Tuesday, April 30, 2013

The austerity tide is turning

Yesterday Neil Irwin wrote an article with a powerful headline: The era of austerity is over (for now). He cites several things that have happened recently - both internationally and in the U.S. - to indicate that the tide is turning.

For example, there's the fact that the research by Reinhardt/Rogoff, which suggested that federal deficits are a drag on the national economy, was recently proven to be based on errors.

Then there's also the fact that our federal deficit is now shrinking faster than at any time since WWII. So much so that for the first quarter of 2013, the Treasury Department was able to pay off some of our national debt.
The Treasury Department announced Monday that it would reduce its level of debt in financial markets for the first time since President Obama took office.

The department said it expects to pay down a net of $35 billion in its marketable debt for the second quarter of 2013, the first time it has done so since 2007.
It's very possible that this is why Republicans are shifting away from a focus on cuts to entitlement programs and towards tax reform as their main issue on the economy.

Of course there will always be those ideologues on the right who cling to austerity as a principle rather than an actual pragmatic need. But perhaps now is the time to pay attention to what the Group of 20 leading nations of the world said following their recent spring meeting.
We reaffirmed our determination to raise growth and create jobs.

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