Paul Krugman has a column and a blog post that ought to be read together. Both are about the way deficit hawkism are prolonging and worsening the recession, here and in Europe.
In “The Austerity Debacle” he writes that Britain climbed out of the Great Depression a lot faster than it is climbing out of the Great Recession. Same thing for Italy, Spain, and a lot of other European countries. And the reason they are having such a hard time is that today’s leaders threw the lessons of the past, including the lessons of the Great Depression out the window.
Britain, in particular, was supposed to be a showcase for “expansionary austerity,†the notion that instead of increasing government spending to fight recessions, you should slash spending instead — and that this would lead to faster economic growth.
This austerity was supposed to foster confidence, which was all that was needed.
Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.
Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.†He then called on President Obama to “do a Cameron†and pursue “a radical rollback of the welfare state now.â€
Strange to say, however, those warnings from economists proved all too accurate. And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.
My question is, why are beltway pundits so stupid? Do they start out that way, or is there something about Foggy Bottom that kills their brain cells?
Of course, many of ’em, and the politicians too, really just want to get rid of “entitlement” programs, and the Great Recession gave them an excuse.
The blog post “Destructive Austerity USA,” shows how budget cuts to state and local governments have been hurting the economy.
It’s hard to overstate just how wrong all this is. We have a situation in which resources are sitting idle looking for uses — massive unemployment of workers, especially construction workers, capital so bereft of good investment opportunities that it’s available to the federal government at negative real interest rates. Never mind multipliers and all that (although they exist too); this is a time when government investment should be pushed very hard. Instead, it’s being slashed.
What an utter disaster.
But, you know what they say — it’s all President Obama’s fault. “They” are idiots, of course.
Update: The utterly pathetic libertarian drones at Cafe Hayek have no argument to refute what Krugman says, so they just lie:
In his New York Times column today, Paul Krugman blames Britain’s economic woes on the British government’s alleged policy of “austerity.†Yet he offers no evidence that Her Majesty’s government is actually pursuing such a policy.
Here you go, pinheads:
U.K. Government Unveils Tough Austerity Plan : NPR (October 20, 2010)
UK Government Introduces Hardline Austerity Plan (October 20, 2010)
Pain of British Fiscal Cuts Could Inform U.S. Debate (April 14, 2011)
In the United States, the debate over how to cut the long-term budget deficit is just getting under way.
But in Britain, one year into its own controversial austerity program to plug a gaping fiscal hole, the future is now. And for the moment, the early returns are less than promising.
Retail sales plunged 3.5 percent in March, the sharpest monthly downturn in Britain in 15 years. And a new report by the Center for Economic and Business Research, an independent research group based here, forecasts that real household income will fall by 2 percent this year. That would make Britain’s income squeeze the worst for two consecutive years since the 1930s.
All of which has challenged the view of Britain’s top economic official, George Osborne, that during a time of high deficits and economic weakness, the best approach is to aggressively attack the deficit first, through rapid-fire cuts aimed at the heart of Britain’s welfare state.
George Osborne will stick to austerity programme despite halting output (July 23, 2011)
Osborne’s austerity program hits the rails (November 29, 2011)
His austerity plans cut far and fast. Osborne was told this would increase unemployment and it has. Increased joblessness has led to pronounced consumer pessimism. Shops are closing, putting more people out of work. Paying several hundred thousand more people unemployment benefits is driving up debt.
UK Sticking To Austerity Plan Despite GDP Drop – NASDAQ.com (5 days ago)
Cafe Hayek’s argument that Britain hasn’t really been engaged in an austerity program is that its budget deficit is still high and has gone higher. That’s because the bleeping austerity program isn’t working, you morons. More people out of work means two things:
1. Lower tax revenue
2. Higher spending
Duh. Of course, the crew at Hayek probably thinks the out-of-work Brits ought to just be allowed to drop dead in the streets, or should start eating babies.
There are so many things that have gone wrong with our elite pundits, and MSM in general, that’s it’s hard to pinpoint the cause(s).
I don’t think, though, that they started off stupid. And I don’t think many of them started out with bad intentions. “The road to Hell…”
I think there’s an echo-chamber effect. DC was once geared mostly to the left. And so was the MSM. But the Conservatives made such an issue of it, that we’ve moved in the complete opposite direction in the last 30+ years. Don’t forget, that from 1969 until 2009, we had 28 years of Republicans as Presidents, and 12 for Democrats.
And in that time, the narrative changed.
So, people, many with good intentions, walk into DC, end up in the echo chamber, and the Mighty Wurlitzer.
They start making some real “coin.” They make paid media appearances. They write articles, books, etc. Their incomes soar – and now it becomes easier to be more amenable to the causes of the well-off, because you’re one of them.
Also, the Democrats went off their rails, and started to look out for the bosses and owners interests, rather than the workers, largely because that’s where their money started coming from. Largely because of the fact that many of those workers became Reagan Democrats, and never looked back – no matter how much harm they did to themselves, their families, and the friends and co-workers.
All of this has moved the Overton Window to the right, and continues to do so.
Now, add a new phenomenon – hereditary TV pundit positions, and you’ve created what I’ll call a”Media Aristocracy.” Examples: Chris Wallace and Luke Russert. They never knew a tough economic moment in their lives; never grew up poor, or were around working or poor people very much.
We’ve long had political families, “Political Aristocracies” – from the Adams’ to the Cuomo’s. But, outside of newspaper owners, we’ve never had a hereditary “Media Aristocracy.” I don’t think this is a good idea at all.
So, in summary, I think the money, the fame, the power, and constantly being in a right-wing oriented bubble, with an active Echo Chamber, that reinforces how knowledgeable these pundits are if they agree with the already agreed-upon memes, has lead to the disaster we have in our Fourth Estate now.
TV news is virtually useless – both in broadcast and cable. The hope, if there remained any, was in print journalism – a dying industry, in the form of both newspapers and magazines. And the question posed by that NY Times editor a week, or so ago, kind of squashed any of that hope.
If we’re to remain any semblance of the country we were once were, or at least aspired to, it will be via the internet.
And that is why the powers-that-be, who already control most of the other means of communication, want so desperately to limit access to most people.
And if they win – “Goodnight, Irene!” The only place we’ll see the America we grew up in, will be in our dreams.
The actual argument of Cafe Hayek is that the unemployed workers are voluntarily unemployed, they’d have jobs if they only lowered their wages to the point where their value to employers exceeded their wages. This of course ignores two points: a) that there is a bottom to wages imposed by survival (i.e., people will not voluntarily accept wages that are insufficient to provide basic food, shelter, and clothing), and b) employers won’t hire additional employees at any cost above $0 if there is no demand for their product, because employers are in business to make money, which means having as few people on payroll as possible to meet current demand, which means the only way they’ll hire *at any wage above $0* is if demand increases.
But of course these unpleasant realities don’t happen in the bubble universe that Hayekians live in, where basic biological needs don’t exist and employers are charities. Of course, in *our* universe, neither of those statements are true…
– Badtux the Reality-based Penguin
Historically they have, but then worker mortality becomes part of the cost of doing business if they die on the job. Terrible nuisance, that.
The free-market is a benevolent deity and the corporation is its great and worthy representative on earth. Man dares not either doubt a deity nor mess with its worthy representative on earth, the corporation. Thus, when economies tank any measures to untank them must not, cannot, in any way ‘interfere’ with the free-market or its representatives. So we try austerity which not only doesn’t fix the problem( it exacerbates it.) It’s sort of like fixing your broken-down car by shoeing your horse.
My question is, why are beltway pundits so stupid?
I’d guess that they either don’t see the connectivity to themselves, or their economic situation insulates them from understanding.
True, historically they have. Then again, in this putrid economic non-system we have the corporatists have managed to get the government to subsidize them by way of food stamps, free emergency health-care and other, mostly hidden subsidies provided to underfed, physically ill workers – thus preventing what would be a “terrible nuisance…”
“That’s because the bleeping austerity program isn’t working, you morons. More people out of work means two things:
1. Lower tax revenue.
2. Higher spending.”
Truer words were never spoken.
Endlessly following Hayek is like endlessly trying to catch the toilet paper right before is spirals down the shit-hole.
Austrian ‘austerity’ is a calamity that will be around for a while. People bent on suicide are not easily dissuaded.
And the pity is, we can’t even sit back and enjoy it. Because we may end up as one of the lead-infused turds, if Republicans have their way….
And you know THEIR philosophy – any shit to piss-off a Liberal!*
*To be adjusted daily, or as needed. Consistency is neither expected – nor is it required.
My question is, why are beltway pundits so stupid?
They earn too much money to understand the rest of us who don’t earn a million dollars a year. I lived in that area for 24 years. One of the the outcomes of Watergate was a distinct rise in the salaries of the beltway pundits. The cost of living out there is also based on the average salary being a million dollars. Thus, my GS-5,6,7 salaries only put me in middle class because I DID NOT have children. I never would have survived that period if I had had children to feed. I only had cats.
We’re getting that here in Walkerstan. Walker cuts about a thousand dollars out of teachers and other government workers salaries each month, along with laying off a ton of them as well, and the economy completely tanks. Other states are seeing a slow fall in unemployment, but WI is the only state still losing jobs. Last month it was a huge ding in the service industry. WI had the biggest cut of any state to its education, bar none. So, lets see if we can connect the dots here. No one has extra money, and then you cut the salaries of anyone who may have a stable job, and then watch your state’s economy do worse than anyone elses. Seems simple to me but if you’re a Retardlican (sorry for the offensive wording), well, enough said.
The Beltway pundits live in their own Hall of Mirrors, rather like Versailles. Hayek was wrong when he wrote his economic tracts, and his economic views are no more correct then than they are now.
People bent on suicide are not easily dissuaded.
A better, more succinct description of the current Republicans has never been written.
And misery loves company.
Now, go back and reread the section on the ‘King and the Duke’ in Huckleberry Finn and tell me Twain was not a genius in his eye for the human condition.
Hayek and the Austrian school of economics is one of the strongest underpinnings, a steel plank, in the conservative mind, one of the few (only?) intellectuals they have. Your average Republican voter has never heard of him. Educated conservatives may have heard of him, but few can explain him, except maybe to mumble the phrase “Free Markets”, because they’ve never actually studied him or studied him critically. He is just completely, 100% embraced by anyone who’s conservative, powerful and wealthy (and smart enough to know who he is), and so all the wealth-adoring sheep just follow along.
And I’m sure his ideas probably work in a limited sense. What you have to remember is that conservatives don’t care if austerity doesn’t work for the whole system. All they care about is themselves. If there’s a philosophy or policy that destroys everyone but them, they’re all for it. And so Krugman’s arguments fall on completely deaf ears. What Krugman decries, to the conservative, is just the way it’s supposed to work.
This is the mentality that permeates Versailles, and so of course any pundit who spends any significant time there lives in a bubble, with its explanations of reality, and has no interest in any data to the contrary.
Badtux tipped me off to this months ago on his blog. Understanding this is crucial to arguments about how the US economy is (or isn’t) going off the same cliff as Greece. The quote is from an article in ‘The New Yorker’.
“Greece is a fairly small country, but for the past year it has been causing an awfully big uproar. Burdened by a pile of government debt that could force it into default (and the European banking system into a meltdown), Greece has had to adopt ever more stringent austerity plans in order to secure a bailout from the European Union. Explanations of how Greece got in this mess typically focus on profligate public spending. But its fiscal woes are also due to a simple fact: tax evasion is the national pastime.
According to a remarkable presentation that a member of Greece’s central bank gave last fall, the gap between what Greek taxpayers owed last year and what they paid was about a third of total tax revenue, roughly the size of the country’s budget deficit. …And the culture of evasion has negative consequences beyond the current crisis. It means that the revenue burden falls too heavily on honest taxpayers. It makes the system unduly regressive, since the rich cheat more. And it’s wasteful: it forces the government to spend extra money on collection (relative to G.D.P., Greece spends four times as much collecting income taxes as the U.S. does), even as evaders are devoting plenty of time and energy to hiding their income.”
http://m.newyorker.com/talk/financial/2011/07/11/110711ta_talk_surowiecki
Get the picture? Austerity means serious hardship for people on the bottom. The root cause of the deficit in Greece is people at the top who won’t pay their fair share. All the screams about the welfare stare and government handouts and Greek socialism are a ploy by conservatives to distract voters from a global movement to exempt the aristocrats from any social obligation.
A few obvious bits of evidence. Mitt paid 13.9% if I recall. Newt’s tax proposal would exempt capital gains entirely, reducing Mitt’s tax percent to almost zero. Last, the IRS had its budget cut, a move that will certainty reduce revenue far in excess of the ‘savings’ as tax cheats are undetected and/or unprotected. But that’s the goal and most of the rest is smoke and mirrors to disguise the real goal.
Doug,
And remember, somewhere about the middle of his Reign of Terror, Little Boots redirected the IRS to go after Joe Stupid Sixpack, and Jane Vapid Minivan, instead of the richest 2-5% of taxpayers.
And the result was a focus, and fines and worse, on people who made a mathematical error, rather than the people who paid their accountants and attorney’s to hide, obfuscate, and flat out lie.
Dan – true, however, I remember reading about a man who jumped off the GG Bridge in San Francisco and lived to tell about it. He revealed that only in mid-air did he know that he shouldn’t have jumped, shouldn’t have thought suicide was an answer – etc.etc.etc.
Wonder if that’ll happen to Republicans sometime between now and election day.
One last thought: When horses were replaced by machines at the dawn of the industrial revolution, the net value of most horses to their employers declined to below what it cost to feed them. At that point there ensued a mass slaughter of horses for use as food, followed by draconian top-down birth control to keep their numbers down, top-down birth control that would make the Chinese government proud.
So if a sizable number of humans now no longer provide sufficient value to their employers to outweigh the costs of feeding them… hmm. Soylent Hayek, anybody?
– Badtux the Connecting-the-dots Penguin
Badtux,
My future’s so dim, wearing a searchlight won’t help me.
You give me a nice meal, give me some nice tranquilizers, show me a nice nature movie while playing me some Ludwig Van, and in the not too distant future, I’ll sign up to be Soylent Green, or Hayek, or Brooks.
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