Everybody else does it by simply cutting back on funding, like for example the NHS. Greece is also trying to implement austerity like cutting pensions, raising retirement, etc.
We are simply discussing a plan to make it fairer by reducing contributions, and telling people what to expect ahead of time.
Deregulated our economy? Not a chance. It cannot be deregulated with the current tax exemptions (for instance), which gives an advantage to bigger companies. The current incarnation of the EPA is a bureaucratic nightmare which can shut down any activity without having to justify itself to anyone except the president. We have saved the banks which were engaging in risky investments.
Lets not forget the drug war, which forces another sector of economic activity into the black market.
Austerity would certainly be appropriate in inflationary conditions, and following a recovery of aggregate demand, but the austerity programs that you cite have had regressive effects in both countries. In Greece, austerity has failed to raise market confidence, arrest a soaring increase in public debt, or restore growth to a stable rate. Rather, there has been a contraction of 5.5% of GDP for Y2011, and since Y2010, the national debt has increased to 182% of GDP---from 120% of GDP. In Britain, its relative strengths, and less draconian cuts in spending have prevented a similar outcome. But, its growth forecast has been reduced by approximately three quarters for Y2012, and whatever improvements that it has enjoyed in its fiscal situation will be wiped out as its tax base shrinks in anemic---or recessionary---conditions. To be sure, though, these growth forecasts can't be attributed to national policies alone, since the dithering, and limited coordination of Euro Zone economies has greatly exacerbated matters.
I understand the appeal of austerity, and sympathize with critics of poorly implemented countercyclical programs, but there are serious costs to cutting back spending in conditions of deflation and greatly reduced demand. Indeed, an IMF authored study of government responses to recessions since 1980 found that a 0.5 reduction in spending was correlated with a 0.25 loss in output---in addition to a mountain of supportive evidence that reached similar conclusions. At the same, though, fiscal stimulatory measures are certainly not a panacea solution, since such spending has in some notable cases---like Japan---failed to deliver expected results. But I think such failures can be attributed to the chosen targets, the timing, misguided actions by the Central Bank, and a failure to signal an intention to seriously unwind operations at a future date. Regardless of the evidence, though, the present level of cognitive dissonance will probably prevent many from departing from their dogmatic views, which could be for the best---since another systemic failure could permanently kill the argument.
Edited by Rational Madman, 03 January 2012 - 05:24 AM.