Greek-style Austerity Measures

Austerity Measures Coming to America

October 20, 2010

Fugumble - While most people in the United States have been focusing on the upcoming midterm elections, European nations have been enacting painful austerity measures. Measures that will be making the jump across the pond into our neck of the woods in the new year, once the next Congress is seated.

Yesterday in the United Kingdom, Prime Minister David Cameron's coalition government announced massive cuts to the military and social housing in an attempt to reign in out of control deficits before addressing a very large debt. In France, an estimated one million protesters took to the streets against austerity measures proposed by the Sarkozy government which would raise the retirement age from 60 to 62. Something that most North Americans would find hard to empathize with to be honest, but it shows how contentious austerity measures can be. We have already heard the story of Greece and the collapse of their economy, but now Portugal's President is warning of a major crisis unless his new austerity budget is accepted and Ireland may not be far behind.

So, as the European community struggles with a major change in lifestyle, and even their own individual identities, the question remains how the United States will handle its own austerity measures? And they are coming

On February 18, 2010, President Obama signed an executive order called the National Commission on Fiscal Responsibility and Reform. He did this by executive order because the Senate was unable to pass a bill agreeing to a binding fiscal commission, which now means that Congress can ignore what comes out of the President's commission. However, even though Congress can ignore the recommendations from the President's panel which is expected to announce preliminary advice early in 2011, members of Congress are actually members of the commission.

Co-chairs Alan Simpson (former Republican Senator from Wyoming) and Erskine Bowles (Bill Clinton's Chief of Staff) have promised, as per the request of President Obama, that everything be on the table when it comes to balancing the budget, including social security, taxes, the military, and Medicare. And while Americans are rightfully sceptical over whether or not Congress can work together to address a problem that will only get worse the longer they wait, the only question remaining is which lines of rhetoric will be most convincing to the American public?

Secretary of Defence, Robert Gates has been busy trying to prepare the Pentagon and the lucrative military industrial complex that the party will have to come to and end, pointing at issues like brass creep, as well as unwanted and unneeded weapons programs, and cuts to the large numbers of contractors. It has been a slow, mostly behind the scenes fight to curb unnecessary spending, but one which will soon explode into the psyche of the general public once the fiscal commission makes its first set of recommendations.

Battle lines are being drawn and interested parties are circling the waggons around their favourite interests. It will be interesting to see how the debate unfolds, not only from a policy perspective, but a societal one. Can politicians in the House and the Senate who are almost entirely reliant on donations for re-election make the tough choices needed to balance the budget? Can they agree like our British friends that everything will really be on the table? Time will tell, but I think in the end, despite the inevitable political bashing, they have no choice.