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‘Austerity’ versus ‘Growth’
Western governments clothe their irresponsibility in misleading words.

President Obama talks about the economy, June 8, 2012.

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Victor Davis Hanson

Who would not prefer “growth” to “austerity”? That is the false dichotomy that insolvent Western governments, both here and abroad, are now constructing. After all, everyone prefers growing things to starving them. Yet in truth, there is no such clear-cut choice.

In other words, “austerity” is a lie. For all the talk of terrible hardship and suffering, most of insolvent southern Europe still enjoys entitlements undreamed of by prior generations. When the French lamented that they were being squeezed to death by postponing retirement, they meant to age 62 rather than 60 — a futile reform soon to be rescinded by new French president François Hollande.

In the case of the United States, “austerity” does not mean significant cuts in food stamps, reductions in unemployment eligibility, or a raised retirement age, but simply not adding new entitlements to those that recently were vastly expanded. It is a trademark of human nature that people resent any reduction of a benefit, or even only a moderate expansion of it, far more than not having it offered at all. Talk today of cutting the Medicare Prescription Drug Benefit or No Child Left Behind, and hysteria follows — without recognition that neither program even existed before the presidency of the unpopular George W. Bush.

But there is an even worse fraud in the new notion of “austerity”: It now commonly refers only to the level of government spending versus revenue, not to fundamental changes in the nature of regulated and closed economies. “Austerity” — the pruning back of government support — is supposed to lead to all sorts of social tensions and civic unrest. By contrast, “growth” — even more government spending — restores calm. But if labor markets are highly regulated and inflexible, if the tax structure is byzantine and punishes entrepreneurs while promoting the black market and cheating, and if government regulations crush new businesses, then the problem goes well beyond a question of expanding or cutting government benefits.

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The crisis in Greece involves not just the question whether the government must cut services and prune its labor force, but also the fact that the entire Greek legal system and national culture punish risk-taking and profit-making while rewarding timidity within a landscape of envy and jealousy. What the Greek government chooses to spend is important, but is rendered unimportant if endemic tax cheating and the regulatory straitjacket are left unaddressed.

In the case of the United States, had Barack Obama reformed the tax code to promote investment and entrepreneurialism, vastly stepped up oil and gas leasing on public lands in lieu of subsidizing Solyndra-like boondoggles, and trimmed back regulations, the economy would have grown far faster, even despite Obama’s vast deficits. To take an example from the private sector, the Harvard graduate with $200,000 in student loans and a sociology degree is in terrible shape; the Harvard graduate with the same level of debt and an engineering or business degree is not.

But if the bogeyman term “austerity” is misleading, even more ridiculous is the fuzzy new idea of “growth” — the notion that by not cutting back massive borrowing and high deficits, governments can create new wealth and grow themselves into prosperity. Here in the United States, we “grew” by adding $5 trillion in new borrowing — and got annual GDP growth of less than 2 percent, 40 months of 8 percent–plus unemployment, $4-a-gallon gas, and serial $1 trillion deficits. If having near-zero interest rates, borrowing more than all previous presidents combined, and putting 50 million people on food stamps is a policy of “growth,” what would be needed to actually show results? Negative interest rates? New debt of $10 trillion? More than 100 million on food stamps?

Does anyone think austere Texas is growing more slowly than big-government California or New York? When southern-European countries piled up trillions in debt over the last decade, did such public “stimulus” and “growth” lead to far greater productivity, wealth, and security than in “austere” Germany or Scandinavia?

So there is a disturbing counterfactual element of “never enough” inherent in the “growth” argument. There is little empirical evidence that borrowing creates national wealth, but it is still promoted on the principle that past efforts to boost the economy by running up gargantuan deficits always were too small. Thus Obama supposedly failed to restore the economy in his first term only because he did not dare to borrow $10 trillion rather than a mere $5 trillion — even though most severe recessions by now would have given way to a natural cycle of robust recoveries.

Finally, there is one more problem with the fake growth/austerity juxtaposition. They are both simply reflections of much deeper ideologies that drive politics. “Growth” is a euphemism for the politics of hiring lots of government workers, preferably unionized, and expanding the number of people dependent on government, who in turn owe politicians their jobs and reciprocate at the polls in expectation of even greater largesse. The costs of expanding the number of government employees and offering them ever higher salaries, benefits, and retirement packages are met not through increasing productivity, but rather by increasing taxes on those who mostly make their livings under very different conditions in the despised private sector.

“Growth,” then, is a sort of “gorge the beast” antithesis to the Reaganite “starve the beast” model. Both ideologies seek to avoid insolvency through a game of chicken — of front-loading the cost and hoping the other guy will blink first when it comes to paying for it. But where the Reagan model sought first to cut taxes, so as to cut revenue, so as to force down the size of government and prune federal dependency, the Obama paradigm seeks first to grow government, which increases dependency and therefore requires more taxes — itself a good thing because it means redistributing income from those who have no clue that they have passed the point at which they no longer need to make any more money.

If politicians talked not of “growth” versus “austerity” but of “borrowing and spending” versus “fiscal discipline,” then there would be very little public support for their disastrous agendas. Instead, we are supposed to like the nurturers who “grow” and despise the “austere” who hack away.

It’s that simple.

NRO contributor Victor Davis Hanson is a senior fellow at the Hoover Institution and the author most recently of The End of Sparta, a novel about ancient freedom.



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