Janet Albrechtsen discusses austerity in The Australian today. A nice column and well timed to coincide with the budget. If actual economic outcomes counted for anything, this Keynesian theory would have been flushed out to sea years ago, but there it is, stronger than ever. So you have to sympathise with Angela Merkel as she tries to battle with people with real money to lose if these balanced budgets ever catch on again. From Janet’s column:

Happily, the ‘austerity thing’ is not pretty much debunked everywhere. While the word may have lost appeal (let the Left enjoy that hollow victory), the need for fiscal discipline is more certain than ever. ‘I call it balancing the budget,’ German Chancellor Angela Merkel said last month. ‘Everyone else is using this term austerity. That makes it sounds like something truly evil.’ A week earlier Merkel repeated her oft-repeated theme that Europe was living beyond its means. It has 8 per cent of the world’s population, 25 per cent of its gross domestic product and 50 per cent of its social spending. ‘That money has to be earned,’ she said.

It’s not even as if Merkel hasn’t got the runs on the board. The German economy is practically supporting the entire southern half of Europe but mendicants, whatever they may lack in honour and scruple, never lack the hunger for the wealth of others. The mentality of the indolent is that the hard working and provident owe them a tribute for being so capable of earning incomes on their own, in contrast with they themselves who can do no more than plead for a cut of the wealth produced by those who are somehow, through hard work and foresight, able to produce the flood of goods and services the mendicant class are so desirous of.

It is all luck in their minds, completely unjust and in no way related to merit.

But I fear Merkel and the rest will never be able to overcome the Keynesian monster until they have a theoretical explanation of how things work that refutes the belief that spending is itself the cause of growth. It’s obviously untrue, but what is even more obvious is that it is not in the interest of those who love parceling the booty out or of those who are on the receiving end, to admit that, just perhaps, this Keynesian economics is utterly mistaken from stem to stern and is the actual source of many of the economic problems we have.

Every fact has a thousand explanations. I used to say during the Costello years that when it is finally over no one would have learned a thing. And it’s true. There is not one economist in a hundred who could give you a coherent theoretical explanation why the Australian economy took off after public spending was cut in 1996 and 1997 just as the Asian Financial Crisis got under way. Zero deficits, zero debt and a strong economy. Sounds good to me. When do you suppose we will see the likes of that again?