Austerity is wrong medicine for bleeding economy

nomorecuts3

The labor movement has persuasively argued that the election's mandate was to create jobs and resolve the economic mess in the interests of working people. The election's mandate was not to make that mess worse. And yet, this is precisely what the Republican policies of draconian spending cuts would do. Nothing could be more harmful.

What is delaying an economic recovery is not too much spending and a growing deficit, but not enough federal spending.

The economy is stalled and spending is down. Consumers are up to their ears in debt and are understandably reluctant to use scarce dollars to buy things like refrigerators, cars, houses, or home improvements. And don't hold your breath waiting for the capitalist class, sitting on roughly two trillion dollars - yes, $2,000,000,000 - to invest its surplus cash in new hiring and productive capacity.

The crisis gripping the country and world is one of demand insufficiency. Thus to cut government spending for jobs, infrastructure, green technology, public education, and aid to local governments in these circumstances is like throwing fuel on a fire - things will get worse, maybe much worse, before they get better.

Nevertheless, the Republican right, if it has its way, is determined to take a meat axe to people's programs at the federal, state and local level. Government, it is said, has to live within its means like everyone else does.

But the truth is just the opposite. For the time being government has to live, not within, but beyond its means. Its immediate imperative is to put dollars in the hands of people who will spend those dollars, namely working and poor people, people of color, youth, and seniors. Nothing could be worse than for the government to tighten its belt in a period when the economy is slumping, unemployment is stuck in the double-digit range, investment in new plants and equipment is meager, and consumer demand is low.

That would be economic suicide. It could turn the warnings of a "double dip" of the economy into a reality.

The millions who went to the polls two weeks ago didn't cast their vote for policies that will drive the economy further downward.

Many were influenced by the toxic environment that was engineered by the right-wing media and corporations and, sorry to say, abetted by the inadequate responses of the Democratic Party to an avalanche of misinformation, demagogy and lies. But it is still a good bet that for millions change looks like a job at a livable wage, a moratorium on mortgage payments, an extension of unemployment insurance, tax breaks for everybody but the richest families and corporations, stiffer regulations on banks and bankers' pay, an expansion of public infrastructure projects, a health care plan that is affordable, universal and easy to understand, well-funded public schools, and retirement security.

Ask Americans feeling the pinch of this economic crisis if their priority - if they have to choose - is the list above or a balanced budget.

I strongly suspect it is the former, not the latter.

President Franklin Delano Roosevelt drank the Kool-Aid of austerity in 1937 and as a result a steep price had to be paid - the economic recovery that was under way lost its steam, hardship grew, and the president and the New Dealers in Congress took a hit in the 1938 elections. Hopefully, this mistake will not be repeated today, because the results will be much the same, including in 2012.

The Republican right won a major victory in this month's midterm elections, but the Democrats and people's movement retain important bases of power.

2010 is not 1994. Obama is not Bill Clinton, who was quick to declare the "era of big government is over." The Senate remains in Democratic hands. The Progressive Caucus in the House is bigger and battle-tested. The coalition opposing the right is more united and more politically attuned. And the people reeling under the weight of a protracted downturn want relief first of all.

The economic policies of the Republican right are also full of contradictions and unsustainable.

The next two years are going to be a dogfight on the ground and in the corridors of political power. And, if the recent elections taught us anything it is that the battle over ideas cannot be underestimated. Right-wing extremism learned this lesson years ago. Our side of the class struggle has to learn and master it now.

To be successful everyone who desires a way out of the current crisis has to become a voice for reason, decency, fairness and economic justice. Simple logic tells us, and we should say it loud and clear: We were not at the switch when the economy unraveled, but we know who was - high finance and the same Republican voices who are now insisting that the government rein in spending for jobs and people's needs and walk away from a wounded and bleeding economy.

Photo: Budget cuts protest at San Francisco State University last year. (coolmikeol CC 2.0) 

 

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  • We are judged by what we say and what we do. Those who fail to defend even the smallest gains of workers and people who are fighting for their lives, need to take note. Bigger struggles are built on a multitude of smaller ones.

    Posted by Beth Edelman, 11/20/2010 3:07pm (3 years ago)

  • @Alex...

    "Keynes and his bozo followers have been totally discredited. You will be too if you continue publishing such drivel."

    I see what you mean, Alex. They DO sound like Keynesians, don't they? Maybe they just don't realize it.

    Everybody, please listen to Alex. If you keep publishing liberal, Keynesian drivel, you could end up totally discredited just like that bozo, Keynes, and his bozo followers. That would be terrible!

    Posted by Trailer Trash, 11/18/2010 6:40pm (3 years ago)

  • It's very important to note the reference to Roosevelt. The adage "there's nothing new under the sun" applies here. If this administration caves.... Sam is right, the consequences will be ugly for many working people and their families.

    wage peace, peace will bring prosperity!

    Posted by Gabriel Falsetta, 11/18/2010 2:17pm (3 years ago)

  • I'd be interested to hear Alex's groundbreaking ideas on how to stimulate consumer demand besides, I guess, everyone scraping up the cash to create a run on Hazlett books. So quick to tear down others' ideas, so reluctant to offer any of their own...besides "follow my leader" of course.

    Posted by Jay, 11/18/2010 12:57pm (3 years ago)

  • This has got to be one of the dumbest things I have ever read. Government at all levels already consumes more than FIFTY percent of GDP. How much do this monster have to steal and waste before it's enough? Using your twisted logic, if the government just spent 100 quadrillion dollars, we'd all be rich and prosperous again.
    It was ironic that you pointed out that Americans are already broke. Where would you like your precious regime to steal the resources necessary to increase spending even more? The evil rich? haha. jealousy and stupidity laid out for the world to read.
    Keynes and his bozo followers have been totally discredited. You will be too if you continue publishing such drivel.
    But maybe you are just ignorant, not complicit, of the causes destroying our economy and our nation. If that is the case, PICK UP A FEW BOOKS! Economics in one lesson by Hazlitt would be a good place to start.

    Posted by Alex, 11/18/2010 11:39am (3 years ago)

  • "The capitalist maxim is from each according to their labor and to each according to their wealth and greed"

    Deficits exist today because the parasite class refuses to pay their share of taxes and have stolen the collective wealth of the nation as a whole. Low marginal tax rates and bailouts for them translates only to the further accumulation of stagnant wealth, while higher tax rates tends to force it's liberation for economically useful purposes.

    It is no accident that the highest rate of economic growth in the United States, and that was growth that did benefit all even if still some more than others, also coincides with the period of highest marginal tax rates on wealth. Restore marginal tax rates for the wealthy to the immediate postwar period, and you will see both an elimination of collective debt and a full fledge economic boom.

    Posted by David Sugar, 11/17/2010 6:56pm (3 years ago)

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