The cost of austerity
At the link is an analysis of the devastating effects from famous Excel spread sheet mistake, leading the authors to conclude that austerity in the time of serious economic depression is the best way to go, and deficit spending would worsen things. And off they went, particularly in Europe, slashing spending during the economic crisis.
And later, some other researchers discovered the mistake, but by then it was too late.
None of this means that countries can simply pile on as much debt as they want. Kimball and Wang, for example, warned that "unless the borrowed money is spent in ways that foster economic growth in a big way, paying it back or paying interest on it forever will mean future pain in the form of higher taxes or lower spending." In other words, if borrowed money is spent wisely - for example, on roads or electric grids - then it will promote future growth, which makes paying down the debt manageable. If it's not, high debt might indeed cause future pain.
But that's a mere caveat. Within reason, what these new studies tell us is that increased national debt simply isn't likely to cause growth to slow down. In fact, it might be just the opposite. Increasing the debt in a situation like the one we face now might, by spurring a faster recovery, produce lower debt in the long run."
In some cases it can be even worse. Thanks to massive austerity forced on Spain by the European Union, the unemployment rate there stands at 27 percent. That's higher than what the United States suffered even in the depths of the Great Recession. Nearly 10 percent of the country has been without work for more than two years. And among the young, the unemployment rate is 57 percent.
Let that sink in for a minute. More than half of the young people in Spain are out of work. The figures are just as bad in Greece, and only modestly less catastrophic in Ireland, Italy, and Portugal. Countries have succumbed to armed revolution - and dragged the world into crisis - for less.
Our obsession with austerity has hurt us in other ways, too. Interest rates, for example, have been at historic lows for the past four years. Until recently, in fact, real interest rates were actually negative, which means the federal government could have spent money and then paid back less than it borrowed in the first place. This was a once-in-a-generation opportunity to repair our decaying infrastructure at bargain rates: roads, bridges, airports, rail lines, local transit, electrical grids, gas pipelines, internet backbones, and much more.
And doing so would have been a twofer: These are all projects that employ workers now and contribute to higher economic growth in the future. We're still going to have to perform all this maintenance eventually, but we've missed our chance to do it on the cheap.
And that's not the worst of it. David Stuckler and Sanjay Basu, of Oxford University and Stanford, respectively, have studied austerity episodes both in the past and in other countries, and their conclusion is grim: "Recessions can hurt, but austerity kills." During the Great Depression, they found, states that implemented New Deal programs most quickly saw significant declines in infectious diseases, child mortality, and suicides. snip
And we poured borrowed money into Iraq and Afghanistan, wonderful economic investments in the future, well before the Great Recession hit. The article sorta passes over that aspect......
Here is a link that might be useful: link