Fight the Austerity Lies

The evidence - nay, proof - that austerity kills is now overwhelming, but that has just made the austerity hysterics more determined to turn the middle class into serfs for the parasite rich.

Zandar:

Paul Krugman once again brings up the fact that every country that has tried austerity to get out of the Great Recession is still back in recession six years later.

At one level this is kind of funny: austerity policies have been applied all across Europe, yet the best example of success the austerians can come up with is a nation with fewer inhabitants than, say, Brooklyn. Still, the International Monetary Fund recently issued two new reports on the Latvian economy, and they really help put this story into perspective. 

To be fair to the Latvians, they do have something to be proud of. After experiencing a Great-Depression-level slump, their economy has experienced two years of solid growth and falling unemployment. Despite that growth, however, they have only regained part of the lost ground in terms of either output or employment — and the unemployment rate is still 14 percent. If this is the austerians’ idea of an economic miracle, they truly are the children of a lesser god. 

Oh, and if we’re going to invoke the experience of small nations as evidence about what economic policies work, let’s not forget the true economic miracle that is Iceland — a nation that was at ground zero of the financial crisis, but which, thanks to its embrace of unorthodox policies, has almost fully recovered. 

So what do we learn from the rather pathetic search for austerity success stories? We learn that the doctrine that has dominated elite economic discourse for the past three years is wrong on all fronts. Not only have we been ruled by fear of nonexistent threats, we’ve been promised rewards that haven’t arrived and never will. It’s time to put the deficit obsession aside and get back to dealing with the real problem — namely, unacceptably high unemployment. 

So how to fight the austerity lies?

Digby:

Bob Borosage has a good piece of advice about how to deal with our coming austerity battles:

Mass unemployment, declining wages, and faltering growth suggests the United States has already suffered too much austerity, too soon. And yet the political debate is focused on how much more to impose. Washington imposed $1.5 trillion in spending cuts over 10 years in the 2011 “debt ceiling” deal. Washington stumbled past the year-end “fiscal cliff” with a deal that featured about $600 billion in tax hikes over ten years, including returning rates for the richest Americans back to Clinton era levels, and ending the payroll tax holiday, adding 2 percent to every working family’s payroll tax rate.

Now Congress has created an even more precarious fiscal peril to extort even greater cuts. Between now and the middle of May, we’ll hit the debt ceiling again, the automatic cut (sequester) of military and domestic budgets for the remainder of the year will kick in, and the temporary appropriations for government will expire. This sets up a new negotiation to forestall these ruinous calamities, now with Social Security, Medicare and Medicaid directly targeted.

The leaders of both parties suggest that more deficit reduction is needed and that it would help the economy. Not surprisingly, polls suggest that most Americans believe that cutting spending will help the economy, not harm the recovery. The reality is that spending is not out of control, the deficit is already plummeting, and we should be focused on fixing the economy to make it work for working people, not on austerity driven by wrong-headed deficit hysteria.

Here’s how we can make the case against it.

Start with the struggles families are facing. The budget debate now underway in Washington, focused on “fixing the debt,” misses the point. Americans are still suffering record levels of long-term unemployment. Poverty has risen to a level unseen in generations. Inequality is at new extremes. Wages are at the lowest percentage of the economy on record, while corporate profits are at the highest. We should be focused on fixing our economy.

Challenge the austerity myth. And here’s the real deal. You can’t fix the economy by “fixing the debt.” Cutting spending now will only slow the recovery, put more people out of work – and as we have seen in Europe, end up adding to our debt burdens.

In fact, fixing the economy is the necessary first step in getting our books back in order. Our deficits are largely due to the recession, with the costs of unemployment and the lost revenue from the loss of jobs. In these conditions, the best deficit reduction program is to put people back to work.

Even the slow growth we’ve witnessed has begun to reduce our deficits as jobs have been created. Despite all the hysteria, deficits are down by 25% compared to the economy, according to the Congressional Budget Office. They are falling faster than anytime since the demobilization at the end of World War II. And our debt level is basically stabilized for the next decade. More austerity – whether balanced between taxes and spending as the president calls for or focused just on spending cuts as Republicans suggest – will only serve to slow growth, cost jobs, and impede the recovery needed to get our books back in shape.

Worse, the austerity debate is now focused on whacking at the basic pillars of family security – Social Security, Medicare and Medicaid. The cuts under discussion – slowing the inflation adjustment for Social Security, raising the eligibility age for Medicare or the retirement age for Social Security — would harm the most vulnerable in our society.

Describe the way out. Fixing our economy requires a very different agenda than mindless cuts. We need to invest in areas vital to our future, and stop squandering resources on things we don’t need and can’t afford. End the wars abroad, bring our troops home, and invest the savings in rebuilding America – putting people to work while modernizing our decrepit infrastructure, from roads and rail to broadband and the electric grid.

End the subsidies and tax breaks to big oil companies and invest the resources in research and development to capture a lead in clean energy and the green industrial revolution sweeping the country.

Crack down on global tax havens, tax Wall Street speculation, tax investors at the same rate as workers, and use that income to provide every child with the opportunity to learn, from universal preschool to affordable college.

Lift the minimum wage, empower workers to gain a fair share of the profits they help to generate and curb perverse CEO compensation schemes that give them million-dollar incentives to ship jobs abroad.

And fix the sole source of our projected long-term debt problems – our broken health care system. Don’t cut benefits for Social Security, Medicare and Medicaid. Instead, take on the insurance and drug company lobbies that have made our health care cost nearly twice what the rest of the industrial world pays.

 The national budget is just about the polar opposite of your family budget: a recession demands the government spend more, not less.

The facts about austerity are counter-intuitive, so we have to fight harder to beat down the lies.