To elaborate a little bit: A monetarily sovereign government really only needs higher tax revenue to stave off demand-driven inflation. But in the case of demand-driven inflation, something has to be done anyway due to real constraints.
Now you might ask whether austerity now could help future real constraints in any way. The answer is typically no: austerity means that less is consumed today, but at the cost of less production today. Austerity does not cause stockpiles of real resources to be built for the future.
If you actually wanted to build real resources for the future (and such a plan would be dubious at best, because predicting future needs is tricky, especially in the face of changing technology), you would actually want to do the opposite of austerity: you would want to spend more now, in order to buy the real resources that are stored away in the stockpile.
It is only these real considerations that matter for a monetarily sovereign country. Monetary constraints only matter for countries that are not sovereign, e.g. the various members of the Euro area.
The members of the Eurozone taken together have the same sovereignty over monetary policy as any other country. But that's beside the point.
The point is that a sovereign country with a central bank can print its own money, but that doesn't mean it can borrow in its own currency. If that country keeps printing tons of money inflating away the value of its debt and running a current account deficit on top of it will not be able to borrow in its own currency under its own laws for long.
That's where monetary constraints become very real constraints, because the country loses its ability to import stuff it doesn't produce.
You are right of course, but they can't get their shit together.
> The point is that a sovereign country with a central bank can print its own money, but that doesn't mean it can borrow in its own currency.
This is getting into a bit wonky details, but the bottom line is that your concerns are misplaced. First of all, a monetarily sovereign government doesn't have to borrow in the first place. The only reason that they "borrow" is to provide a safe interest earning asset for the financial sector to play with, and so that the central bank can effectively raise the interest rate without paying interest itself - and wouldn't that cause interesting questions by the public, if suddenly raising interest rates would cost the central bank money!
Second, at the end of the day when the government runs a deficit, banks have a choice between keeping surplus reserves at the central bank or buying government bonds. As long as the interest rate paid on government bonds is higher than that on reserves, banks will buy government bonds.
So there are no monetary constraints.
What you should be concerned about, if anything at all, is the exchange rate to other currencies. Clearly, most normal countries see their exchange rate fall if they run a current account deficit for too long (the US is an interesting but explainable exception to that rule).
This makes imports more expensive. On the other hand, it makes your exports cheaper for foreigners, which is a boost for domestic industry. So in the end, the economy actually benefits.
For starters there will always be some unemployment due to natural turnover: companies sometimes have to reduce their workforce and not every hire is a success for either the company or the employee. People need time to find the next job and companies need time to fill the position. This is often called the natural rate of unemployment.
However it is much more than that. Suppose the government could just spend lots more. What does it spend on? Or does it just hire every unemployed person? Are these permanent government jobs? What do they do? What are the long term effects?
Sadly I am not aware of any country that has managed to solve unemployment (except perhaps some totalitarian regimes like the former USSR and these were not sustainable solutions). You would think that is it was just a matter of spending as much as you want that this solution wold have been found long ago.
You are right that there will always be some unemployed as people need to find the next job after a surprising layoff. However, this is known as frictional unemployment, and can basically not be more than 2%. In practice, you'd expect it to be well below 1% in an otherwise well-functioning labor market, though I will admit that it depends on the exact institutions and laws surrounding labor.
What economists mean when they say "natural" unemployment is something else entirely. It refers to the (contested) idea that there is some "natural" rate of unemployment that the economy "wants" to achieve, in the sense that you will supposedly see some unintended negative side-effects if you use policy (such as classical demand policies) to push unemployment below that level. This unintended negative side-effect is typically said to be inflation.
There is some truth to this idea; the criticism is mostly in how one responds to it. There is truth to this idea because low unemployment increases the wage bargaining power of labor, which may result in higher inflation via the wage-price cycle.
However, the standard reaction to this is disappointing: Central banks purposefully generate unemployment to keep inflation low, making unemployment a macro-level problem, while the rest of policy (and public opinion) acts as if unemployment were the fault of the individual. This is clearly schizophrenic behavior.
The more intelligent response is to say that infinite demand for labor should be created at a fixed wage. This eliminates unemployment without enabling the wage-price cycle. This idea isn't exactly new, but it is not yet widely known, even though its supporters come from a surprisingly wide range of the political spectrum (the supporters disagree on the how of the implementation details; the main search keyword is "Job Guarantee", though I have also seen some superficially quite different proposals such as this one: http://www.morganwarstler.com/post/44789487956/guaranteed-in...).
Why is it not widely known? I believe it is a combination of (a) efforts to make this idea known outside of small academic circles are relatively recent, and (b) while individuals clearly benefit, there are no truly powerful individuals or social institutions that clearly benefit, hence the advocacy is not as well-organized as e.g. Austrian propaganda.
I wish nobody was unemployed. Well not really - I don't want an employer - a boss. You should be able to do what you want.
Milton Friedman was a very productive guy. Besides coining "natural rate of unemployment" he also invented the "basic income" (aka"negative income tax") many years ago. Great idea!
Once everyone has a sufficiently decent job, workers will have have enormous bargaining power, because they do not fear losing their jobs. Imagine how negotiations between bosses and workers would go. The ability to openly disrespect the boss, and the clearer possibility to transcend boss rule.
Absent other methods of control (like the USSR used, as you point out), capitalism would risk overthrow; that is, replaced by another system, with different defining institutions.
Needless to say, this poses a problem for policymakers, whose success depends on their ability to serve the wealthy elites who finance their campaigns and dominate government. So they must pursue economic policies which lead to sufficiently high unemployment (often sacrificing growth too; obviously less people are making stuff); or at least fragile employment, like in the service industry.
