And then there are those of us who admire those great Founding Fathers, Thomas Jefferson and James Madison - and still think they were right about the role of the state! When they look down on the great republic now, modelling itself ever closer to Europe, what must they think?
Hi streina, I don’t have a clue what they’d think, I know Thomas Jefferson envisaged the future US as a rural country of small farmers, which was already gone by the time he died, but I don’t see us modeling on Europe at all. I think Europe should model more on us. They are mostly socialist in their basic philosophies, after all, and young european entrepreneurs come to the US or England to start a business instead of dealing with the myriad of red tape and regulation in France, for instance. Companies don’t hire in France because of the difficulty of reducing the workforce because of all the socialist rules, if the company should need to at some point in the future, etc.
However, the worst thing for governments to do in a recession is to cut spending. The European governments did just that in the great recession, with their self-righteous “austerity”. The US did the opposite and stimulated the economy. We have been growing for six years and have an unemployment rate down to 5% or 6% or so. The European countries are happy if they grow 0.2% per year, and the unemployment rate is still around 12%.
Why do I say that the worst thing for governments to do in a recession is to cut spending? (Well, I thought everyone KNEW that for starters). The reason is that your spending is my income. When the government repairs a highway or a bridge, or builds one, they pay workers and suppliers who manufacture materials. The people who are paid buy new cars and new refrigerators and more services. The people who are paid by their spending go out and buy more fruit and vegetables and milk and clothes, and the people who sell it to them and work in stores and manufacture it, and grow it, go out and buy new tractors and Starbucks coffee and…etc etc, and at the end of the year, the government taxes all this income and gets back in taxes most of what it spent to get the ball rolling.
When the government doesn’t spend in the first place, or cuts spending, the people who would have worked on the bridge have to cut back, so they don’t buy the new cars and refrigerators, and the workers who made the new cars did’t have as much work and cut back and don’t buy as much fruit and vegetables and milk and clothes, and the farmers who would have sold it to them cut back and don’t buy new tractors, etc, AND, the KEY POINT, the government doesn’t make as much in taxes, so the government deficit goes UP when they cut spending, not down!
You see it in most countries in Europe. They opted for “austerity” and trying to cut deficits! In a recession! They cut back spending, their economies stayed in recession, their deficits have grown, their people still feel poor and don’t spend money. It’s a vicious circle. It’s only in the last year or so that some brave souls are finally saying “This Austerity doesn’t work!” Well DUH… I thought everyone knew that from the start.
Best,
Saul
