Spain In Recession

It was announced this morning that Spain is officially in recession. Not a surprise. Spain, like other countries in the periphery of Europe, has been pressed by Germany and the European Central Bank to pursue policies of economic austerity. This is guaranteed to make things worse. Paul Krugman recently (and accurately) identified what was happening in Spain as insane.

But the insanity is not confined to Spain. It is happening everywhere in Europe, but voters are beginning to push back. Spain's unemployment rate, by the way is 23.6% and among young people about 50%. Austerity will make this worse. Is Europe committing economic suicide? Or just political suicide?

In the Netherlands, already in recession, the government has resigned after failing to get approval for further austerity measures.

Guess what? The economic measures causing such distress in Europe are just like the ones contained in Paul Ryan's budget.

Two years ago, the Republican narrative was that it was the budget deficit that caused the economic decline and loss of jobs. I would call that an intentional lie, except there are some voodoo economists playing for team Republican who still hawk those wares.

But it isn't true. It is true that economic crises and the resulting loss of jobs and income causes budget deficits. More government spending is still the most effective and speedy remedy for declines in aggregate demand that result from unemployment, even while spending on such safety net measures as extended unemployment benefits protects businesses from even more precipitous declines in their customer base.