Over the past year , we have seen almost all the European countries enact their own version of deficit spending cuts and austerity measures, and we can now see the results of those policies – the self same policies that the Republicans are trying to install here.
The result has been an almost complete collapse of the European economies – even Germany, which is financially healthy and was growing at 4% annually in January , is now stalled with almost no growth. Spain now has a youth unemployment rate of 50%, and in one survey 80% of Spanish university students expected to have to leave Spain to get a job.
By contrast, our slim 2% growth rate and 9% unemployment actually looks good, which of course,it is not.
So what can we learn:
1. If we cut spending in a recession/very low growth world, we will increase unemployment and risk a depression
2. If we increase spending in the short term, we will create jobs and get the economy growing again. The first stimulus plan took us from minus 6% “growth” to plus 2% – we just need another stimulus plan now.
3. Once we have a solidly growing economy and unemployment back to 4 or 5% , then we can cut spending and get our long term finances in order.
President Obama has the right plan – the Republican “cut spending now” plan will give us the European disease and we will all suffer.