The specter of austerity lies heavy on America. Hardly a day passes without another warning from New York Times whiner and erstwhile economist Paul Krugman, his colleague Nicholas Kristof, and the legion of other progressive apologists that “austerity” is threatening the U.S. recovery and destroying Europe.
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?
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?
In short, austerity is a myth. But the myth does a disservice by blocking efforts for the real changes the economy needs: fundamental entitlement fixes and tax reforms. These reforms are not near-term in nature, are a step to rationality and not to austerity, and will happen either of our own accord or when international lenders force them upon the U.S. The latter should be unthinkable. It is time to put aside the austerity myth.