Today, TV news carried videos of riots in Great Britain. Students were protesting cuts in spending for education and huge increases in college tuitions. The British austerity program brought those riots on. The United Kingdom plans to cut 490,000 government employees and expect to lose an equal number of jobs in the private sector. Government jobs will be cut by 19 percent and defense spending will be cut by 8%. These are the deepest cuts for the U.K. since World War II. Ireland has planned the toughest budget in that country’s history. Irish banks have been bailed out and a carbon tax has been imposed. Public employees will get a 5% pay cut. Child benefits will be cut by about 10% and Social welfare programs will be cut.
If you have watched television you know that when France was in the process of raising the retirement age from 60 to 62 there were widespread riots and strikes in protest. We might not think that a small increase like that would warrant that type of reaction. This observer thought that the French reaction was far too extreme. After all, Social Security retirement age in this country is between 65 and 67 years of age. However, if there are no private retirement programs in France and workers are forced to stay on the job for an extra two years, the work force will grow and that will leave less room for new employees. This increase could well drive up the French unemployment rate. On the tax side, those with the highest incomes will see a 1% tax increase.
Most of us probably witnessed riots in Greece on TV when that country announced its austerity program. Greece was facing a debt crisis when it took steps to correct its budget imbalances. Like France, Greece increased the retirement age by just over two years to just over 63. Greece has frozen public sector wages and pensions. Greece, like many other European countries, has a value added tax. Their plan calls for increasing that tax from 19% to 23%. The VAT is a regressive tax that hurts low and middle income families inversely to their incomes. In short, a very low wage family must pay the same sales tax as the rich but it takes a much larger percentage of their incomes because they make so much less.
I predict that making these huge budget cuts will lead to a far more difficult recovery from, or a recurrence of, economic recessions. In deep economic downturns, governments must to spend in deficit in order to restore economic health. The world went through a very deep depression that started with the stock market crash of 1929. It took over a decade and years of deficit spending during WWII to pull this country out of the mire. The recovery started in the 1930s when the government started public works programs, building roads, bridges, schools etc. Unemployment during the 1930s was in the mid twenties. The recovery worked until the President decided to try to get the budget under control. That led to a new recession in an already weak economy.
You can read more information at the following websites. Some data for this blog was borrowed from each of them. The opinion is mine.
http://www.bbc.co.uk/news/10162176
http://zfacts.com/p/318.html
http://www.huppi.com/kangaroo/Timeline.htm
No comments:
Post a Comment