Welfare, pensions, salaries slashed if we quit bailout

[Sunny]

No he didn't. WWI and its related military spending ended 14 months before the depression of 1920 began. Military spending was still included in the 1919 Federal budget which was $18.9b. The 1920 budget shows that military spending had already been cut out when the federal budget was a mere $6.8b (source: http://www.usgovernmentspending.com/year1918_0.html#usgs302).
Harding further cut spending in March 1921 (2 1/2 years after the war had ended) ultimately reducing the federal budget by 50% in two years. These were cuts in general government spending, not war spending.

This is completely off topic and I don't really want to go down this road. Even using the figures on that site, Harding chopped the federal budget from USD 6.8 billion to USD 3.8 billion by 1922. Out of this, USD 1.3 or nearly 44% of the cut came from a drop in military spending. The other big change is under the balance heading which I have no idea what it relates to. But you can see yourself that the spending on the other headline areas did not change to any great extent.

You also credit him with chopping income tax rates but what you are leaving out is that tax rates were at extremly high levels to pay for WWI. As far as I can remember people were paying nearly 60% rates on income over USD 100,000 by 1920. By 1925, Harding and then Coolridge had brought these down to more respectable levels (about 20-25% I think). However these rates were still a lot higher the rates that were seen in the US before WWI.

Like I say, completely off topic!

 

[csirl]

I can't help thinking that the ECB should just write off what it is owed by piigs countries and simply print that figure in new euros (in the USA & UK do they not call printing money 'quantitative easing'?), the problem would be fixed at a key stroke.

Agree with this - ECB needs to take some responsibility for its wreckless lending.

Pre-Euro, both fiscal policy (currency & interest rates etc) and banking regulation were dealt with by the same organisation, in our case the Central Bank of Ireland. This made sense - the fiscal policy could be adjusted to deal with banking problems. However, the Euro has seen the ECB take away the fiscal policy without taking the responsibility for the banks. If we have a single currency and a single central bank (ECB), then this single central bank needs to be fully responsible for banking across the eurozone and prepared to clean up any problems it's policies/actions create. The current situation means the ECB are not responsible for their mistakes and our Central Bank cannot adjust fiscal policy to fix the mistakes. There is a huge moral argument for saying to the ECB 'you created the monster that is the Irish banking crisis, so you deal with it and cover the cost'.

 

[Firefly]

I can't help thinking that the ECB should just write off what it is owed by piigs countries and simply print that figure in new euros (in the USA & UK do they not call printing money 'quantitative easing'?), the problem would be fixed at a key stroke.

It would certainly help those indebted here but it would also mean that those who have savings would see a reduction in their purchasing power through inflation. Not sure the Germans would be too happy....neither people here who have saved a lot of money by not indulging in recent years.

 

[DerKaiser]

Like I say, completely off topic!

But very worthwhile

Health, Education & Social Welfare make up almost 75% of our current expediture.

It doesn't apear that this applied to the US situation 90 years ago.

Have we ever had a situation where a first world country has slashed its health, education and social welfare budgets by almost 50%?

 

[Chris]

This is completely off topic and I don't really want to go down this road. Even using the figures on that site, Harding chopped the federal budget from USD 6.8 billion to USD 3.8 billion by 1922. Out of this, USD 1.3 or nearly 44% of the cut came from a drop in military spending. The other big change is under the balance heading which I have no idea what it relates to. But you can see yourself that the spending on the other headline areas did not change to any great extent.

You also credit him with chopping income tax rates but what you are leaving out is that tax rates were at extremly high levels to pay for WWI. As far as I can remember people were paying nearly 60% rates on income over USD 100,000 by 1920. By 1925, Harding and then Coolridge had brought these down to more respectable levels (about 20-25% I think). However these rates were still a lot higher the rates that were seen in the US before WWI.

Like I say, completely off topic!

Yes, a bit off topic to go into the details of that era. However, my main reason for posting on this time period is that it is continuously falsely stated that a reduction in government spending would create a worse economic environment when the exact opposite is the case.
I think your 60% marginal tax rate is about right, and not much above our own marginal rate which of course kicks in at a much lower income level.
Ultimately it doesn't matter where the government spending cuts come from, they just simply have to be made in order to balance the budget without destroying the last remnants of a viable economy through taxation. It will mean hardship in the short term but will ensure that the economy will survive in some meaningful way in the medium and long term.