The European sovereign debt crisis has brought about a strange mutation of the word ‘austerity’. Austerity down the ages has usually been associated with self-denial, plainness of style and asceticism. However, somewhere along the line, governments have managed to co-opt it to mean quite the opposite.
When you hear the word austerity, you might think of monks living silently in rooms akin to solitary confinement, eating gruel and walking barefoot in a cold monastery. It conveys a certain harshness of circumstance, sparseness of surrounds or abstention from indulgence. Austerity is not, however, a good word to describe the actions of governments now that the emperor of government debt has been shown to be wearing only a (decidedly smug) smile.
The main problem is that these cuts to government spending are because governments were spending crazy amounts of money outside of their ability to fund normally! If you spend absurd amounts of money that aren’t yours and are forced to stop your deficit spending, it isn’t austerity – it’s reality! Only in a government’s deluded world could borrowing over 40c for every dollar spent in the budget be considered ‘the normal level’, therefore any cuts to spending ‘austerity’. If someone starts up spending massive amounts on their credit card, way beyond their means, and the bank comes calling, would you call selling their luxury yacht to reduce their spending an ‘austerity cut’? How is government any different, with their colossal spending programs and immense waste?
It is almost too bizarre for words that ‘austerity’ has become associated with reducing ridiculous levels of debt-fuelled money spent by governments (read here for a top ten list of government debt or here for my fav graphic of US debt levels) to spending within their means. This all quite apart from the fact that places like Portugal, Spain and the US won’t actually cut spending below deficit levels!!!
I would call on all serious commentators and analysts to stop perpetuating an illogical, preposterous government lie – that reducing unsustainable levels of government spending is somehow austerity. It excuses governments from actually reducing their spending levels, it encourages those who want endless increases to government spending and it betrays the taxpayers who will eventually have to pay for the profligacy of irresponsible governments past and present.
UPDATE: Andy Semple, at Menzies House, gives an excellent analogy of how badly screwed the financial situation of the US Federal government is.