Paul Krugman's piece today characterizes Great Britain's latest fiscal austerity program as a fad. He also tags it as destroying the welfare state under the guise of saving the economy. Unlike the US, Britain does not print dollars, so they can't get out of a recession by issuing new money. If they print new pounds, the value of the pound will go down against the dollar. Ironically, for the US, it's good to be the King.
I'm not in Krugman's league by a long shot, so I'm sure he's right. One of the things people like about Dr. Krugman is that he dares to consider morality as part of economics. Most economists are solely concerned with efficiency and output. It is not settled that these are worthy goals, certainly not in and of themselves.
Ancient Rome, for example, was efficient. The price for this efficiency was a ruthless upper class, slavery, war, and a permanent police state. Many economists would consider it a victory if the US abandoned democracy for fascism, because the GDP and DJIA would blow up.
Anyway, I think the instinct towards austerity comes from home economics. Most mature people who have families know that they have to have a budget. The budget is based on income, which is fairly predictable for most families, and expenses. Regular expenses can be predicted fairly well, and they place a limit on leftover, or discretionary income. Extra income is saved first, then spent cautiously.
In a family, when income goes down or is interrupted, the first choice is to cut all discretionary spending, then stop saving, then cut fixed expenses as much as possible, then use up savings, then borrow money as a last resort. These are the economic principles our parents teach us, both in word and by example.
Conservatives are mad because they think the government has been a bad family. We haven't been saving, we've been borrowing money to buy extravagances, we haven't been strict about fixed expenses, and we're borrowing out the wazoo. (whazoo? sp?)
Anyway, the US government, for the past 30 years, has been a dysfunctional family. The idea of government paternalism or maternalism has gone out of fashion. If the US economy was ever family-oriented, Dad and Mom separated in 1980 and sent the kids to a private boarding school. The home economics model doesn't apply to our country's economy because it is a "broken home." Mom and Dad decided they could make a buttload of money if they didn't have the damned kids to worry about. Now they only pay what the courts ordered them to pay as child support and not a penny more. And they bitch about that, into their iPhones, in their Porsches.
And now, the boarding school they sent the kids to is broke and wants Mom and Dad to take the kids back. Dad says, "I'm not paying taxes (child support) to help these spoiled kids! You take them." Mom says, "Why don't you and your fucking whore (Ayn Rand) raise them!" So they bought the boarding school instead of helping out the kids . . .
And then they get all indignant when the kids become potheads and prostitutes.
At the risk of badly overextending this analogy, raising kids, like governing, is expensive and hard. A family (or country) that is truly down and out has to first pull together and recommit to each other so everybody calms down. Our strength is in each other. Then you go and borrow the money necessary to feed the kids FIRST, or maybe sell the Porsche.
In other words, in times like these, you take care of the citizens who are out of work, the citizens who have lost home value, the citizens who have lost 1/2 of their retirement funds, and the citizens who need health care. If you have to steal from those with extra money, so be it. Do it at gunpoint if you have to. It's the kids we're talking about.
But it shouldn't have come to this. Countries like France and Sweden, who had set up responsible social welfare programs to protect citizens against the vagaries of free market capitalism, have made it through the recession with much less agony.
I understand that they gave up a few growth points to do it. I call that one of the sacrifices good parents make. Being a rich family is not as important as being a safe, secure family.