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If New York Times Reporters Won’t Read Krugman about Austerity Will they Read Brooks?

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The Obama administration is still hooked on austerity and the grand betrayal

The Obama administration is still enamored of austerity, it simply wants it "balanced" which is code for about one-third austerity through increased taxes and two-thirds of austerity through cutting social programs and the safety net.  Again, cutting social programs and the safety net and raising taxes at this time are all means of adding to harmful austerity.  It is like bleeding the patients three times and claiming that "balanced" bleeding is good for patients.  That is economically illiterate.  But one would never even learn a hint of that even from the closest reading of Shear's column.  The real takeaway is that it is an odd combination of Tea Party intransigence and progressive grit that forced Obama to back down (so far) on his long-term desire to inflict greater austerity and begin to unravel the safety net.

"White House officials said the president remained open to the idea of slowing the growth of the Social Security payments if Republicans change their minds. But senior officials said Thursday that they have no reason to believe that will happen before midterm elections this fall."

As with the 2012 elections, the truly bizarre result is that the Tea Party is again preventing Obama from committing electoral suicide in November 2014 by refusing to accept even modest tax increases for wealthy Americans as part of Obama's grand betrayal of the public and the Democratic Party.  If the Tea Party keeps opposing Obama for the wrong reasons and progressives continue to oppose him for the right reasons we may actually avoid the grand betrayal.

Krugman's column

Krugman's February 20, 2014 column was entitled "The Stimulus Tragedy."  It said pretty much what I just wrote above.  Like Krugman, we expressed our views contemporaneously that the stimulus package was far too small.  Because we don't have the same column length restrictions that Krugman must meet the readers of New Economic Perspectives have been able to read much more detailed explanations of how successful stimulus was in turning around the horrors of the Great Recession.  The readers of Krugman or New Economic Perspectives would find equally familiar our overall analysis of stimulus and austerity because economists have known for 75 years, and policy has proved recurrently, that robust automatic stabilizers (which are fiscal) and specialized fiscal stimulus programs work effectively to reduce the length and severity of recessions.

I do understand that Krugman doesn't work out of an office at the NYT, but if I can read his columns in Minnesota in frigid February, I am confident that Shear can read those same columns and could interview Krugman if he had any questions about Krugman's columns.  I disagree with many dominant ideas in economics, so I'm happy to read Shear's explanation of why he is an austerian despite economic theory and, as Krugman emphasizes in his column, the disastrous real world experiment with austerity in the eurozone that forced several nations of the periphery into gratuitous Great Depressions.

I would be delighted to have Shear interview the Obama administration and report why it believes that "balanced" austerity is desirable and why it still favors the grand betrayal.  It would be a fabulous journalistic enterprise to ask every member of Congress whether and why they thought stimulus succeeded or failed and whether they believe that the U.S. has run out of money.

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The four tragic memes of austerity and stimulus

Krugman's column explains one aspect of the tragedy -- the Republican's explicit, false meme that U.S. stimulus was a failure is now widely accepted even though it is utterly false.  The data show a sharp break in the economic collapse during the Great Recession that makes perfect sense given expected lags as being the result of the stimulus program.  As knowingly inadequate as the stimulus program was and as poorly designed as it was in terms of emphasis on far less effective (in increasing demand) tax cuts for the wealthy, it was still a substantial success.

The second tragic meme is the claim that austerity has worked in the eurozone -- when it forced the overall Eurozone into a second, gratuitous recession and one-third of the eurozone's total population into Great Depressions.  The U.S. avoided these harms and experienced not only a sharp break in the collapse and a steady, albeit modest, recovery while one of our leading trading partners (the EU) went into the another recession, with much of it still suffering unemployment rates in excess of Great Depression levels.  But the presentation I have given actually understates the case against austerity for the eurozone's initial response to the Great Recession was dominated by its automatic stabilizers -- automatic fiscal stimulus.  EU public expenditures rose due to the Great Recession costing millions of lost jobs while tax revenues fell.  The EU initially rode that fiscal stimulus out of recession.  The Eurozone, however, was plunged back into recession, and Italy, Spain, and Greece (collectively, one-third of the area's population) were forced into Great Depression levels of unemployment.  They remain in Great Depression levels of unemployment roughly six years after the crisis face began.  Worse, the EU's leading apologist for austerity, Ollie Rehn, recently predicted that under austerity it will take Spain ten years to emerge from the crisis phase (full employment would then still be years away).  It takes astonishing chutzpah, but the troika (the EU Commission, the ECB, and the IMF) has most elites and media believing that causing a gratuitous eurozone-wide recession and a Great Depression to a vast swath of the region's population represents a "success" while the U.S. stimulus program that avoided a second recession (much less Great Depression) and returned the U.S. economy to growth years before the eurozone constitutes an epic failure.  To the extent the eurozone's core may finally be crawling its way out of recession it is critical to recall that nearly all of the core nations continue to run budget deficits that help provide the minimal growth we are seeing in many of the core nations.

Third, unemployment, poverty, large scale emigration of new university graduates, and record inequality all tend to disappear from consideration under the austerity meme.  What is substituted is "there is no alternative" (TINA), which seeks to preempt debate and even thought.  The plight of one-third the eurozone's population trapped in Great Depression levels of unemployment becomes a non-issue.  There is no alternative: gut it out and stop whining.  The curves of economic illiteracy and callousness are intersecting at their respective maxima under the troika's infliction of austerity.

Fourth, the meme of Social Darwinism on steroids inevitably accompanies TINA, mass unemployment, and record inequality.  The unemployed are the problem; mass unemployment is merely a symptom of their deficiencies.  The unemployed lack proper skills, they are protected by labor laws, and they are paid too much.  Their unions need to be crushed and wages reduced dramatically to make them more "competitive."  The troika is not only generating a race to the bottom of wages -- it is proud that it has created the perverse incentives that generate the "Road to Bangladesh" for workers' wages in the European periphery.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)

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