“It's important to understand that what we're seeing isn't a failure of orthodox economics. Standard economics in this case—that is, economics based on what the profession has learned these past three generations, and for that matter on most textbooks—was the Keynesian position. The austerity thing was just invented out of thin air and a few dubious historical examples to serve the prejudices of the elite.”
Monday, March 04, 2013
Congratulations to the Tea Party
Sequestration is underway, and Tea Partiers are claiming victory in their war against deficits. They see this as the first win in their campaign to impose austerity on the American people. Many Republicans, fearful of being challenged from the right in a primary, have argued that “everyone knows that spending is out of control.” Never mind that Federal nondefense discretionary spending — all spending minus defense and entitlements — is on track to hit its lowest level as a share of GDP in more than 50 years, according to data from the Congressional Budget Office.
These self-proclaimed deficit hawks argue that we need austerity because, just like many American families, we have to “tighten our belt.” Unlike many American families, the
government can print money.
Also, it can spend on a scale that alters the unemployment rate around the
country, stimulating the economy and producing more revenues. And it can borrow
money at rates that approach zero per cent. Nevertheless, the acolytes of Grover
Norquist insist that we must shrink government until it is the small enough to drown
in a bathtub. U.S.
If only we could be certain of how austerity works. Does it enable the economy to flourish? For that, we would need something like a controlled experiment.
government “austerity programme” is a series of sustained reductions in public
spending, intended to reduce the budget deficit. How’s that working out? The United Kingdom economy is
3.3% smaller than it was in 2008. The U.K. economy is 2.9% larger (both
adjusted for inflation). Get it? The U.K is in recession and the U.S. isn’t. U.S.
What’s the number one cause of deficits? Recession. Hail Britannia! As Paul Krugman put it:
Think about that if you have some extra time today. Maybe you are trying to get through the shrunken TSA while trying to catch a plane that is delayed because of layoffs of air traffic controllers. Or maybe you are driving over unsafe bridges and on roads with potholes, with your kids whose Head Start program was shutdown, to get some meat at the market, where, because of a lack of meat inspectors, prices have shot up.
And think on this: the sequestration is the result of Republicans refusal to close tax loopholes that it said were unfair and non-productive when negotiating a way to avoid the fiscal cliff. They claim that the President “already got his tax hikes.” Of course, last time I checked, Republicans controlled the House of Representatives and had a filibuster/veto in the Senate. So go ask John Boehner to name names: Which Republicans voted for a tax increase?
“ …. and tell ’em Big Mitch sent ya!”