The end of the age of austerity even before it began

detroit

The US is heading the way of Detroit. Is there really no stopping this pillage. The headline is just as mad as the text of the story: With 2015 budget request, Obama will call for an end to era of austerity.

President Obama’s forthcoming budget request will seek tens of billions of dollars in fresh spending for domestic priorities while abandoning a compromise proposal to tame the national debt in part by trimming Social Security benefits.

With the 2015 budget request, Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans. Instead, the president will focus on pumping new cash into job training, early-childhood education and other programs aimed at bolstering the middle class, providing Democrats with a policy blueprint heading into the midterm elections.

Does anyone in the United States think that public spending has actually been restrained? Do they actually also think that more spending will give them faster growth and higher employment? And the policy blueprint is a series of unproductive, wasteful projects that will waste more value than it creates. Early childhood education is just so value adding, in about twenty years when these children finally start to work and are so much more productive because of their early start on the education treadmill.

By the time of the next election, there will be a much reduced USA for others to salvage. It’s clearly a train wreck that no one can stop.

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43 Responses to The end of the age of austerity even before it began

  1. GC

    It sure is a train wreck ….. Just finished Mark Steyn’s After America book which brilliantly sets the scene of the current state of their financial affairs ….. and his dire predictions for their future.

  2. Sea Wolf

    “….other programs aimed at bolstering the middle class…” They’ll have to be quick. The middle class is unlikely to exist by 2015.

  3. johanna

    From my scanning of the UK press, it is the same over there. “Austerity” means slightly reducing the rate of growth of government expenditure, which already exceeds income.

    Yet the Keynesians claim that even this kind of “austerity” could wreck the economy.

    They are like kids who have been given Mummy and Daddy’s credit card and PIN.

  4. Bruce of Newcastle

    There is something odd going on in the Left. They seem to have lost any understanding of prudence, or of the dire costs of imprudence. Like Anne Summers today in the SMH who is actually saying how wonderful red tape is. Bonkers.

    All successful civilisations have built their success on surpluses, which could then be used to support armies and thinkers and infrastructure building. The Left appears to think this can all be dispensed with and we can all live a life of ease if only the government prints more money to pay for our welfare.

    There must be a crack-up eventually. This Zimbabwe-like magical thinking just doesn’t work, something will happen to break them out of this strange fluffy place they have gone into.

  5. lem

    The US goes from strength to strength now that Harvard has appointed Kevin Rudd to assist them on researching and implementing policies to improve the China-US relationship.

    Wonder what the ratf&&%ers think of that?

  6. Derp

    Obama has negotiated in bad faith every time, why should this be any different?

  7. Ralph

    G’day,

    Steve, hat makes you think there’s is going to be anything to salvage? There’s not much to salvage in Detroit and the remaining inhabitants seem to lack the interest or the ability to change.

    ta

    Ralph

  8. Cold-Hands

    This is the ultimate result of journalist “profession” that have abrogated their professional responsibilities and instead have become uncritical boosters of their chosen messiah. No politician would dare to propose such an illogical destructive policy if there was any chance of a media prepared to rationally examine its ramifications. Obama is an ignorant buffoon who would never have been elected President if the fourth estate (now a fifth column) was doing its job.

  9. Tel

    Since the phrase “era of austerity” has no relation to government spending, I’m sure Obama can find someone in the USA living in austerity. I’m using the dictionary definition of “austerity” here (being a bit traditional in this way).

  10. Crossie

    No politician would dare to propose such an illogical destructive policy if there was any chance of a media prepared to rationally examine its ramifications.

    True. First, they ignore the fact that the ‘era of austerity’ still applies is due to Obama’s policies or lack of them. Then to compound the problem they encourage him in further stupidity. That saying how insanity is repeatedly doing the same thing and expecting different results certainly applies here.

  11. duncanm

    There is something odd going on in the Left. They seem to have lost any understanding of prudence, or of the dire costs of imprudence

    Bruce,

    I’m not sure there’s any evidence they know what prudence is.

    They’ve always been saved by conservative / right governments.

    The more extreme the leftism (Argentina, Chile, et al.), more extreme the swing back to the right for economic recovery.

  12. duncanm

    .. and that’s one of my concerns. The worse Obama makes it now, the more painful the response will be in the end.

  13. cynical1

    It’s too late in the West.

    Too many people rely on welfare and such and any politician proposing a change has
    no chance of being elected, and even if elected, what do you do? Where do you start
    cutting?

    Basically, the welfare stops the ferals going feral, but eventually they will,
    because the dancing has to stop somewhere

    The line is just being put further back by insane, unproductive borrowing to finance the Payola.

    Which means even more pressure building up in the pot for when TSHTF.

  14. Mk50 of Brisbane, Henchman to the VRWC

    Bruce:

    There must be a crack-up eventually.

    Yes, of course, and it won’t be pretty and they will not see it coming. We will, and can prepare.

    This Zimbabwe-like magical thinking just doesn’t work, something will happen to break them out of this strange fluffy place they have gone into.

    here I entirely disagree with you. They have built themselves a world-view, an ethos, an entire internalised culture based on magical thinking. I have studied these people for a long time now. There is one thing they cannot possibly do, and that is to change that world-view. They will descend into literal insanity first – as in curled up under the desk because the neon brain-spiders are after them – rather than permit that world-view to change.

    They are the people like the WWII French communists wh were dragged to the wall by the Germans and simply kept repeating ‘this cannot be happening’ until the bullets hit.

    it’s only us who think to “break them out of this strange fluffy place they have gone into”.

    They will not, do not and can not accept that the ‘strange fluffy place’ is not reality. They will break before their worldview breaks.

    So get out of your head any thought that they can be ‘shown the light’. That is not possible.

  15. johanna

    I have read comments from Americans who seriously say that it is impossible for the US to go broke, because they can keep on printing money. They go on to explain all this stuff about international banking, sovereign currencies, yada yada. We are talking people who comment on serious science blogs here.

    How people can become so disconnected from reality is a mystery. They talk about money as though it is an abstract concept that has nothing to do with actual production of wealth. It’s bizarre.

    The Abbott government needs to grind home the message that one of the reasons we came out of the GFC as well as we did was because we had bugger-all debt (back then), thanks to the Howard government.

    BTW, I read this week that the Canadian government is in surplus. At this rate, they will shortly be in a better position than the behemoth they are attached to.

  16. C.L.

    … Obama will call for an end to the era of austerity that has dogged much of his presidency …

    Stunning.

    I have never seen a more evil liar in politics in my lifetime.

  17. Myrddin Seren

    Bruce of Newie

    There is something odd going on in the Left.

    It is quite addictive to watch here and elsewhere in the bloggosphere as literally dozens of mindboggling examples are presented daily. But I digress….

    They seem to have lost any understanding of prudence, or of the dire costs of imprudence

    Because while we get a few out in front of the herd, like Argentina, most of the supposed democratic, market economies are being pulled, pushed and litigated into the direction of choking out the market at roughly the same pace.

    So who is going to be the outlier when you look at the EU and USA, and where Australia was rushing to pre-the last election ?

    Either the Left gets to ramp up the spending, redistribution and regulation to move their respective societies, or the thing falls over. At which time you want to be managing the direction of the fall. In this then the Left is signed on to Obama Chicago confrere Rahm Emanuel:

    You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.

    This is why I believe analysis and debate – such as exists – with Paul Krugman is a waste of time. Mr and Mrs Krugman aren’t coming to the policy debate with a skewed view of how to restore the status quo ante of the liberal democratic market economy. They want the shebang to fall over completely and the technocratic Left elites to pick the pieces up of the Serious Crisis and deliver their desired outcomes.

    For which the rest of us can at best hope to be just disenfranchised and left alone with our ration cards. History suggests though that in the Brave New World envisaged by the Left – the trains will be transporting a lot of dissenters to the Hunger Games.

  18. Ant

    It is really some quite obnoxious in hearing Obama talk about austerity, income inequality and poverty.

    No president has done more to impose these conditions on millions of people, while he and his family live a lifestyle of such obscene opulence with such an ‘in your face’ attitude towards those who pay for it all.

  19. Rococo Liberal

    It all comes down to this: the lefty pundits want to be rich, but they haven’t got the talent to become rich by completion in the market. They thus become rich by rent seeking and destroying the market, because all that commerce and trade is beneath a smart person.

  20. brc

    I visited Detroit in 2000, to go to the excellent henry ford museum. I have never, in all my travels, seen such a run-down, destroyed city. Imagine Sydney with the opera house falling to bits and surrounded by razor wire and graffiti. Imagine the mall covered in weeds and homeless camps. Imagine large sections of the road at central quay compete,y missing, with potholes big enoug to lose a car in. Imagine violent looking people loitering around on every street corner. Imagine paddington or newtown only 50% populated, with the rest empty lots, weeds and derelict houses like the one in the photo.

    And that was 14 years ago, before the place really hit the skids. I can scarcely imagine what the place is like now.

    How is it that we even discuss socialist policies anymore? Failure after failure after failure,and yet we still have people agitating for a ‘fairer’ society, the prescriptions of which are always the same- less competition, more regulation, winding back free markets.
    Venezuela is about to fall over but you will still find people defending the way it has been run into the ground. Venezuela should be one of the richest, most prosperous countries on earth. A norway of south America. But this basket case now has the government murdering its own citizens – the exact same place that *all* socialist experiments end. Remember, when the government is hunting you down for execution – you ended up in this situation because capitalism and free markets are ‘unfair’.

  21. Zatara

    With the 2015 budget request, Obama will call for an end to the era of austerity that has dogged much of his presidency and to his efforts to find common ground with Republicans.

    Smoke, mirrors and deception plan.

    Obama’s proposed annual federal budgets have been laughed out of the House and Senate every time he has submitted them. In several cases not even one Democrat lawmaker supported them.

    The US hasn’t had a Budget passed by the Congress and signed by the President since Obama took office. They have chosen instead to live by the “continuing resolution” which means ‘blank checkbook with no responsible ongoing accounting”. Continuing resolution accounting is at best forensic and takes place years later when all the receipts come in. Therefore the govt feels free to spend at will unless a line item is specifically restricted by law i.e. the sequester.

  22. And that was 14 years ago, before [Detroit] really hit the skids. I can scarcely imagine what the place is like now.

    Concomitant with the city’s decline, nearly half of its population, supposedly, is functionally illiterate (though this article questions the validity of the claim).
    Ha! Half of Tasmania’s teenagers are functionally illiterate now; and, with teachers wanting even more money dumped into a failing system (without questioning how we had well over 90% literacy back in the days of one-room schools and teachers without degrees), literacy rates will surely keep declining.

  23. James of the Glen

    Bruce: “Like Anne Summers today in the SMH who is actually saying how wonderful red tape is. Bonkers.”.

    Anne Summers’ love of red tape extends to plastering it horizontally on both lips where it resembles the remnants of a dead algal bloom on a parched Lake Eyre.

    Prudence and imprudence have become inverted in Summers’ world; imprudence is greatly to be desired as it includes the continual transferral of monies from the productive to the unproductive, as if there’s no tomorrow. The mendicants, rent-seekers and indolent love it.

  24. Tel

    Yes, of course, and it won’t be pretty and they will not see it coming. We will, and can prepare.

    I started wondering whether George W Bush was really an idiot (or merely doing a good job of pretending) when someone pointed out that he lived in a prepper house.

  25. .

    johanna
    #1198610, posted on February 22, 2014 at 9:40 am
    I have read comments from Americans who seriously say that it is impossible for the US to go broke, because they can keep on printing money. They go on to explain all this stuff about international banking, sovereign currencies, yada yada. We are talking people who comment on serious science blogs here.

    One more time with feeling:

    https://mises.org/daily/5463/A-Short-History-of-US-Credit-Defaults

    The Continental Currency Default of 1779
    The Default on Continental Domestic Loans
    The Greenback Default of 1862
    The Liberty Bond Default of 1934
    The Momentary Default of 1979

    Let us also remember the Weimar Papiermark, The Argentine Peso in 1932, the John Law era assignants in France and now presently Zimbabwe.

    Sure, you can keep on doing this crap, as long as you don’t mind a currency collapse which means a lack of a banking system and international trade.

  26. Michel Lasouris

    Is that house for real? Or is it the set for the Addams Family? Whichever, it’s a stunning photo.

  27. Mk50 of Brisbane, Henchman to the VRWC

    The house is for real.

    It is the William Livingstone House.

    A tineye search shows it to be from’ Parisian photographers Yves Marchand and Romain Meffre [who] took a trip to Detroit to capture the urban decay of a once thriving city. In their book The Ruins of Detroit, Yves and Romain photograph abandoned buildings, offering a chilling look into a city in decline.’

    More imagery of the ruins of this city here.

  28. Derp

    I’m using the dictionary definition of “austerity” here (being a bit traditional in this way).

    That’s a bit misogynistic

  29. mundi

    This is all just part of the leftist operation.

    There has not been ‘austerity’ anywhere – except the repeated use of the word. Like ‘deregulation’ when there was none, the goal was simply to smear austerity so they don’t have to do it.

    Also does anyone believe the deficit will only be $500b? Yeah right.

  30. stackja

    It’s clearly a train wreck that no one can stop.

    Voters can. But will they?

  31. Tel

    On a slightly different tack, I’d be interested to hear responses to this:

    http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100026708/france-is-looking-straight-down-the-barrel-of-a-deflation-shock/

    AEP is a culturally conservative Keynesian inflationist, while François Hollande is a self-declared Socialist who genuinely believes in central planning but has started to recognize the trick that Keynesian stimulus is a short term solution at best, with a long term backwards step tied into the deal.

  32. brc

    Is that house for real? Or is it the set for the Addams Family? Whichever, it’s a stunning photo.

    Not only is that house real, there is an entire city worth of them.

    Again, I ask you to imagine Sydney with paddington full of houses like the one pictured. Detroit was once the most prosperous city in America, and within the lifetime of many reading here.

  33. Tel

    A tineye search shows it to be from’ Parisian photographers Yves Marchand and Romain Meffre [who] took a trip to Detroit to capture the urban decay of a once thriving city. In their book The Ruins of Detroit, Yves and Romain photograph abandoned buildings, offering a chilling look into a city in decline.’

    Opacity has been into that scene for ages, but only has a little bit of Detroit to show. Never mind, I’m sure the ruins won’t go away in a hurry :-)

    http://opacity.us/gallery196_to_the_top.htm

  34. Whiskers

    What a magnificent house gone to ruin. Even in a middling suburb in any Australian city it would be worth $1 mil +. That’s the tragedy of America, the wealth of its forebears is diminishing

  35. Pedro the Ignorant

    Detroit is not the only US city descending into ruin. There is a very long list of them, right across the country.

    Some notable ones:
    Baltimore MA
    Birmingham AL
    Camden NJ
    Gary IN
    Buffalo NY
    Hartford CT
    Cleveland OH etc ……….

    Not to mention the hundreds of formerly prosperous rural communities that have disappeared forever.

    A common thread among the ruined cities is a huge welfare population and tiny and shrinking tax base.

  36. cynical1

    stackja
    #1198784, posted on February 22, 2014 at 1:10 pm

    It’s clearly a train wreck that no one can stop.

    Voters can. But will they?

    No. A hell of a lot would vote themselves out of an income.

  37. brc

    It’s clearly a train wreck that no one can stop.
    Voters can. But will they?

    No. A hell of a lot would vote themselves out of an income.

    There are two ways if voting. One is with a ballot box. The other is with your feet. Most opt for the latter, leaving the former to vote themselves whatever the hell they like. There is a lot of Galt-like behaviour going on.

    I have long raised a plan to fix Detroit. It is devastatingly simple. Form a free trade, low tax area around the city. No federal assistance in, no tax dollars out, except for perhaps a 5% revenue defense payment. Scrap all laws except criminal codes. No import duties. Flat 15% income tax rate and sales tax rate. No welfare. Residents pay for all schooling and healthcare.

    In 10 years or less people would be queuing up at the borders wanting a piece of the action.

    It’s a sign if the times that this would be considered a radical, extreme proposal, yet it is the exact same conditions that got the US going in the first place.

  38. .

    Flat 15% income tax rate and sales tax rate.

    Bloody communist.

  39. Boambee John

    johanna:

    “it is impossible for the US to go broke, because they can keep on printing money:

    I haven’t followed the bitcoin development process so far, but this attitude might well give it a boost.

    Sinc:

    Any comments on bitcoin from the economists’ point of view?

  40. yackman

    Re Myers Briggs; “Please Understand Me” (Kiersey,Bates) & “People Types & Tiger Stripes” (Lawrence) are interesting.

  41. Bons

    Interesting isn’t it that Rudd arrived and believed that he would storm the international stage but became a laughing stock.
    Little Tony, who despises left dominated multilateralism, quietly goes about his work and is becoming the demagogue of the survivors of the UN/EU holocaust.
    Hope remains, but we need to give him a break, he is fighting 30 years of lazy, media responsive, non-entity pollies. The new LNP gang do appear to have the courage and intelligence to set the traps, take their time and screw them.

  42. The left in the US of A live within the knowledge the GOP is nearly unelectable as long as they’re seen as the party of ill-educated bigots who do nothing to change that perception of them. Which means, for those on the left in the US of A there is no need to be even remotely honest, rational or prudent or forward thinking, because the electoral results are guaranteed.

    In Australia the fact that there has been a conservative resurgence has driven the left here into a state of frustrated confusion and rage, and it is enjoyable to watch.

    Perhaps some time in the near future we will get the see the GOP do the same the left in the US of A by reclaiming the Whitehouse, but I doubt that will be any time soon.

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