Here We Go: More Austerity Nonsense

Allow me to rant a little:

Sometimes you read a comment and just sigh out loud. What are we to do with ill informed media types who want to write a story rather than provide insight?

In today’s New York Times there is an article proclaiming that Irish “debt woes” are raising wider fears about Europe. The writer is someone called Landon Thomas Jr.. This is a meaty topic for the austerity folks since the awful state of the Irish economy is meant to be a harbinger of all the nasty things about to fall us if we don’t get our debt under control. Apparently the end of the world is nigh.

Here’s the opening paragraph:

“When interest rates soared last week on Irish government bonds, it served as a grim warning to other indebted nations of how difficult and even politically ruinous it could be to roll back decades of public sector largess.”

Oh well.

Presumably Mr Thomas prefers not to check his history too carefully. Plus he seems to love conflating events and drawing utterly specious conclusions.

You see: the Irish economy was well managed. The so-called largess was well under control. Debt to GDP ratios were fine. Everything was hunky dory.

Until the US real estate market imploded and those securitized loans on the books of the biggest Irish banks were exposed as worthless. After that came the bank bail out and the obligatory capitulation to the big banks, whereafter the Irish government saw fit to plunge its economy into a vicious and hitherto unsuccessful effort to avoid tailspinning out of control.

You see, the issue was never all those decades of largess. Not at all. The current debt problems have absolutely nothing to do with social programs and the evil largess that social programs represent to austerity folks. It is not the “decades of public sector largess” that need rolling back at all. It is the banking system. The soaring debt ratios that so scare the credit markets exist as a direct result of bailing out the banks.

The only thing standing between the Irish public and a total depression is that “public sector largess”. Take that away and an epic lost decade beckons.

Duh.

That anyone can print such a totally misleading so-called analysis is beyond me. Presumably the NYT has no editorial process for these things.

Let me repeat in different words: the current crisis in Ireland has nothing – nothing – to do with public sector largess. It has everything to do with the incestuous relationship between the big Irish banks, that country’s leading politicians, the resultant horrendous regulation of the banks, and the total collapse of those banks in the wake of the US real estate bubble.

It gets worse: Mr Thomas wants to wave his austerity credentials, so he mentions that current anti-American sentiment around the world is based upon those nations being ticked off by “Washington‰Ûªs seeming willingness to print money rather than tackle tough debt-cutting measures”. Evidently Mr Thomas sides with those who want to swing the axe at our social programs. Can his “we should privatize social security article” be far away?

I agree that foreigners have been taking a dim view of our policies recently, but as a counterfactual to Mr Thomas’ pseudo analysis allow me to present this:

“An Irish bond market already in free fall plunged further after Irelandannounced on Thursday that it planned to nearly double its package of spending cuts and tax increases to try to rein in its huge deficit. Investors took it not as a sign of resolve but rather of Ireland‰Ûªs desperation and uncertainty about the true extent of its problems.”

That is Mr Thomas observing that the credit markets are punishing the Irish for doubling up on … austerity measures. Umm. That implies that the credit markets have not been impressed with all that austerity. Maybe that’s because they think the economy is about to sink as those austerity measures cripple growth and the underlying cash flow potential of the economy shrinks as a result.

The credit markets are saying the exact opposite of what Mr Thomas argues. Yet he mentions that in support of his austerity is necessary thesis. Or try this fact: US bond interest rates have trended down. How come? Clearly were the markets clamoring for austerity policies rates would be rising were those policies not put into effect. Since those foreigners are, according to Mr Thomas, annoyed at us for not so doing, and since rates are going down and not up, I can only conclude that the markets don’t give a damn right now about austerity.

But let’s not allow that to get in the way of Mr Thomas.

He is so far off the point that it is hard for him to rustle up even made up facts.

Let me put it in words that the NYT will understand: It was the banks what done it.

So to lead off a so-called analysis of the Irish debt crisis, which is a wreaking terrible social cost of the poor Irish citizenry, with a reference to public sector largess as its prime cause is so wildly inaccurate, so totally off base, and so utterly bereft of any worthwhile analytical content that it is beyond laughable. It is shameful. It is shoddy. It is destructive.

But I expect more of this faux analysis. After all, the austerity crowd is feeling angry: the facts don’t support the implementation of their desired policy. So they ignore the facts. We see that already here in the US, and stupid articles such as that produced by Mr Thomas merely reflect the search for a result regardless of fact.

Fact based policy making was an early victim of the Reagan illusion. I had hoped that the collapse of free market economic theory and all the associated puritanical nonsense that goes with it, would cleanse us of this error. I had hopes, in other words, that we could return to fact based policy making.

That return will be much harder if the NYT keeps publishing rubbish like this.