Germany as a Poster Child for Austerity

In his NY Times blog, Paul Krugman has been sniping at those who claim that German "austerity" is a better model for handling the financial crisis that Obama's stimulus program. This is a real zinger. I've added the bold:

German growth hasn’t been great, one quarter notwithstanding; but it avoided US-style mass layoffs even when it was slumping badly. Part of the explanation is the Kurzarbeit program of work-sharing; also, Germany’s labor laws and its strong unions have led to a situation in which workers aren’t treated as much as variable costs as they are here.

So American conservatives now holding up Germany as a role model are actually praising the virtues of Eurosclerosis, and disparaging American-style capitalism.

Conservatives claim that Germany has been doing "austerity" but because of the social programs, Germany has actually done more stimulative spending than the US. In Germany that spending is automatically triggered by a downturn. In the US, legislator have to get together, have a big pillow fight, and if the voters are lucky, a bill to generate stimulative spending will get passed without too much pork or too many tax cuts for the rich. Also, because of the US's state laws demanding "balanced budgets", the US is more anti-Keynesian than any European country. So when American conservatives laud Germany, they are simply showing their ignorance of the world. Amazingly, the American electorate appears ready to vote these ignoramuses back into power!