Budget Austerity Proved a Joke, But the US and Europe Won't Change Course [View all]

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http://www.commondreams.org/view/2013/05/07-1

t appears that the Reinhart-Rogoff battles over their faulty data about government debt have flamed out. Even the inventors of the 90% debt cliff are now anxious to portray themselves of cautious supporters of expansionary fiscal policy. This should mean that sober policy types everywhere can turn to the immediate problem of reducing unemployment with more expansionary fiscal policy.

Unfortunately, this does not appear likely to happen. Even though the case against fiscal policy has been blown to smithereens, there is little impulse in the United States or Europe to change course. The counter-argument appears to have two sides. First, growth has picked up so that we don't really need it. Second, we really wouldn't know what to spend money on in any case.

Neither of these arguments deserves to be taken seriously on its merits. But they nonetheless must be taken seriously because of the prominence of the people who say them.

The argument that the economy is picking up in the United States stems from the April jobs report that showed a slightly better than projected 165,000 jobs added. (In the United Kingdom, celebrations broke out over the fact that GDP grew at a 1.2% percent annual rate in the first quarter). These reports provide a rather flimsy basis for optimism.