Last week, President Obama released his new budget proposal, which in February he said would be the end of austerity. First let’s ask, what is meant by “austerity”? As a policy, was it ever tried?
As discussed by myself and others, “austerity” means tax hikes (not spending cuts) in practice. Lefties hurl the word “austerity” to demonize the idea of spending cuts. But few of the countries which left-liberals accused of cruel austerity in the last few years cut their overall government spending levels; the majority continued to increase spending. So spending cuts can’t explain those countries’ poor economic results. What can? Well, most of them raised taxes.
Clearly, we should end (or reverse) the tax hikes. That would be a great “end of austerity”. But Obama’s meaning is that we should undertake spending increases; which, for reasons touched on below, probably mean deficit increases.
Before going into Obama’s proposal, let’s review the current state of the U.S. budget. [Read more…]