Even for the Left this is moronic…
Might it then be the case that something like a Laffer Curve exists for austerity? That is to say that cutting government spending up to a certain point leads to lower deficits but beyond a certain point, the impact of lower growth and higher unemployment means that deficits get worse as the government cuts more?
Like the Laffer Curve it suggests that there is a point at which cutting government spending becomes self-defeating, it simply lowers growth, depresses tax revenues and pushes up social security spending by more than the government is cutting.
I’ll just make a couple of points — even though you could write a tome on how stupid this idea is.
The reason the Laffer Curve is regarded as a reasonable yard stick for setting taxes is that, at the very least, it’s start and end points are basically sound. If the tax rate is set to 0% you will raise no taxes. And if the tax rate is set to 100% you will raise no taxes.
You can argue about everything between 1% and 99% but the start and end points can’t really be argued. Even if you could find the one or two idiots who would work and hand over all their earnings to the state…
The problem with the ‘Austerity Curve’ is that not even the start point is sound. A Higher Deficit doesn’t necessarilly mean No Austerity. A high deficit will lead to high debts. High debts to higher borrowing costs and potentially default. And default equals catastrophic ‘austerity’.
I could go on, but I think it is clear that the Austeruty Curve is one of the most laughable economic theories ever imagined.