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European Arguments Over Austerity Echoed in Washington Debate on Budget Cuts

May 1, 2013 at 12:00 AM EST
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JUDY WOODRUFF: And we turn to a growing pushback against economic austerity measures here and in Europe. The day started with several big protests abroad, as citizens complained their governments are cutting spending too severely.

European capitals filled with May Day crowds protesting austerity measures that are meant to bring down sky-high government debt. In Athens, Greek union workers went on strike against proposed layoffs of public employees.

KOSTAS TSIKRIKAS, President, Confederation of Civil Servants Trade Union: We will continue to fight to overturn this unfair and dead-end policy that is destroying millions of jobs on a national and European level and is driving large swathes of society to poverty and destruction.

JUDY WOODRUFF: In Madrid, Spaniards joined the protests. Unemployment in Spain and Greece now tops 27 percent. And for the Eurozone as a whole, it hit a record high 12.1 percent in March. The human toll behind the data also fueled rallies today in Britain, Portugal and France, with trade unions and others insisting that spending cuts and tax hikes have killed economic growth.

THIERRY LEPAON, Secretary General, CGT Workers Union: We have seen that in Spain, in Greece, in Portugal, in Italy, the austerity policies launched by these governments are leading once again to a dead end.

JUDY WOODRUFF: The arguments over austerity and debt are echoed in Washington’s debates over budget cuts. A 2010 Harvard study by economists Kenneth Rogoff and Carmen Reinhart concluded that when government debt exceeds 90 percent of the gross domestic product, the economy shrinks a 10th of a percent. It’s frequently cited by Republicans, including House Budget Committee Chair Paul Ryan and Utah Sen. Orrin Hatch.

SEN. ORRIN HATCH, R-Utah: And while one might quibble with the particulars of Reinhart’s and Rogoff’s assessment, failure to take it seriously, given the recent struggles of the Eurozone, amounts to whistling past the graveyard.

JUDY WOODRUFF: But, this month, researchers at the University of Massachusetts did more than quibble. They concluded that average annual growth actually tops two percent even when government debt is high. And they charged the Rogoff-Reinhart study included key calculation errors and omitted important post-World War II data from other countries, such as Australia and New Zealand.

The furor became fodder for comedian Stephen Colbert.

STEPHEN COLBERT, “The Colbert Report”: Please.

If ignoring New Zealand, Australia, and Canada were a crime, everyone in America would be on death row.

But, come on, 2.2 percent up, 0.1 percent down. You say potato, I say eliminate food stamps.

JUDY WOODRUFF: Reinhart and Rogoff have acknowledged some errors, but they say their conclusions are sound just the same. Other economists say mandatory budget cuts, known as the sequester, are at least partly to blame for the disappointing March jobs report. President Obama said as much yesterday.

PRESIDENT BARACK OBAMA: It’s slowed our growth. It’s resulting in people being thrown out of work, and it’s hurting folks all across the country.

JUDY WOODRUFF: Another picture of the sequester’s effects on growth may come Friday, when April’s unemployment numbers are released.