Paul Krugman reviews the baneful effects of austerity on the current economic recovery. His essential case is that:
Under President Obama, however, the dire
fiscal condition of state and local governments -- the result of a
sustained slump, which in turn was caused largely by that private debt
explosion before 2008 -- has led to forced spending cuts. The fiscal
straits of lower-level governments could and should have been
alleviated by aid from Washington, which remains able to borrow at
incredibly low interest rates. But this aid was never provided on a
remotely adequate scale.
policy malpractice is doing double damage to America. On one side,
it's helping lose the future -- because that's what happens when you
neglect education and public investment. At the same time, it's hurting
us right now, by helping keep growth low and unemployment high.
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So, with austerity policies doing a double whammy on America, what is the proposed course of action
by House Democratic Whip Steny Hoyer? Why of course
, he's pushing for austerity! I mean, naturally, what else
should one do under these circumstances? America is suffering, as
Krugman points out, because the Federal Government is refusing to take
advantage of very low interest rates to borrow money and then give that
money to state and local governments.
As any parent knows, you can't re-do
years of a child's life. Once their third grade has passed them by
because the local government couldn't afford to keep their school in
operation, you can't just hit a re-set button and re-do that year once
properity returns. That year of the child's life is gone forever and the
child will simply have to work harder to simply keep up with his or her
peers who weren't deprived of that year of education.
Columbia University put out a study (PDF
on the job losses of the 1982 recession, showing that the long-term
effects were quite bad and that they've lasted to this day. Earning
losses for people who lost that year of employment were 30% and after 15
to 20 years, were still 20% lower than for their peers in similar
But, the right wing says, we don't
want to be "another Greece," now, do we? Greece is currently sufferings
lots of economic troubles, true, but the CEPR
pins the blame for those troubles on European Finance Ministers.
"Given the underestimation of Greek losses so far, and the recessionary impact of budget tightening , mass layoffs, a 20 percent reduction of the minimum wage , and other austerity measures -- I think the pessimistic scenario outlined in the leaked document is a very plausible scenario," said Weisbrot.
"The bottom line is that you can't shrink your way out of a recession
-- you have to grow your way out. What they are doing to Greece really
makes no economic sense. At this point, it looks like the economy would
do better if Greece were to exit from the euro, as opposed to enduring
indefinite recession and stagnation, extremely high and persistent
unemployment, and increasing poverty. The European authorities are
certainly pushing Greece toward the exit and default option." [emphasis
How's the American economy doing at this point? It's doing relatively okay, but not great and there might be serious trouble
on the horizon. This is hardly the time to be engaged in budget-cutting and " other austerity measures,
" but that's apparently
just what Hoyer is determined to do.
Minority Whip Steny Hoyer (D-Md.) said Monday that he and other House
centrists are working to put together a "concrete" deficit-reduction
What Hoyer wants is to contract the
American economy at a time when we're hardly out of the woods, when
we're nowhere near full recovery and when contractionary policies are
absolutely the worst
option on the menu right now. The recent announcement of the centrist
Senator Olympia Snowe (R-ME) that she will retire prompted me to review
how the centrists generally have done as far as progressives are
concerned. Quite frankly, I think they've been pretty gosh-darned worthless
and far too concerned with their own short-term political fortunes
to give a hang about how America in general is doing.
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