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Wednesday, September 04, 2013

'The Austerian Mask Slips'

Many of us have argued repeatedly that the push for austerity was, for many, nothing more than a means of achieving the ideological goal of a smaller government, hence the opposition to increases in taxes to solve the budget problem and the insistence that it come trhough spending cuts. Paul Krugman highlights evidence that this is true:

The Austerian Mask Slips: Simon Wren-Lewis looks at France, and finds that it is engaging in a lot of fiscal austerity — far more than makes sense given the macroeconomic situation. He notes, however, that France has eliminated its structural primary deficit mainly by raising taxes rather than by cutting spending.
And Olli Rehn [European Commissioner for Economic and Monetary Affairs and the Euro and vice president of the European Commission] — who should be praising the French for their fiscal responsibility, their willingness to defy textbook macroeconomics in favor of the austerity gospel — is furious, declaring that fiscal restraint must come through spending cuts.
As Wren-Lewis notes, Rehn is very clearly overstepping his bounds here: France is a sovereign nation... — and is not, by the way, seeking any kind of special aid from the Commission. So he has no business whatsoever telling the French how big their government should be.
But the larger point here, surely, is that Rehn has let the mask slip. It’s not about fiscal responsibility; it never was. It was always about using hyperbole about the dangers of debt to dismantle the welfare state. How dare the French take the alleged worries about the deficit literally, while declining to remake their society along neoliberal lines?

    Posted by on Wednesday, September 4, 2013 at 02:34 AM in Economics, Fiscal Policy, Politics | Permalink  Comments (19)


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