Europe Can Spend Its Way to Growth

That’s the claim made by Hannes Swoboda, an Austrian MEP and President of the Progressive Alliance of Socialists and Democrats in that European Parliament, in a recent Wall Street Journal op-ed.

Mr Swoboda said about German reluctance to support continued excessive government borrowing:

Should companies that seek to grow not be allowed to take out loans anymore?  Should states, in order to fight recession and unemployment, not assume debt?

The first, of course, is little more than a disingenuous red herring.  Companies are not governments.  When a company (spends and) borrows too much and cannot repay, only the company’s investors and creditors, and in the most extreme cases the company’s employees, lose.  When governments (spend and) borrow too much, it is that polity’s taxpayers…well, we’re seeing the results of this sort of government irresponsibility play out today in Greece, California, Illinois, the United States as a whole.

…austerity politics and…their antisocial character, proven by record unemployment figures.  The collapse of some governments…notably in France and Greece…further demonstrate the political danger.

Of course generations of dependency on, and addiction to, government handouts don’t have anything to do with the pain of the forced withdrawal that results from these governments’ having run out of OPM.  Not a bit of it.  In fact, though, the only real, long-lasting political danger is to the political incumbents who find at risk their ability to keep the handouts coming and the capacity of the resulting dependency to preserve their power.

Then Swoboda (to coin a phrase) doubled down.

The fact that the current recession was preceded by a decrease of public investment in measures and policies that produce growth and employment clearly indicates that these must be the starting point of an alternative strategy.  In the evaluation of national budgets,…[e]xpenditures for these purposes should not be integrated in calculations of structural deficits….

Italian Prime Minister Mario Monti has already called for policies that favor targeted public investments in growth and employment.…

We actually need to go a step even further. … The European institutions should enact legislation that requires all members to make public investments in growth and employment.

Those public investment measures are nothing more than the repeatedly failed Keynesian policy of “stimulus” spending at the expense of necessary fiscal discipline.  In fact, the current European recession also was not preceded by an increase in private investment—because the money wasn’t available due to excessive taxes and high government spending and borrowing for those dysfunctional spending and borrowing efforts.

Moreover, any remaining government expenditures, including any Keynesian “stimulus” (is there any serious economist who still thinks stuff is sound economics?), must strictly be on the books and in the public’s view.  If Swoboda thinks his policies are so wonderful, why does he demand to hide them behind locked doors and in the secrecy of off the books crony deals?

Finally, Mr Swoboda, not trusting the people to make their own personal and business decisions, demanded to codify in international law a permanent government interference with the market place.

No.  The answer to Europe’s—and the United States’—problems are for government to get out of the way of the private economy.  To get out of the way of the flower of individual ingenuity and out of the way of the collective wisdom of private citizens.

Mr Swoboda had more fanciful claptrap, but you get the idea.  One can only hope that we get the idea this fall.

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