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Paul Krugman

Paul Krugman: U.S. faces ruin if it follows Ireland's ‘austerity’

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Paul Krugman

Ireland's economic policy is a disaster which if followed by the United States would lead to ruin says Nobel Prize winning economist Paul Krugman, The New York Times columnist.

Ireland is used by America’s most influential economic writer  as an example of how the idea of austerity is a delusion.

He says Ireland, Greece and Britain are examples of how spending cuts have failed to bring a rise in confidence or benefit growth or the jobs market.

He points out that "the Irish, whose government — having taken on an unsustainable debt burden by trying to bail out runaway banks — tried to reassure markets by imposing savage austerity measures on ordinary citizens."

The same people urging spending cuts on America cheered. “Ireland offers an admirable lesson in fiscal responsibility,” declared Alan Reynolds of the Cato Institute, who said that the spending cuts had removed fears over Irish solvency and predicted rapid economic recovery.

That was in June 2009. Since then, the interest rate on Irish debt has doubled; Ireland’s unemployment rate now stands at 13.5 percent.

Giving the United States as an example Krugman says that "tax increases and cuts in government spending would depress economies further, worsening unemployment…So jobs now, deficits later was and is the right strategy."

He concludes by referring back to Europe as an example of what not to do where the British as well now find themselves in deep problems because of deficit reduction above all policies all in the name of getting confidence back in the financial system.

He warns, "The confidence fairy won’t save us from the consequences of our folly."

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