I have covered here many times the often hysterical efforts of the forces of statism to prevent any and all reductions in government spending by attacking the bugaboo of "austerity." For example, there was the IMF World Economic Outlook report of October 2012, covered here, that criticized countries adopting policies of "austerity" for causing decreases in employment and output. And the Washington Post article covering same, headlined "IMF: Austerity is much worse for the economy than we thought." And the new book by junior academics Stuckler and Basu titled "The Body Economic: Why Austerity Kills," together with the big New York Times op-ed by the same authors titled "How Austerity Kills," both covered here. Not to mention the endless anti-austerity tirades from the official Worst Economics Writer, Paul Krugman.
So it is only fitting then that the Manhattan Contrarian should examine the horrors that are occurring to the practitioner of the world's most extreme austerity, Singapore.
Recall that the term "austerity" is a befuddled Keynesian mixture of low government spending and taxes sufficient to cover all spending. I don't agree that this is a very relevant metric for evaluating government economic policy, but for today, assume that it is. By this metric, Singapore is clearly the leader among all countries. First, its government spending as a percent of GDP is a ridiculously low 17%. Among other significant countries, only Hong Kong at 19% even comes close. In the United States, it varies by state, but combined state and federal spending as a percent of GDP in most states is between 40 and 45%. Italy and Greece both have government spending of around 50% of GDP. For an Italy or a Greece to cut government spending to get it down to the same proportion of GDP as Singapore, they would have to cut about two-thirds of all spending. For the United States to achieve the same thing, it would have to cut well over half of all government spending. Talk about austerity! (The actual "austerity" programs implemented by some European countries seek cuts of government spending of 1 or 2% of GDP at best.)
And then those crazy Singaporeans have the nerve to not even run any budget deficits! While the U.S. has run up cash-basis deficits of a trillion or so dollars per year through the age of Obama, about 7+% of GDP, and all the respectable European countries have been running deficits of at least 5% and often 10% of GDP, Singapore has been running surpluses. For example, it had a surplus of 2.99 billion Singapore dollars in 2011, and 2.80 billion Singapore dollars in 2012, (a Singapore dollar is worth about 0.8 of a U.S. dollar) and is projecting further surpluses averaging 0.7% of GDP in 2013 and 2014.
Now clearly, if the IMF, Krugman, the Washington Post, Stuckler and Basu, et al. are anything near right, Singapore should be in the throes of economic horror. So let us look to the statistics to see how they are doing.
Bloomberg here has a long article by Sharon Chen from Thursday August 16 reporting on economic conditions in Singapore. Well, to start with, they have had the "rich world's biggest jobs growth" for the past decade. Using a ratio of jobs to total population, Singapore has gone from 49.5% in 2004 to 58.4% estimated for 2014. During the same period, U.S. jobs to total population has gone down from 47.5% to 46.0%. Using the more traditional metric of unemployment rate, Singapore's most recent rate for July 2013 was 2.1%. That is not a typo.
But wait! The Bloomberg article reports that Singapore's jobs growth is "near[ing] an end"! Well, the reason is that the government has decided to reduce the ability of employers to import foreign workers to fill new jobs. That will leave essentially nobody left to fill new jobs, but the government is still projecting about 100,000 new jobs per year in the coming years. That's down from a recent high of 234,900 jobs added in 2007 -- on a base of only around 3 million jobs, that's over 7% job growth in one year. Wow! It would be the equivalent of the U.S. adding around 10 million jobs in a year. (Actual U.S. jobs growth has been running around 2 million +/- for the past few years.)
And does any of this trickle down to the little guy? The Bloomberg article reports that a fellow named Tony Cousens is trying to find waiters and housekeepers for Ramada and Days Hotels in Singapore, and has had to pay over S$100,000, equivalent to $79,000. And he still has 100 unfilled positions.
Meanwhile, the New York Times runs one supposed "news" article after another describing how the minuscule spending cuts of the "sequester" are supposedly reducing jobs growth in the U.S. (E.g., "Yes, the Sequester Is Affecting the Job Market" by Catherine Rampell, July 5) Do you believe them?