Perhaps the biggest problem with this newly found love of austerity is that it does not work. Other countries have tried it over the last few years and the results have been an abject, abysmal and total failure. Those countries that did the opposite -- that spent massively -- grew sharply. We're documented both of these here, here, here, here, here, and here. So, we know that countries like China that engaged in massive stimulus are growing and those that are cutting are growing slowly. Logic dictates we follow the former and not the latter.
And that's where the rub is. Instead of engaging in a nice infrastructure program which will lead to decades of growth where we can borrow at incredibly cheap interest rates, put a ton of blue collar people back to work, lower the unemployment rate, solve the problem of our deteriorating infrastructure and start to increase aggregate demand we do the exact opposite.
And that's why I call it the Washington Lobotomy factory. It's completely backward and governed by stupidity.
BTW: thanks for the upcoming slow growth, guys. It'll be a pleasure.
