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October 15, 2011

The Austerity Myth

When 70% of US GDP depends on spending, cutting anything in a time of low to no economic growth, high unemployment and high economic anxiety only means that there will be less growth, lower tax revenues, and higher deficits.  Yet, that is precisely what austerity means: cuts in spending, government employment and deficits.  

These aren’t assertions.  These are facts and facts that have been proved over and over again in history, as Joe Nocera in today’s New York Times reminds us, as so many others have before.  “The 1930s Sure Sound Familiar,” the title of Joe’s column, again spells out how eerily similar today’s circumstances are to the 1930s and how we seem determined to make the exact same mistakes that prolonged and made the Great Depression worse.  (Read here)

It can’t be denied that “austerity is a political ideology masquerading as an economic policy,” as the New York Times editorial cogently lays out today.  “It rests on a myth, impervious to facts, that portrays all government spending as wasteful and harmful, and unnecessary to the recovery. The real world is a lot more complicated.” (Read here)

We don’t have to go all the way back to the 1930s to see that austerity simply doesn’t work.  Look at Britain today,  as the editorial does:  “For a year now, Britain’s economy has been stuck in a vicious cycle of low growth, high unemployment and fiscal austerity. But unlike Greece, which has been forced into induced recession by misguided European Union creditors, Britain has inflicted this harmful quack cure on itself.”

The US appears equally committed to inflicting this harmful, indeed, counter-productive quack cure on itself.  It is past time to bring economic history and knowledge to bear on our current circumstances, rather than ideology, spin and political posturing.  



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