Make Austerity Your Friend

Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

“The solution to our problems is found in business, outside of government.”
— Tony Blair, Milken conference 2013


“There is much revenue in economy.” — Ben Franklin

SPECIAL ANNOUNCEMENT: At 9 p.m. EDT tonight, I appear on John Stossel’s Fox Business (check local listings) show “Stossel” to discuss the growing debate “Austerity vs. Stimulus: Which is the Best Way Out of the Great Recession?”

I invite you to watch me debate Robert Kuttner, author of the new book, “Debtor’s Prison: The Politics of Austerity.” He and other big-government Keynesians have been attacking the policy of cutting back government spending, which they contend only will cause more unemployment and misery. They not only reject austerity, but insist on going into debt even more to stimulate the economy.


A slew of anti-austerity books have come out lately: “Austerity: The History of a Dangerous Idea”… “Why Austerity Kills”… followed by articles like this one from Paul Krugman, “The Case for Austerity Crumbles.” He specifically refers to Europe, where he claims cutbacks have pushed unemployment higher and made things worse.

But have Krugman, Kuttner and the social democrats won the day? Not so fast.

First of all, it’s important to note that Washington and most countries in Europe have talked austerity but have not had the guts to really follow through. “The sequester” only reduced the growth of U.S. government spending. Equally, there have been few real cuts in spending in Europe, including the United Kingdom. In most cases, the “austerity” involved sharp increases in taxes — even Keynesians oppose raising taxes during a slowdown. Government spending as a percentage of gross domestic product (GDP) is way up since 2007. That’s why Europe continues to suffer.

In fact, the only country in Europe that actually has cut government spending and taxes is tiny Estonia, and that nation is booming.

Exclusive  Why Did This Happen? This Chart Says It All

We must not ignore the benefits of austerity — eliminating waste in the private and public sector, rebuilding company balance sheets, improving labor and capital productivity, etc., and warning government at all levels to avoid excessive “Great Society” welfare programs and deficits that got us into this mess in the first place. Governments need to build rainy day funds so that cutbacks on essential government services are not necessary during the next downturn.

Smart individuals and families know they must live within their means and not get into excessive credit card debt or buy a house they can’t afford — it’s called prudent personal finance.

A government is no different. As Adam Smith stated, “What is prudence in the conduct of every private family can scarcely be folly in that of a great kingdom.” This quote is found in the direct center of Smith’s classic work, “The Wealth of Nations” published in 1776.

The key to any recovery is to encourage the private sector, which represents the majority shareholders in the economy and the creator of new jobs. The Keynesians hope to jump start business by running massive deficits and using easy-money policies, thinking such spending will increase aggregate demand. But the truth is that government spending is often offset by companies playing it safe, cutting back on private spending and building large cash positions (over $2 trillion now) in anticipation of higher taxes down the road, instead of investing funds in new projects and jobs. The crowding out problem is real.

My solution is more on the supply side: removing barriers to new production by cutting the corporate tax rate and curtailing new regulations (ObamaCare, Dodd-Frank, Sarbanes-Oxley, EPA, IRS). By reducing the deficit, more money is made available to the private sector, which is more productive.

Exclusive  'The Incident' Transformed This Hollywood Producer: A Thanksgiving Story


Great Caesar’s Ghost! We’ve just posted our full schedule of speakers, panels, debates and our three-day investment conference for this year’s FreedomFest, July 10-13, Caesars Palace, Las Vegas. Plus, we just confirmed Dr. T. Colin Campbell, America’s #1 nutritional scientist, will address us at FreedomFest. He’s world famous as the author of “The China Study,” which focuses on the right kind of diet to consume to live well past 100. Dr. Campbell is in huge demand, and now he’s coming to our show to speak on his new book “Whole,” the secret to aging without getting cancer, heart disease, diabetes, stroke or… what was the name of that other disease? Oh, yeah, Alzheimer’s!

Rates go up July 1, so now is the time to register at Or call Tami Holland, 1-866/266-5101. Our room block at Caesars is now FULL, but we are working with Caesars to find more rooms at $129 a night. Meanwhile, there are plenty of hotels nearby offering low rates. (For instance, Bally’s across the street has rooms for $60-80 a night.) And remember, parking at all Vegas hotels is FREE. Drive there, fly there, bike there. Just be sure to be there for “the greatest libertarian show on earth.”

You Blew it! I’m Sick of Sic

Recently, I read an article by an erudite writer on the financial crisis. He cited a government official and placed the term “sic” near the end of the quotation. Here is the sentence:

“Just ask Gideon Gono, chief of the Zimbabwean central bank, who, reflecting bitterly on the world’s second-worst hyperinflation, wrote: ‘These interventions which were exactly in the mould of bail out packages and quantitative easing measures currently instituted in the US and the EU, were geared at evoking a positive supply response and arrest[sic] further economic decline.'”

Exclusive  Is Income Inequality a Myth?

For the life of me, I can’t figure out what’s so bad about the word “arrest” that it deserves to be labeled “sic.” Sic, of course, is the Latin adverb meaning “thus” (short for sic erat scriptum, “thus was it written”). It is typically used to note an erroneous spelling of a word.

Since much handwriting involved non-standard spellings, historians today usually note in the introduction of their books that the spelling is “as is” or has been standardized to modern spelling. That’s much better than constantly adding “sic” to every other sentence or word.

In the above case, “arrest” is not misspelled. I had to ask my editor — my wife Jo Ann, an English professor — what was wrong in this sentence. She replied: “It should be ‘arresting,’ to match the progressive verb ‘evoking,’ instead of just ‘arrest.'”

Oh, my, talk about picky.

Here is how my wife, the English professor, said she would have handled the situation… “arrest[ing] further economic development.”

“I would just correct the quote, using brackets to indicate that something was changed,” Jo Ann explained. “In fact, ‘sic’ indicates that the quoter has checked the source and is verifying that it is correct as written (let it stand). Simple typos and careless mistakes should be corrected with brackets.”

Unfortunately, “sic” is being used more and more as a form of ridicule or insult, a way of attacking an opponent’s philosophy or policies by trying to show how much smarter the writer is. In short, I’m sick of sic.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

share on:

Like This Article?
Now Get Mark's FREE Special Report:
3 Dividend Plays with Sky-High Returns

This newly-released report by a top-20 living economist details three investments that are your best bets for income and appreciation for the rest of the year and beyond.

Get Access to the Report, 100% FREE

share on:


Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader

Used by financial advisors and individual investors all over the world, is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle


DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops