Respectfully submitted by Lawrence E. Rafferty (rafflaw)- Guest Blogger
Everyday we read about the latest call for drastic cuts in government spending and claims that our national debt is killing us. Those calling for the cuts claim that austerity is the only way that we can get the economy moving again. To that end they call for cuts in Social Security, Medicare, SNAP and many other assistance programs, but consistently refuse to cut our immense defense budget. Where else have these calls for austerity been made into law and what are the results of these programs?
If you look to Ireland, you can see just one example how austerity has brought a country and its people, to their knees.
“Today, Ireland is under a different sort of tyranny, one imposed by the banks and the troika—the EU, ECB and IMF. The oppressors have demanded austerity and more austerity, forcing the public to pick up the tab for bills incurred by profligate private bankers.
The official unemployment rate is 13.5%—up from 5% in 2006—and this figure does not take into account the mass emigration of Ireland’s young people in search of better opportunities abroad. Job loss and a flood of foreclosures are leading to suicides. A raft of new taxes and charges has been sold as necessary to reduce the deficit, but they are simply a backdoor bailout of the banks.” Nation of Change
How did Ireland get into this immense cavern of debt? Irish leaders decided that it was in the best interest of the country to bail out its failing banking system and guaranteed all of their banks deposits, loans and bond liabilities. Where have I seen that played out before? Once the Irish made that guarantee, the country’s economic troubles got worse.
It was only a very short time before the results of the bank guarantees came to fruition. “Within two years, the state bank guarantee had bankrupted Ireland. The international money markets would no longer lend to the Irish government.
Before the bailout, the Irish budget was in surplus. By 2011, its deficit was 32% of the country’s GDP, the highest by far in the Eurozone. At that rate, bank losses would take every penny of Irish taxes for at least the next three years.” Ellen Brown
The Irish bankruptcy got even worse when it was forced to borrow bailout funds from the European Union and the International Monetary Fund. The bailout required the Irish government to make drastic spending cuts.
“To avoid collapse, the government had to sign up for an €85 billion bailout from the EU-IMF and enter a four year program of economic austerity, monitored every three months by an EU/IMF team sent to Dublin.
Public assets have also been put on the auction block. Assets currently under consideration include parts of Ireland’s power and gas companies and its 25% stake in the airline Aer Lingus.
At one time, Ireland could have followed the lead of Iceland and refused to bail out its bondholders or to bow to the demands for austerity. But that was before the Irish government used ECB money to pay off the foreign bondholders of Irish banks. Now its debt is to the troika, and the troika are tightening the screws. In September 2013, they demanded another 3.1 billion euro reduction in spending.” Nation of Change
The cuts and austerity measures required by the EU-IMF sound familiar to me. Privatize government assets and bailout the banks who were the original cause of most of the economic hardship and everything will be peachy keen. It seems clear that these required austerity measure have not restored the Irish economy.
If you research the issue, austerity has never brought any country back from financial collapse. All it does is reward the bankers who gambled the depositors funds and private corporations who jump in to purchase valuable public infrastructure for a pittance. One former IMF official confirms that history shows us that an austerity program has never succeeded in rehabilitating an economy.
‘ “The only instrument left to address this in the short term is the fiscal instrument and that requires complete rethinking of how aggressive and how persistent the austerity has to be,” Mr Mody said.
There was “not one single historical instance” where austerity policies have led to an exit from heavy debt burden. Changing policies could possibly lead to growth, reduce debt levels and also prompt a “psychological boost” for the economy, he added.’ ” Irish Times
Can we learn from the tragedy in Ireland? Their efforts to cut their way to prosperity have failed miserably and I submit that the calls for austerity in this country are asking for the same result.
A professor at Denison University in Ohio, Dr. Fadhel Kaboub, also suggests that austerity has not worked in Ireland and will not work. ” Austerity measures are not only incapable of solving the sovereign debt problem, but also a major obstacle to increasing aggregate demand in the eurozone. The Maastricht treaty’s “no bail-out, no exit, no default” clauses essentially amount to a joint economic suicide pact for the eurozone countries.” Nation of Change
When you read about demands of sequestration cuts and cuts to food stamps and Social Security and Medicare, do not forget that this is all part of an austerity program. Ask any Irish citizen how that worked out for them. They are now investigating public banks to aid them in breaking the chains created by austerity. Can the United State learn a lesson from the austerity programs in Ireland and the rest of the European Union?
What do you think?