Paul Krugman's "When Austerity Fails": Europe in Decline

In an op-ed in today's New York Times entitled "When Austerity Fails" (http://www.nytimes.com/2011/05/23/opinion/23krugman.html?hp), Paul Krugman tells us that attempts in Europe to cut spending have not resulted in economic resurgence and that the U.S. should learn from this failure. Krugman writes:

"In Europe, by contrast, the pain caucus has been in control for more than a year, insisting that sound money and balanced budgets are the answer to all problems. Underlying this insistence have been economic fantasies, in particular belief in the confidence fairy — that is, belief that slashing spending will actually create jobs, because fiscal austerity will improve private-sector confidence."

. . . .

But as I said, the confidence fairy hasn’t shown up. Europe’s troubled debtor nations are, as we should have expected, suffering further economic decline thanks to those austerity programs, and confidence is plunging instead of rising. It’s now clear that Greece, Ireland and Portugal can’t and won’t repay their debts in full, although Spain might manage to tough it out."

Could it be, however, that even were these governments to attempt to spur growth with aggressive spending, their efforts would fail, provoking an even more severe crisis? Allow me to be politically incorrect for a moment and ask, hypothetically, whether Europe might be in permanent decline, owing to:

• the burden of their social welfare programs;
• an influx of unskilled persons from Turkey and North Africa, many of whom have been unable to find work and have further strained Europe's social welfare programs to the breaking point;
• the acceptance of high unemployment as the norm;
• shorter work weeks and longer vacations;
• declining birthrates.

Let's hope I'm wrong and pray that Europe will experience another renaissance.

But my point is otherwise: What works or doesn't work in Europe doesn't guarantee a similar result in the United States. Europe and the U.S. are literally and figuratively an ocean apart.