What Austerity Means

This quote from the German Finance Minister (quoted by Krugman) is pretty striking to me:

Governments in and beyond the eurozone need not just to commit to fiscal consolidation and improved competitiveness – they need to start delivering on these now.
…
There is some concern that fiscal consolidation, a smaller public sector and more flexible labour markets could undermine demand in these countries in the short term. I am not convinced that this is a foregone conclusion, but even if it were, there is a trade-off between short-term pain and long-term gain. An increase in consumer and investor confidence and a shortening of unemployment lines will in the medium term cancel out any short-term dip in consumption.

This could have been written by anyone in the US Right too.  Krugman goes on to make his oft-repeated point that austerity will be contractionary, and that this strategy counts on the Confidence Fairy to work everything out, even though the economics models show austerity will just lead to long-term slow growth and high unemployment.

I'd make another point, though.  This argument as made above almost concedes the point that austerity will be rough in the short term, but worth it in the long term.  That might be a legitimate point- "we need to balance the budget and take the short-term pain, so that by 2018 we'll be growing like crazy again".  But that actual argument gets little play in the press or among the politicians and pundits who support it.

But let's be clear: conservative plans for the current economic crisis will clearly lead to lots of pain for many years, before a hoped-for explosion of growth when these inefficiencies are wrung out of the economy.  I don't think that's a winning argument with Americans who don't understand economics, but it would be nice if repoters would draw that distinction.

Nevertheless, it's full speed ahead for austerity.  After all, the economy in Washington is just fine so where's the job problem??