Learn From Thy Neighbor

Picture, if you will, your back yard. And there you are standing in the middle of it. You are surrounded by fertilizer and grass seed. Bermuda grass seed, to be exact. You intend to spread the fertilizer and sow the seeds in the hope of enjoying a lush and robust lawn come next summer.

You casually look over the fence into your neighbor’s back yard and notice that it is in great need of repair. Coincidentally, he, too, has planted Bermuda grass, but it is not flourishing. Rather, it has died in spots while others are marginal, at best. This strikes you as odd because the rest of the grounds look wonderful. Could it be that Bermuda grass simply does not do well in your area?

Now picture yourself spreading the fertilizer and planting the Bermuda grass seed as originally intended. “What? Am I nuts?” you ask. And rightfully so. Who would maintain a course of folly in the face of less-than-hoped-for results? Well, it looks like we would, economically speaking, at least.

Our political debate currently revolves about the best way to reinvigorate the economy. One side (the Right) maintains that austerity alone will bring about prosperity. They reason further that, as the deficit is reduced and tax rates are kept low confidence will return, companies will hire, and all will be well. The other side (the Left) argues that what is needed now is a combination of more government spending and higher tax rates. Then, as good times return, the deficit can be addressed as more money flows into the federal coffers.

Which one is right? How do we know? Well, it turns out that we have a neighbor with experience in such things (just like those in our Bermuda grass analogy): Europe. As the Euro crisis unfolded, countries chose austerity as a way out of the doldrums. Less government spending would decrease debt and low tax rates would encourage “job creators” to do just that. Britain is now in a second recession, Greece and Spain have received large bail-outs, and Iceland (once the darling of austerity) has not delivered on its promise of prosperity.  

I’m not an economist, but I read Paul Krugman’s column in the New York Times regularly. And I am struck not so much by his position, but the history upon which it is based. He looks back at our Great Depression, the Japanese “lost years” and Europe’s current dilemma and draws eerie similarities between those failed agendas and the current popular idea of running our national economy as we would our personal one.

Oddly, the comparisons of how we operate our family budget and how the feds should run the country’s are diametrically opposed. I’ll leave it to Mr. Krugman to elaborate, but the bottom line is the fact that if the government doesn’t spend and companies do not hire there is no one left to spend any money on anything.

No, the time for our government to spend is now. And it needs to spend a lot. The Japanese tried using small stimulus plans which only served to stagnate their potential for a decade. The time for deficit reduction is when the economy prospers. (Of course, in good times politicians are tempted for tax roll backs and the like so as to endear themselves to the electorate. But no one wins, long term, in that scenario.) And we need only to look over our fence and take a look at our neighbor’s lawn to see that our present course of action will lead to less-than-desired results. Nothing complicated: austerity, alone, will not work for, if it did, Europe would be flying high.

I believe the Right knows this, too, but has discovered a mantra that resonates while allowing the pursuit of their “true agenda”: the dismantling of both social programs and an organized workforce. I could be wrong, but regardless I urge you to Google Mr. Krugman and read his op-eds. They offer more than a debatable solution. They offer historical perspective and real-time comparison to our European neighbors. Or you could always go out and plant that Bermuda grass.