Tags: Reich | US | Europe | Austerity

Reich: U.S. Should Learn From Europe That Austerity Can Wait

Wednesday, 09 May 2012 07:39 AM

Regime-changing elections in France and Greece should serve as a reminder to the U.S. that austerity measures that compromise growth can send a ruling party quickly packing, says economist and former U.S. Secretary of Labor Robert Reich.

In France, socialist Francois Hollande beat President Nicolas Sarkozy in recent elections, as voters rejected austerity measures supported by the outgoing administration and opted to rally behind Hollande's calls to prioritize growth over cutting spending.

In Greece, the country's leading political parties failed to secure 50 percent of the votes in parliamentary elections, with more extreme fringe parties chipping away at the establishment's hold on power, throwing the country's leadership structure in doubt.

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To deal with the debt crisis, ailing European economies have cut spending and laid off public sector workers to narrow deficits, although such measures often cut growth rates, thus resulting in even further economic decline.

Calls in the U.S. to cut spending could threaten tepid recovery here, Reich points out, and voters could send a clear message that government influence in the economy is better than contraction.

"The proper sequence is for government to keep spending until jobs and growth are restored, and only then to take out the budget axe," Reich writes in his blog.

"Yes, America has a long-term budget deficit that’s scary. So does Europe,” says Reich, now a professor of public policy at the University of California at Berkeley.

“But the first priority in America and in Europe must be growth and jobs,” says Reich, who served in three national administrations and was a secretary of labor under President Bill Clinton.

“That means rejecting austerity economics for now, while at the same time demanding that corporations and the rich pay their fair share of the cost of keeping everyone else afloat."

German Chancellor Angela Merkel, who supported Sarkozy, says she'll welcome Hollande "with open arms" and continue trying to find a way to navigate all of Europe out of the debt crisis.

However, fiscal discipline commitments signed under Sarkozy will stay in place despite Hollande's statements that France won't support them unless measures are added to foster economic growth.

"We in Germany are of the opinion, and so am I personally, that the fiscal pact is not negotiable. It has been negotiated and has been signed by 25 countries," Merkel told journalists, according to Reuters.

"We are in the middle of a debate to which France, of course, under its new president will bring its own emphasis. But we are talking about two sides of the same coin — progress is only achievable via solid finances plus growth."

Editor's Note: The Final Turning Predicted for America. See Proof.

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Wednesday, 09 May 2012 07:39 AM
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