In the case of the United States, “austerity” does not mean significant cuts in food stamps, reductions in unemployment eligibility, or a raised retirement age, but simply not adding new entitlements to those that recently were vastly expanded. It is a trademark of human nature that people resent any reduction of a benefit, or even only a moderate expansion of it, far more than not having it offered at all. Talk today of cutting the Medicare Prescription Drug Benefit or No Child Left Behind, and hysteria follows — without recognition that neither program even existed before the presidency of the unpopular George W. Bush.
But there is an even worse fraud in the new notion of “austerity”: It now commonly refers only to the level of government spending versus revenue, not to fundamental changes in the nature of regulated and closed economies. “Austerity” — the pruning back of government support — is supposed to lead to all sorts of social tensions and civic unrest. By contrast, “growth” — even more government spending — restores calm. But if labor markets are highly regulated and inflexible, if the tax structure is byzantine and punishes entrepreneurs while promoting the black market and cheating, and if government regulations crush new businesses, then the problem goes well beyond a question of expanding or cutting government benefits.