble-driven revenues, to the point that it was over 50 percent above 2000 levels. Austerity?

The only austerity that has been implemented whole heatedly can be found in the only European nation to receive debt rating upgrades, Estonia:

Skype And Sensibility:

Estonia finally joined the euro zone this January. The euro had always been the country's declared goal. In the last few years, starting in 2008, the Estonians had fought their way through the worst economic crisis they had ever seen, triggered by the global financial crisis and the bursting of the local real estate bubble. The economy shrank by 14 percent in 2009.

Then three things happened. First, the government announced a harsh austerity program. The government bureaucracy was thinned out, healthcare and social services were cut back, and even the streetlights in Tallinn were switched off at 3:30 in the morning. Businesses reduced wages by up to 40 percent, with the promise they would be increased as soon as the economy improved. The government did not pump borrowed funds into the economic cycle. Instead, it did what economists call internal devaluation.

...

In the middle of this year, two rating agencies, Standard & Poor's and Fitch, upgraded Estonia's credit rating. The country had a budget surplus of €115 million in the first two quarters, and it is expected to virtually balance its budget for the entire year. Government debt is about 6.6 percent of the gross domestic product, as compared with 120 percent in Italy, 160 percent in Greece and 80 percent in Germany. In the first two quarters of 2011, the Estonian economy grew at an annualized rate of 8 percent.

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Ask Not What Keyes Can do For You, But What Austerity Can Do For Your Nation...

polifrog




 Skype and Sensibility:

In the middle of this year, two rating agencies, Standard & Poor's and Fitch, upgraded Estonia's credit rating. The country had a budget surplus of €115 million in the first two quarters, and it is expected to virtually balance its budget for the entire year. Government debt is about 6.6 percent of the gross domestic product, as compared with 120 percent in Italy, 160 percent in Greece and 80 percent in Germany. In the first two quarters of 2011, the Estonian economy grew at an annualized rate of 8 percent.
...

"But when we had finally escaped from Soviet socialism, we were sick and tired of government centralism. We wanted precisely the opposite in all respects: We wanted a transparent state. A country that isn't constantly intervening, nationalizing businesses, placing a bureaucracy above everything and imposing rules on people in every respect."

...

"I don't want to pass judgment on Germany or Greece. All I can say is that Estonia is contributing its part of the bailout fund, even though our average income is smaller than that of the Greeks. And that, by the way, is a bitter pill to swallow for many Estonians."

...

Estonia finally joined the euro zone this January. The euro had always been the country's declared goal. In the last few years, starting in 2008, the Estonians had fought their way through the worst economic crisis they had ever seen, triggered by the global financial crisis and the bursting of the local real estate bubble. The economy shrank by 14 percent in 2009.

Then three things happened. First, the government announced a harsh austerity program. The government bureaucracy was thinned out, healthcare and social services were cut back, and even the streetlights in Tallinn were switched off at 3:30 in the morning. Businesses reduced wages by up to 40 percent, with the promise they would be increased as soon as the economy improved. The government did not pump borrowed funds into the economic cycle. Instead, it did what economists call internal devaluation.

The second -- and oddest -- development here was that the Estonians stoically accepted these measures. There was no unrest and no protests.

The third thing that happened was the positive outcome of this blood, sweat and tears strategy. Last year, Estonia easily satisfied the Maastricht criteria. In fact, its government finances were sounder than anywhere else in the European Union.

The US was once an Estonia, but unfortunately according to Nixon we are all Keynesians now.




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Anything but Austerity...Internet Tax -- Transaction Tax....

polifrog


New taxes. If they are new taxes then they are not being raised. Yea.

They are floating a transaction tax to pay for our debt:

One idea for raising taxes to pay down the debt is the bill introduced this February by Rep. Chaka Fattah (D-Pa.). His “Debt Free America Act” (H.R. 4646) would impose a 1 percent “transaction tax” on every financial transaction — whether paid by cash, credit card or any form of financial transfer, the only exception being transactions involving the purchase or sale of stock. Theoretically, everyone would pay one cent on the dollar for every such transaction in America every day — whether $3 million on a $300 million business acquisition, $300 on the purchase of a $30,000 car, or $5 on a $500 ATM withdrawal.

Also they seem to be reviving the idea that we should tax into submission one of the only bright spots we can point to...the internet.

The president’s deficit commission is expected to report its recommendations shortly after the midterm elections. It’s widely expected that Congressional leaders may attempt to push through any tax increases during the lame duck session – before a new Congress is sworn in, in January. Don’t be surprised if a new tax on internet commerce is seriously considered.

You see, we have to pay for the non-stimulation stimulus packages, bank bailouts, and cheap home loans the fed gave us by purchasing our own treasuries.

Are you stimulated yet?

Polifrog would find austerity far more stimulating.

Of course, brought to you via RedState.



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