Austerity's Wake: Why Ireland's Spending Cuts Should Scare Us, Too

By Matthew O'Brien
If you want to know what real austerity does to a country, check out the Emerald Isle. The below chart from the Irish Central Statistics Office shows the percent-change of Irish household disposable income from 2009 to 2010, broken down by income decile. (Note: The tenth decile refers to the most affluent ten percent of households, the ninth decile to the next most affluent ten percent, and so on, and so on).

Ireland.png
This is what austerity looks like when the brunt of retrenchment comes from spending cuts rather than revenue increases. People who rely on the government the most suffer the most. People who rely on it less suffer less. And people who don't really rely on it at all don't really suffer at all. As a result, the poor get whacked, the middle class gets punched, and the rich get richer.

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When Republicans and Democrats fight over deficit reduction, they're fighting over who gets hurt. Will it be the poor with safety net cuts, the middle class with tax and entitlement tweaks, or the rich with upper-end tax hikes?

If Ireland is any guide, a cuts-only approach like Paul Ryan's "Path to Prosperity" will have a very predicable short-term effect on family incomes. By cutting taxes for the rich, the rich will benefit. Meanwhile, the other 99% who depend on road, public schools, and FDA-inspected food, and even unemployment insurance will be out of luck. There won't be much money left for any of those things. That is the inevitable conclusion of shrinking discretionary spending to century-lows. Ryan and conservatives are within their right to call for dramatically shrinking government. But Ryan's future is a different country. And it just might look like Ireland.

This article available online at:

http://www.theatlantic.com/business/archive/2012/03/austeritys-wake-why-irelands-spending-cuts-should-scare-us-too/255181/