Portugal for the win - again

[Elixir]

First drugs, and now this:

Portugal Dared to Cast Aside Austerity. It’s Having a Major Revival.

At a time of mounting uncertainty in Europe, the country has defied critics who insisted on austerity as the answer to the Continent’s economic and financial crisis.

 

[Narapoia]

I'm not getting a link showing, but it could be the mobile site.

 

[Elixir]

I'm not getting a link showing, but it could be the mobile site.

No, my bad. Fixed it. Thanks!

 

[Axulus]

The idea that they cast aside austerity doesn't seem to hold up to the facts:

The cyclically adjusted deficit has decreased considerably, moving from 8.7% of potential GDP to 1.9% in 2013 and to 0.9% in 2014. This is better (lower) than the OECD average in 2014 (3.1%), reflecting some improvement in the underlying fiscal position of Portugal.

https://www.oecd.org/gov/Portugal.pdf

Also, from the OP article itself:

The government raised public sector salaries, the minimum wage and pensions and even restored the amount of vacation days to prebailout levels over objections from creditors like Germany and the International Monetary Fund. Incentives to stimulate business included development subsidies, tax credits and funding for small and midsize companies. Mr. Costa made up for the givebacks with cuts in infrastructure and other spending, whittling the annual budget deficit to less than 1 percent of its gross domestic product, compared with 4.4 percent when he took office. The government is on track to achieve a surplus by 2020, a year ahead of schedule, ending a quarter-century of deficits.

Sounds like there was still a focus on reducing deficits, which have declined quote dramatically.

 

[Loren Pechtel]

Of course austerity hurts. The only reason to chooses the austerity route is when the spending is unsustainable (something the left refuses to recognize can happen.) It looks like they found another path--cutting other government spending.

 

[ZiprHead]

Of course austerity hurts. The only reason to chooses the austerity route is when the spending is unsustainable (something the left refuses to recognize can happen.) It looks like they found another path--cutting other government spending.

Looks like they found a way to pay their debts and grow their economy instead of stifling it the way austerity demands.

 

[SimpleDon]

Of course austerity hurts. The only reason to chooses the austerity route is when the spending is unsustainable (something the left refuses to recognize can happen.) It looks like they found another path--cutting other government spending.

Then this must be some of that "fake news" that the New York Times is so famous for producing. Lies to make liberals feel good about themselves?

How the Trump Tax Cut Is Helping to Push the Federal Deficit to $1 Trillion

In addition to cutting their spending, Portugal has cut their trade deficit by more than one half since 2007 and 2008. This has also helped them to cut their budget deficit by so much. They aren't sending as much money to other countries, notably to Germany.

Austerity is only wrong as a reaction to a recession. In better economic times governments might have to reduce their budget deficit or even to run a budget surplus to avoid inflation.

It is the neoliberals who get it backward. They say that we should practice austerity in a recession and save their profligate ways for good economic conditions.

In the US we run a huge deficit, 5% of GDP, with no fear of inflation because we give tax cuts and all of the growth in the economy to the wealthy who save most of the money which means that it doesn't impact the economy enough to raise inflation worries in the general economy. It does produce inflation in the stock market, which has little effect on the economy, and unfortunately, for the economy, in real estate.

 

[Horatio Parker]

Sounds like they're robbing Peter to pay Paul. The infrastructure austerity will catch up to them eventually, but for now, party on!

Still, it illustrates the importance of stimulating aggregate demand.

But if you're in the EU monetary union, being an exporter is the only game in town. Britain gets away with being a net importer because it has its own currency.

Southern Europe will eventually bring down the monetary union, I'd guess.

 

[Elixir]

Sounds like they're robbing Peter to pay Paul. The infrastructure austerity will catch up to them eventually, but for now, party on!

Time will tell. But fixing an infrastructure if/when they must, will be a whole lot easier with a booming economy than otherwise.

Still, it illustrates the importance of stimulating aggregate demand.

Yeah, it stimulates aggregate production, which creates profits and taxes.

Southern Europe will eventually bring down the monetary union, I'd guess.

Doesn't look like the cause will be Portugal's debt. Maybe, just maybe they have it right? Kinda like their legalization of drugs - there are still those saying that in the long(er) run it will cause more addiction, crime and cultural degradation. Meanwhile, all the facts at hand ALL argue the exact opposite.

 

[SimpleDon]

Time will tell. But fixing an infrastructure if/when they must, will be a whole lot easier with a booming economy than otherwise.



Yeah, it stimulates aggregate production, which creates profits and taxes.

Southern Europe will eventually bring down the monetary union, I'd guess.

Doesn't look like the cause will be Portugal's debt. Maybe, just maybe they have it right? Kinda like their legalization of drugs - there are still those saying that in the long(er) run it will cause more addiction, crime, and cultural degradation. Meanwhile, all the facts at hand ALL argue the exact opposite.

Legalizing drugs is a double-edged sword. More than 10% of the regular users of marijuana become addicted to it, higher than for heroin, alcohol or gambling. Legalizing it to balance a country's budget or to put some more people to work is crazy.

A nation can never pay off its accumulated national debt. Trying to do so means lowering government spending or increasing taxes, either of which reduces demand in the economy, lowering tax revenue and ending up with more government debt than before, more private debt than before, creating debt deflation and a certain massive recession or even a depression.

The only possible exception would be a nation with a high trade deficit who could get it under control somehow, (I don't know how this would be done), and a relatively large population of high-income individuals who are relatively lightly taxed, aka the US right now. Taxing the high-income earners to pay off the debt would cause the least damage to the economy.

 

[Elixir]

Time will tell. But fixing an infrastructure if/when they must, will be a whole lot easier with a booming economy than otherwise.

Yeah, it stimulates aggregate production, which creates profits and taxes.

Southern Europe will eventually bring down the monetary union, I'd guess.

Doesn't look like the cause will be Portugal's debt. Maybe, just maybe they have it right? Kinda like their legalization of drugs - there are still those saying that in the long(er) run it will cause more addiction, crime, and cultural degradation. Meanwhile, all the facts at hand ALL argue the exact opposite.

Legalizing drugs is a double-edged sword. More than 10% of the regular users of marijuana become addicted to it

That is bullshit. There is no physiologically addictive substance in marijuana. It may (or may not) be habit-forming, but so is picking your nose. I've been smoking pot for 50+ years, and have never had any problem "giving it up" for a day, a week, a year or more. Pot is NOT addictive, no matter what you have heard. I'd be mildly interested to know what source fed you that lie.

A nation can never pay off its accumulated national debt. Trying to do so means lowering government spending or increasing taxes, either of which reduces demand in the economy, lowering tax revenue and ending up with more government debt than before, more private debt than before, creating debt deflation and a certain massive recession or even a depression.

Then stimulating the economy is the way to go. and that's what Portugal is doing.

Portugal’s radical drugs policy is working. Why hasn’t the world copied it?

 

[Horatio Parker]

I think infrastructure projects would be easier in a recession, actually.

Anyway, Check this out:

The data tells us that when the crisis started to undermine growth (first in the June-quarter 2008) it was mainly household consumption spending and private investment spending exacerbated by on-going external deficits that failed. At that time, government spending was providing fiscal support to the economt.

Then the Brussels Groupthink stepped in and after recording 6 successive quarters of growth with domestic demand on the improve (with fiscal support), the economy went back into recession in the December-quarter 2010 and posted negative growth for the next 8 quarters – a lengthy recession.

During that second episode, the contribution of government spending to growth was systematically negative (the austerity effect), which undermined household consumption and private investment spending.

It was an act of sabotage.

In the more recent growth phase, investment spending remains weak. and the modst growth is being driven largely by household consumption expenditure with some modest support from recurrent public spending.

But such was the severity of the downturn (Portugal lost, at its worst, 9.6 per cent of the size of its economy – by the December-quarter 2012) as a result of the harsh austerity that was imposed under orders from Brussels (taking orders from Washington, in part) that even though there has been a some modest growth since the end of 2014, the economy is still 4.1 per cent smaller than what it was in the March-quarter 2008 (the last peak).

In other words, the Portuguese economy has still not regained the position it was in when the crisis struck.

1. Total consumption expenditure is still 3.6 per cent below where it was in the March-quarter 2008 (households minus 3.2 per cent; government minus 6.4 per cent).

2. Overall capital formation (investment) is down 32.2 per cent (a radical drop), with public capital expenditure falling significantly in recent years.

3. Domestic demand (spending) is down 9.8 per cent overall.

4. Export spending is up by 33.2 per cent. Net exports have made a positive contribution to growth in 5 of the 11 quarters since the June-quarter 2014, when sustained growth returned.

So the lingering recession effect should be borne in mind when the cheer squads come out in favour of Portugal. It has been an unmitigated disaster and remains in a parlous state.

http://bilbo.economicoutlook.net/blog/?p=35803

 

[BH]

No matter what policies you pursue you are going to hurt something somewhere in the end no matter what.

 

[Elixir]

I think infrastructure projects would be easier in a recession, actually.

Anyway, Check this out:

The data tells us that when the crisis started to undermine growth (first in the June-quarter 2008) it was mainly household consumption spending and private investment spending exacerbated by on-going external deficits that failed. At that time, government spending was providing fiscal support to the economt.

Then the Brussels Groupthink stepped in and after recording 6 successive quarters of growth with domestic demand on the improve (with fiscal support), the economy went back into recession in the December-quarter 2010 and posted negative growth for the next 8 quarters – a lengthy recession.

During that second episode, the contribution of government spending to growth was systematically negative (the austerity effect), which undermined household consumption and private investment spending.

It was an act of sabotage.

In the more recent growth phase, investment spending remains weak. and the modst growth is being driven largely by household consumption expenditure with some modest support from recurrent public spending.

But such was the severity of the downturn (Portugal lost, at its worst, 9.6 per cent of the size of its economy – by the December-quarter 2012) as a result of the harsh austerity that was imposed under orders from Brussels (taking orders from Washington, in part) that even though there has been a some modest growth since the end of 2014, the economy is still 4.1 per cent smaller than what it was in the March-quarter 2008 (the last peak).

In other words, the Portuguese economy has still not regained the position it was in when the crisis struck.

1. Total consumption expenditure is still 3.6 per cent below where it was in the March-quarter 2008 (households minus 3.2 per cent; government minus 6.4 per cent).

2. Overall capital formation (investment) is down 32.2 per cent (a radical drop), with public capital expenditure falling significantly in recent years.

3. Domestic demand (spending) is down 9.8 per cent overall.

4. Export spending is up by 33.2 per cent. Net exports have made a positive contribution to growth in 5 of the 11 quarters since the June-quarter 2014, when sustained growth returned.

So the lingering recession effect should be borne in mind when the cheer squads come out in favour of Portugal. It has been an unmitigated disaster and remains in a parlous state.

http://bilbo.economicoutlook.net/blog/?p=35803

Hate go to "yabut", but - compare to Greece: