In my ongoing series on the stupidity of austerity cuts to cure deficits, here’s a new analysis that once again proves the point. The lede says it all:
Europe’s “no pain no gain” attitude to solving its sovereign crisis risks exacerbating the bloc’s problems, choking off the very growth needed to raise the money to pay down the debt.
There is no confidence fairy that will magically come to the rescue because governments enact slash and burn spending cuts that kill consumer demand. And ratings agencies are downgrading Europe’s ratings because of “dismal growth prospects and an inability to pass growth-enhancing reforms,” not because of budget deficits.
It’s common sense. The way to grow an economy is put money in people’s pockets. They spend the money and the economy and the revenue base grows. In other words, as one expert puts it, “The expansionary fiscal contraction story is a lie. You don’t cut your way to growth.”