Tuesday, June 29, 2010
The Irish Grasshopper
Today's New York Times reports on a new kind of "troubles" in Ireland. After more than a decade of capitalizing on cheap labor and goods in the expensive Euro-zone, Ireland has fallen harder than most in the global downturn. The same forces that propelled Ireland's economy forward before the crash have now driven unemployment above 13%. Trapped by the Euro, Ireland cannot now devalue their currency to boost economic growth.
Despite this, the Times portrays Ireland's economic troubles as the tragic consequence of so-called austerity measures that were enacted in 2008 to prevent Ireland's government from defaulting. Sticking with the liberal playbook, the Times trumpets Keynesian stimuli enacted by other countries while lamenting that Ireland couldn't afford to save jobs with a stimulus of their own. This is preposterous: raising taxes while Ireland's economy was going down the toilet is the source of their trouble, not a lack of stimulus.
To wit, we have seen that the Democrats' massive $800 billion Keynesian "stimulus" package has done nothing to slow the loss of jobs here in America. After passage of the bill in February of 2009, the US unemployment rate continued to rise, spiking at 10.6% in January of this year. At 9.3%, it is still higher than it was then. Worse still, jobs "created or saved" by the stimulus—if not outright fabrications—are at best only temporary. Unless the private sector starts creating new jobs—which it has not—unemployment will spike again.
The real problem with Ireland's austerity is that, like all of Europe, they waited until after the crisis to address outrageous deficits and runaway spending. Like the grasshopper of fable, Ireland and the rest of Europe danced in the summertime, blithely spending money they didn't have to fund an ever-increasing entitlement state. Now, Europe's welfare bomb has exploded, and it can't be put together again. America still has hope of avoiding the same fate, but we must learn to save when times are good.
The Obama Administration has created vast new spending programs that will not take full effect for several years, and while repealing ObamaCare is a good start, it will take much more to put America back in the black. Politicians hate cutting spending; more so when revenues are high, but when the economy eventually recovers, we must remember this moment. If we do not reduce spending when times are good, we too will end up like the grasshopper, dying in the cold.