Home > Domestic Issues, Economy, Policies, World Issues > Austerity is the new Policy

Austerity is the new Policy

Happy New Year…..unless you’re in Britain.

On January 1st, a number of austerity measures went into place in order to help reduce their record deficit of around 150 billion pounds (174 billion euros, 231 billion US dollars).  One of the measures that have gone into place is an increase in their Value Added Tax from 17.5 to 20 percent.  There was a rush over the Christmas holidays to purchase big ticket items like televisions before the VAT went up.

Another sign of the times is a cut in government funded food handouts.  In Britain, a family can get a food assistance package – three days of milk, canned meats, fruit, pasta, and other essentials.  Over the past two years, the number of families that are receiving assistance has nearly tripled, and its expected to rise even more between now and 2015.  It’s expected to rise so much that the government will need to build nearly six hundred additional food banks in order to meet the demand for services.

Economists are saying that between the VAT increase, cuts in emergency food assistance, and other austerity measures, that unemployment is expected to rise over the next year, shedding an additional 350,000 private sector jobs.  Along with the job losses, these measures will keep GDP growth down to a meager 2 percent, which is barely enough to hold steady with the sluggish economy and loss of jobs.

Here in the US when the new Congress opens for business this week, there will be a push by Tea Party Republicans to limit our debt ceiling and start our own round of austerity measures beginning with cuts in discretionary spending.  However, many economists, economic advisers, and even Conservative columnists are saying that doing so will only hurt our chances for economic recovery.  As I posted on my Wish List for 2011, we need to start working on paying down our deficit and working toward not having our children and grand-children saddled with a debt they will never be able to pay off, but we can not afford to do so with one hand or both hands tied behind our back.  If we enact austerity measures and not raise the debt ceiling, that will only give the impression that we will not be able to ever pay off our debtors and that could ignite a new round of recessions around the world.

Regardless if we like it or not, the economy of the United States is linked with economies around the world.  If there is a major economic downturn here, it could send ripples of uncertainty that may slow down the recovery of Britain, France, or other European allies.  It could also hurt relations with Saudi Arabia and even China, who is our largest debt holder.

We need to change the dynamic in Congress from one that is headed toward financial suicide to one that will grow jobs and the economy.  What ideas do you have that would help this discussion?  What would you say to your Congressman?

F

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