Austerity Gains Traction
Here is another New York Times article on global austerity measures. I am not convinced this is smart or prudent economic policy at this point of the economic recovery. I understand the arguments for cutbacks and am all for debt reduction, but don't feel the economy is fully recovered and at a point where it can depend on corporate growth alone. Politicians will pay for their decisions if unemployment stays high and growth remains sluggish. Politicians in the U.S. don't have the courage or conviction to make cuts that will really lower the deficit, such as in Social Security, Medicare or defense, there are just too many vocal, voting parties supporting government spending in these areas. No US politician, not even a lame duck, would dare float the idea of a tax increase to tackle the debt. I like to look at the stock and bond markets as good barometers of the future. The yield on the Ten-Year Treasury is under 3%, which indicates the market is not afraid of current debt levels and that inflation is not a concern, and the recent down trend in the stock market is over concern about the slowing economy due to lack of stimulus spending. Ceding the economic growth mantle to China and India is bad economic policy.