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CAN AMERICA AFFORD AUSTERITY ECONOMICS? (PART I)

June 12, 2013

CAN AMERICA AFFORD AUSTERITY ECONOMICS? (PART I)

We can afford austerity economics and even prosper if you consider the present day examples of the current debacles in Greece, Spain and some of the other euro zone states to be smashing successes. These Merkel-dictated states are not in charge of their own economies; their leaders (?) effectively serve as mere conduits for orders from headquarters (aka the Brussels-Berlin axis). Aliens also design their spending limits, additional taxes and other such (previously thought to be) exercises of sovereignty, and the leaders of the poverty-stricken euro zone states are told that they must comply with such edicts or will otherwise be denied further “loans” to shore up their respective bond markets without which all such future debt will be junk – or worse – which will carry such high costs as to be unmarketable. (I note here that the rating services classify Greek bonds as junk even WITH bailout loans from the axis.)

The euro money trail begins and ends in Brussels and Berlin – none other (especially Athens, Lisbon and Madrid) need apply (unless willing to give up their sovereignty to the money changers in this common currency regime). The only real threat to the economic (and thus political) power of the axis is the example of Argentina, which defaulted on its obligations some years ago, thus becoming a pariah in international debt circles. They are recovering, and on their own terms. Greek leadership, with a ratio of debt to GDP of (I read recently) 189% and depression-era unemployment, must be considering the Argentine example. If you are hopelessly broke and not in charge of your own attempts to recover, what do you have to lose with such a sovereign decision to emulate the Argentine example, one not subject to either the advice or consent of your currency overseers? These Band-Aid “loans” aren’t working, anyway, and are only serving to deepen the hole Greeks find themselves in, with the very possible result that they are headed for bankruptcy in any event.

So what does this European disaster in the making have to do with austerity in America? Let’s do some background to answer that question. There are some obvious European problems we don’t have: we have a world reserve currency but have no common currency commitments with other states; we are free to devalue our currency – euro states cannot; we do not have aliens running our economy and telling us what we must do in terms of spending, taxing etc.; we have entirely different economic histories than those of the euro states with our free-wheeling capitalism in a risk economy etc. I could go on and on, but the reader will get the point.

Let’s look at austerity as practiced here, and increasingly with the blessings of both political parties. Unfortunately, the economy has become a political football. We are coming up with numbers from “think tanks” for the rich and corporate class that warn us of the dire consequences of over-spending, of not paying our debt down, and other Puritanical precepts Puritans never practiced. They equate “government spending” with household budgeting, when the design and purpose of such spending and budgeting has entirely different objectives. Government is not now and never was designed to either make a profit or save money. It was and is designed to serve the people and spend money to accomplish its mission.

Sometimes government spends too much money on questionable exercises, such as huge tax reductions for the rich and corporate class, and sometimes government spends too little, as in lagging social investments that have the potential to provide jobs for people of varying skill levels while boosting the nation’s productivity. Jared Bernstein, economist, notes in the current edition of The American Prospect  as follows:

. . . The only time I saw middle and lower-income families get ahead, in the sense of their income growing apace with productivity, was in the latter 1990s, when the unemployment rate was so low that employers had to increase compensation to attract and keep the workers they needed. . . Thanks in part to the austerity movement sweeping across advanced economies, we’re far away from full employment. . . . But as the economy finally works through the excesses that brought us the deep recession, will the private labor market create the quantity and quality of jobs that we need? For reasons that go beyond my scope here, having to do with advances in laborsaving capital technology, I fear not.

I am older than Jared Bernstein, and do remember a time when working families did get ahead in good times (unlike now). It was after WW II, and lasted for the most part until circa 1974, when Wall Street decided to stop sharing newly created wealth with workers in our economy, and, with the exception of a couple of bubbles (tech and otherwise, one of which Bernstein notes above), it has been all downhill for America’s working class, and Wall Street is assisting in such descent.

Wall Street is interested solely in profit-making; unemployment rates in America are mere fodder for discussion of how the rest of us should order our lives under a new austerity regime, one in which the rich and corporate class prospers (witness the Dow) and the rest of us continue to suffer reductions in median family income. What’s worse is this: Wall Street is using its considerable political clout (festooned with unlimited potential for “campaign contributions”) designed to deepen austerity application in education, unemployment, and other important programs in our social safety net that keep body and soul together for many. As state and federal spending take austerity cuts, state-funded colleges and universities raise tuition sharply, and services even with such increases are cut, services that include but are not limited to course offerings, campus access, faculty positions and library services.

Both parties in Washington have swallowed the medicine that deficit control equates with responsible governing. That view has some validity during normal times, but not in a prolonged slide. Wall Street and Republicans have enjoyed some success in emphasizing deficit savings over offsetting increases in taxes, thus further reducing an opportunity for us to mend our social safety net and fund important initiatives in education and employment, areas we dare not neglect on pain of Third World status.

As for austerity generally, the president correctly notes that deficit reduction alone is not a growth plan and that reducing debt won’t bring down the unemployment rate. Unfortunately, such rhetoric is not matched in his budget proposals, one of which places Social Security cuts on the table. What we need to see in any such proposals (aka offers to Ryan & McConnell) are measures designed to avail families and children of more opportunities to share in the growth of this economy, and not just hand all such growth of new wealth over to Wall Street, as usual. As one of Faulkner’s characters said: The past is not dead; it isn’t even past. In that spirit, let’s go back to a pre-1974 sharing of new wealth created by this economy.

I will write more on this topic shortly in Part II. Stay tuned.  GERALD  E

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