Sunday, April 22, 2012

How's That European Austerity Working Vs America's Stimulus?

So Europe, how's that austerity plan working for ya?

When the worst financial meltdown since the Great Depression hit the world economies starting in late 2008, Europe took the "austerity" route while America took the "stimulus" route.  So  how's that austerity strategy working for you? What was the result compared to the American "stimulus" strategy?

VERY different.  After embracing austerity and cutting budgets for the past three years, in 2012 most of Europe is near death economically. Growth is NEGATIVE. At best it will be FLAT. Austerity means budget cuts. That means jobs lost and that cuts tax revenues. As a result unemployment in Spain has surged to 20%. England's economy is comatose after conservative Prime Minister David Cameron made "austerity" the British plan. 

Meanwhile, despite the demands for austerity in 2010 by the GOP Congress, America took a different rout after the 2008 collapse. It followed a "Stimulus" path not unlike what Franklin Roosevelt did when he was elected to create jobs after the Great Depression started. People forget that Roosevelt's predecessor Herbert Hoover, took the "do nothing" approach to deal with the Depression, and was swiftly voted out of office!

In 2012 the United States economy will grow between 2-3%. That may not sound like much but is light years ahead of the negative growth territory Europe finds itself buried in.  Even during "normal" years a developed country like America will grow about 3%.  Only a developing country like China or India can mange growth rates greater that that (China's is about 8-9%).

In short, because of our leadership that took the right road, America avoided making the same mistake as FDR did in 1937 when he panicked at the surging deficit and reversed course when he tried to balance the budget and change to an "austerity" plan. When he did that, America's economy went right into the tank - and never fully recovered until the huge demand sparked by World War II got things moving again. 

The lesson?  In face of a severe depression, austerity is the worst strategy to follow, as the Europeans may yet figure out.  In the U.S. we not only are growing but we have over 2 million job that are available TODAY, enough to drop our unemployment rate another 2%!

So what's the problem? We don't have enough AMERICANS with the skills to fill those millions of jobs - and the GOP Congress has ignored the President's repeated requests for retraining funds needed to give Americans the skills for those jobs instead of sending them overseas or giving them to foreigners who DO have the skills required.

For example, we have a shortage of skilled truck drivers. The tuition cost: $4,000. That's more than what people can afford. If the government stepped in to cover those costs, those jobs could be filled and the taxes generated by the newly employed American truck drivers would greatly exceed the $4,000 investment in the first year! We also lack skilled machinists, etc. because people don't have the math and science skills needed.  Texas just adopted math standards that are BELOW the national standards, guaranteeing that our students will not be competitive in the jobs of the 21st century.

Bottom line: The Conservative Mr. Sarkozy could well lose the Presidency because of his choice of austerity. Had President Obama followed the same road, America would have lost millions of jobs, from hundreds of thousands of auto workers to even more teachers and first responders -- and we would be facing negative growth and substantially higher unemployment than what we have today.

Instead, we have turned the corner and have the opportunity to address our increasing "skills gap" instead. We can fix that, if Congress would do something other than vote "no" on everything, including education and job training.

Moral: Those who do not know history are doomed to repeat it.

Michael Fjetland
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