An economic slowdown is a fact of life. However, the response to this slowdown is a matter of policy and so far austerity is the chosen governmental response. Austerity is where the rich make you pay for the costs of their mistakes. Too many bad loans bundled out by Wall Street, too much spending on insane wars in the Middle East and Afghanistan, don't worry be happy multi-millionaires because while you and your minions caused the crisis you won't have to pay a dime, to fix it, instead austerity like the plague will be visited upon the elderly, the unemployed, union members, the mentally challenged and the disabled who will be forced to pick up the bill. A bill they can't afford to pay.
The latest round of austerity started in Europe, where the imposition of austerity measures was fought in the streets by Greek workers who didn't like the idea of bailing out the money-bags in Brussels and Frankfurt.
Knowing a good thing when they see it the American upper class led by the Republicans, Blue Dog Democrats in Congress and the right wing media couldn't wait to impose austerity on America, a program that has been called Reaganism on steroids.
How did we get here? It's no secret that for the last three years America has been in the grips of a powerful "great recession". Anthony DiMaggio found that in the first year of the economic collapse 2008 the Obama Administration attempted to stimulate the economy and promote recovery through the passage of a $787 billion "stimulus package". Part of this stimulus went to the states which prevented an epidemic of mass firings and other state by state cutbacks.
In 2009 we were faced with the same lousy, underperforming economy. However the Federal stimulus was smaller than that which was passed in 2008 and more and more State budgets found themselves in the red. Now DiMaggio reports that attempts by the Obama Administration to push a new stimulus have been stymied by that old reliable coalition of blue dogs and Republicans with a $140 billion package designed to cover aid to states and unemployed benefits never to see the light of day.
The damage done by austerity politics is truly frightening. The Center on Budget and Policy Priorities (CBPP) reports that "at least 45 states have imposed cuts that have hurt vulnerable residents and the economy". In fact with "tax revenue still declining as a result of the recession and budget reserves largely drained the vast majority of states have mad spending cuts that hurt families and reduce necessary services".
As mentioned austerity policies seek out the frail, the elderly and the ill --some typical cuts include the following:
Public Health- According to the CBPP at least 30 states have instituted cuts that will limit low income children's or families eligibility for health insurance.
Programs for Elderly and Disabled-At least 25 states and the Washington D.C. are cutting rehabilitative, homecare or other services needed by low income people who are elderly or have disabilities or significantly increasing the costs of these services.
K-12 Education- At least 30 states and D.C. are cutting aid to K-12 schools and various education programs.
Higher Education- At least 41 states have cut assistance to public colleges and universities that have resulted in faculty and staff reductions in addition to tuition increases.
Under virtually every States' laws the legislature is required to submit and the Governor to sign a balanced budget. So in a recession states cannot maintain needed services by running a deficit. Either tax the rich or cut services is the only option State's have to keep out of the red and the overwhelming answer from the states is the austerity option, cut services for the poor and middle class and lay off workers. The CBPP found that without additional federal aid if states continue to cut spending as they have in the current fiscal year the national economy stands to lose up to 900,000 public and private service jobs.
But the news only gets worse. States have enacted budget cuts for the current Fiscal Year that go beyond the levels enacted during the last two years.
Worse yet austerity comes with a built in negative multiplier effect. As the CPBB found when states cut spending they lay off employees, cancel contracts with vendor, reduce payments to businesses and non-profits that provide services and cut benefit payments to individuals. All these steps remove demand from the economy. Creating the need for further cuts in future budgets! In fact total revenue shortfalls for 2011 and 2012 are likely to reach $300 billion.
Austerity is a nationwide phenomenon. However two states California and New Jersey have seen particularly fierce battles regarding attempts to impose austerity on state Residents.
This May in California Governor Schwarzenegger unveiled a budget plan that will if adopted plug California's deficit by instituting $12.4 billion in spending cuts that are "needed" to close a $19.1 billion dollar budget deficit. Additionally state employees would be "asked" to take direct pay cuts. The rich would face no new tax increases. Specific cuts would include eliminating child care programs and reducing funding for local mental health services by approximately 60 percent.