In this opinion piece, Robert Kuttner - co-founder and co-editor of The American Prospect - explains in clear terms why austerity is not the answer to all economic crisis, and how and why Europe's projected austerity program could lead to the collapse of the EU. Here are some excerpts:
The budget deficit here and overseas does need to return to a more moderate level -- after we get an economic recovery. But the problem with the austerity treatment during a recession is that if everyone tightens their belts at once, there is nobody to buy the products; the economy shrinks and repayment of debt is even more arduous...
...the economics of belt-tightening is a fool's errand in a recession.
...the large deficits in the OECD countries are not the result of fiscal profligacy, but of revenue losses caused by the downturn. And in the case of Greece, ... the (current) government is having to clean up after the fiscal mismanagement of its conservative predecessor. Greece (does) need tax reform to make sure that so many of its very wealthy do not hide their assets. It does not need general austerity.