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Could austerity be the right cure for Europe's hangover?

By Alex Castellanos, CNN Contributor
June 7, 2012 -- Updated 1145 GMT (1945 HKT)
Protesters gather in the rain for a demonstration against austerity measures at the Greek parliament in Athens in February .
Protesters gather in the rain for a demonstration against austerity measures at the Greek parliament in Athens in February .
  • Commentators are placing the blame for Europe's spending woes on government austerity
  • Alex Castellanos says Europe hasn't really embraced austerity yet
  • He says the binge in government spending can't go on forever
  • Castellanos: Asking whether austerity works is like asking a drinker if sobriety works

Editor's note: Alex Castellanos, a CNN contributor, is a Republican consultant and the co-founder of Purple Strategies. 

(CNN) -- I never imagined we would find a no-win question to displace the genre's champ, "Have you stopped beating your wife?"  Now, there is contender: "Does austerity work?"

Fareed Zakaria tells us it doesn't, faulting it for Europe's constriction.  The problem is not a borderless European financial system, unable to quarantine nations sick with public and private debt.  Oh, no, Zakaria writes, "The larger failure, shared across Europe, has been too much austerity." 

In the Washington Post, Ezra Klein notes unemployment is "skyrocketing" across Europe and he contends the fault lies in shrinking budget deficits brought by spending cuts and tax increases.  Klein tells us this is what austerity looks like "and it can be expected to reduce economic growth." 

Alex Castellanos
Alex Castellanos

As the UK slides into a double-dip recession, economist Paul Krugman blames David Cameron's austerity. Borrowing from John Maynard Keynes, he tells us, "The boom, not the slump, is the right time for austerity."

Never mind that spending in Britain is virtually unchanged and other nations in Europe are spending more. Neal Reynolds writes that "austerity," as practiced in Euro27 countries, has actually increased government spending from 46% to 51% of Europe's GDP from 2006 to 2010. 

Greece, where rioters protest "austeros," increased its public sector expenditures from 45.2 % of GDP to 50.1% tin he same period.  As the Richmond Times-Dispatch noted, in 2011, 23 of the EU's 27 nations jacked up their spending levels. This year 24 will. Apparently, it is not austerity itself that constricts economies.  The mere thought of austerity is enough to choke the eurozone to death.

Austerity seems to be working just fine for the masters of the practice, the Germans:  We are counting on them to bail out the entire eurozone.  Let's ignore that, however. Instead, let's assume Europe had not only contemplated austerity but also actually imposed it: cutting spending, raising taxes and shrinking its public sector.

Even then, "Does austerity work?" would be the wrong question.  Let's view the occasional need to embrace responsibility through a more familiar, though equally unpopular lens: Does "sobriety" work? 

Immediately, it wouldn't seem so.

When we engage in "sobriety," after a long period of over-indulgence, its effect is much like "austerity;" our heads hurt, our tongues get fuzzy and our vision blurs.  I would invite my friends in journalism, dedicated to the rigorous pursuit of truth, to join me in extended study.  We might conclude, through the crusty eyes of another morning, that drinking alcohol does not cause hangovers; stopping drinking alcohol causes hangovers.  Sobriety does not work, it seems -- and governments feel no better when they sober up from a binge. 

When an economy stops borrowing money from its future, well, there is less money in that economy in the present.  Post-indulgence discipline is painful.  Yet we do not blame the glutton who ordered the meal for this poverty, just the fool who pays the check. We fault austerity.

Wouldn't we all feel better if we lifted our glasses and had another round?  We are persuaded to drink our way through our drunkenness, even if we have to borrow the money. Why shouldn't gratification be instant and eternal?

Life, we are eager to believe, should be frictionless.  We are happy to hear that we are not required to suffer penalties for stupid economic decisions.  Our leaders, godlike and high above, tell us their brilliance can protect us from the consequences of our poor choices.  Spend what we don't have, they urge:  The same euro, dollar or pound that is invaluable when we put it in to stimulate an economy will not be missed when we pull it out. 

The same journalists who laugh at the idea of perpetual motion embrace the voodoo of perpetual prosperity. They twist modest Keynesianism into an arrogant declaration that we are above the cost of our excesses.  No longer must God ask Moses to walk the desert to reach the Promised Land.

On June 17, the world will come to an end, as it often does.  Ripples from Europe's unraveling will begin traveling to America.  Greece will have an election.  Greeks will vote to make Germans work until they are 67 so they can retire at 50.  They will vote to make someone else pay their bills, fund their holidays and support their benefits. 

They will be lectured about this by an American president who asks his own nation to make China pay its bills, fund its holidays and support its benefits.  We can only hope he does it from the Hellenic state of California, which has also attempted to outsmart austerity.  Remarkably, it hasn't grown jobs, just debt.

Paul Krugman is a noble man.  If he could, with his bright mind, he would free us from the costs of our foolish economic decisions, many of which he has recommended.  He is the blackjack player, deep in debt, who knows he can outsmart the house. 

On our behalf, with his infallible system, he'll keep doubling his bet every hand until he wins back our money -- unless he hits the house limit or a run of bad luck empties his pockets first.  That is not an uncommon fate for the adversaries of austerity. 

Genuinely bright people built Las Vegas on the arrogance of such men.

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The opinions expressed in this commentary are solely those of Alex Castellanos

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