How much sicker does the patient have to get before the doctors stop prescribing poison?
Here are some selected news stories out of Europe:
New York Times: "Unemployment in Euro Zone Reaches a Record High" WSJ: "Sixth Quarter of Contraction Looms for Euro Zone" Der Spiegel: "Shredded Social Safety Net: European Austerity Costing Lives" WSJ: "Spain Says Budget Gap Is Wider Than Reported" New York Times: "European Car Sales Point to Continuing Slump" WSJ: "Italy Unable to Form Government" New York Times: "Debt Rising in Europe"
Paul Krugman's right: This isn't a recession. It's Europe's Second Depression, and it's on track to last even longer than the first one. Austerity economics has been imposed across most of the Eurozone, to a greater or lesser degree, with devastating economic results: This is Europe's sixth consecutive quarter of economic contraction.
Economist Dr. Richard Wolff warns of the encroaching economic tipping point, past which Americans will not be pushed and answers questions on the potential results of civil unrest. He also breaks down the latest in economic propaganda, details the immense power of the 1% to control the debate, and offers potential solutions to increase economic stability and personal freedom at the same time. Strap in!
Here's some stuff we aren't hearing on Meet the Press:
Correcting the spin of "Fix The Debt" shills, economist, professor, and author of "Capitalism Hits The Fan: The Global Economic Meltdown and What to Do About It", Dr. Richard Wolff, who was fresh off his debut appearance on Bill Moyers, sits down with me for a quick talk about the sequester in the context of our ailing economic system. In this, the first of a four-part series, he breaks down the sequester and discusses what he calls a 'hustle' being perpetrated by the Obama Administration on the American people.
Stay tuned here on Crooks and Liars for Part 2, or subscribe to Absurdity Today's Youtube Channel here.
George Osborne's drastic deficit-cutting programme will have sucked £76bn more out of the economy than he expected by 2015, according to estimates from the International Monetary Fund of the price of austerity.
Christine Lagarde, the IMF's managing director, last week caused consternation among governments that have embarked on controversial spending cuts by arguing that the impact on economic growth may be greater than previously thought.
The independent Office for Budget Responsibility implicitly used a "fiscal multiplier" of 0.5 to estimate the impact of the coalition's tax rises and spending cuts on the economy. That meant each pound of cuts was expected to reduce economic output by 50p. However, after examining the records of many countries that have embraced austerity since the financial crisis, the IMF reckons the true multiplier is 0.9-1.7.
Wow, who could have predicted that? Well, everybody who isn't a conservative.
Neal Lawson, director of left-wing pressure group Compass, said, "the cuts were never going to work, but these calculations show the effect is bigger than anyone judged. The economy isn't suffering from government borrowing but a severe lack of demand that only the government can fix."
Osborne told reporters in Tokyo that the IMF does not allow for the boost provided to growth by the Bank of England's £375bn of quantitative easing. "The point I would make about their study of the fiscal multipliers is that they explicitly say they were not taking into account offsetting monetary policy action. In the UK, I would argue we have a tough and credible fiscal policy to allow for loose and accommodative monetary policy and I think that is the right combination."
But many economists believe the dent in growth caused by austerity policies may be larger than first thought, because the financial crisis has left banks starving firms and households of credit; and with many countries cutting back simultaneously, it is harder to fill the gap created by cuts with demand for exports.
We're forgoing our regular weekly candidate chat this week to talk about another the choice voters have to make in November-- the choice between Austerity and Prosperity. Paul Ryan, Mitt Romney and Co. have brought back Voodoo Economics under a new, more respectable (in certain non-C&L circles) name: Austerity. Yeah, that thing failing miserably in every single European country that's ried it, including the U.K., which is currently experiencing a double dip recession. The alternative, Prosperity Economics, is what our candidates have been talking about all year.
Progressives are in an awkward position right now. It's pretty essential the our most important task is to help as many progressives as possible win seats in Congress. And we have to do what we can-- those of us in swing states-- to prevent Wall Street from imposing their anti-democracy ticket, Romney/Ryan, on the country. But after that we're still going to have to contend with a Barack Obama who doesn't quite live up to the progressive approach we need to move the country forward. In fact, certain people-- if you accept Romney's definition of "people"-- are already looking forward to a post-election "bipartisan" lame-duck session in which Obama and Boehner will sell out working families to Big Business. Over the weekend, the president did a major interview with AP's White House correspondent Ben Feller which sounds, on first glance, like some standard reelection stuff about how radical the GOP has become. But digging just a little deeper you find some scarier stuff than that... stuff about Washington's conservative consensus that threatens America almost as much as Romney/Ryan.
Obama's view of a different second-term dynamic in Washington, even if both he and House Republicans retain power, seems a stretch given the stalemated politics of a divided government. He said two changes-- the facts that "the American people will have voted," and that Republicans will no longer need to be focused on beating him-- could lead to better conditions for deal-making.
If Republicans are willing, Obama said, "I'm prepared to make a whole range of compromises" that could even rankle his own party. But he did not get specific.
Those last 6 words should chill you to the bone. Judging by actions he's taken in the past-- particularly in appointing Wall Street shills, from Rahm Emanuel, Tim Geithner and Larry Summers to Simpson/Bowles to key economic positions-- the kind of compromise the president is talking about leans very heavily towards thos same failed Austerity programs being pushed by Ryan and Romney and their Wall Street masters. It's the wrong way to go. And that's why that video of Jacob Hacker talking about Prosperity Economics is up top. I hope you watched it already. If not, please do so now. I'll wait; don't worry.
Obama didn't get specific... but he should-- and he should in exactly the way Professor Hacker has laid out, in the video and at the Prosperity Economics website. Short version:
"Smokestack Lightnin'," with Hubert Sumlin backing Howlin' Wolf in 1964
This is the time of year when we're reminded of all the famous people who died over the last twelve months, a list which includes two of my favorite guitar players (Hubert Sumlin and Cornell Dupree). But there were also some notable non-human deaths in 2011, especially in the world of economic policy.
One of those deaths should have completely altered the political debate in Washington. The name of the deceased was "Austerity Economics," and it was first glimpsed in a 1921 paper by conservative economist Frank Wright. Austerity died of natural causes brought on by prolonged exposure to reality.
But the debate in Washington didn't change nearly enough after its passing. In the nation's capital, dead things still rule the night.
"Austerity economics" backers claim that today's economic woes can only be fixed by dramatic reductions in government spending, which will lead to increased private-sector confidence and therefore to greater investment and growth.
But it's never worked. And if investors have lost confidence in the U.S. government's fiscal stability, they're sure not acting that way. There hasn't been this much demand for Treasury bonds since the government began tracking it twenty years ago, and they haven't performed as well since the go-go 1990s.
It's easy to understand austerity's attraction for power elites inside and outside of government. The people who suffer from austerity budgets aren't the kinds of people they know personally, since they're typically public employees like teachers, police, firefighters and the administrators of social programs; people who need government assistance, like the poor; and middle-class people with the temerity to either grow old or become disabled.
Austerity's attraction became even greater in the U.S. because once it became conventional wisdom that tax increases on the wealthy was "politically infeasible." That made it a program whose sole purpose was to cut government spending, lowering the pressure to increase taxes on the wealthy from today's historically low levels.
For a one-percenter, what's not to love?
Austerity Comes of Age
The idea's been around in one form or another since that 1921 paper, and the International Monetary Fund (IMF) had been imposing it on Third World nations for decades.
But 2009 was the year that austerity really came of age. That was the year that a wealthy stockbroker's son named David Cameron began campaigning for Prime Minister of Great Britain on an explicitly pro-austerity platform.
It was also the year that Cameron helped to form a group named European Conservatives and Reformists (ECR) dedicated to electing like-minded politicians across Europe and helping them collaborate on ways to slash government spending. It was also the year that right-leaning Angela Merkel won reelection as the Chancellor of Germany with a stronger mandate than she'd been given in her first term.
With Nicolas Sarkozy as President of France, Great Britain was the only major European power not yet in the hands of the corporate-backed austerity crowd.
The Global Sado-Erotic Thrill Machine
That changed with Cameron's election as Prime Minister in May 2010, an event that threw pro-austerity Americans into throes of near-erotic ecstasy. And if that sounds like hyperbole, consider conservative Anne Appelbaum's reaction to Cameron's budget in September of 2010:
Vicious cuts." "Savage cuts." "Swingeing (sic) cuts." The language that the British use to describe their new government's spending-reduction policy is apocalyptic in the extreme. The ministers in charge of the country's finances are known as "axe-wielders" who will be "hacking" away at the budget. Articles about the nation's finances are filled with talk of blood, knives, and amputation.
And the British love it.
What can I say? There are people who collect serial-killer memorabilia, too. But Appelbaum wasn't just speaking for herself. It became unacceptable for any politician in Washington, Democrat or Republican, to advocate anything other than an austerity budget for the United States.
And it was more than an economic strategy to its backers. Austerity became a way to demonize those who had suffered most from the banking abuses and self-indulgences of the wealthy, a totemic "blame the victim" response that turned the political debate into a grotesque inversion of morality. Again, Appelbaum:
"Not only is austerity being touted as the solution to Britain's economic woes; it is also being described as the answer to the country's moral failings."
Bad Metaphors vs. Good Economists
The Democratic President of the United States, Barack Obama, jumped onto the bandwagon with both feet by repeatedly lecturing Americans on the need for government to stop "spending beyond its means." Obama recycled the popular conservative metaphor of a family that has to sit around the kitchen table and decide how much money it has to spend.
That's one of the worst metaphors in modern politics. Does a family establish its own currency -- especially one that has the unique position of the dollar? Can a family borrow money at rates so low they're effectively less than zero? Would a family let Grandma go hungry because Junior bought too many Porsches out of the family kitty and then gambled it away on lousy mortgage investments?
The world's top economists, those who had successfully predicted the crisis of 2008, tried telling the rest of the world what was wrong with the idea: Joblessness and consumer fears were killing any chance of real recovery. More short-term spending was needed to get the economy moving again. Austerity would make things worse, not better.
But nobody listened. Austerity's S&M-like attraction had the world's elites in its grip.
Death of a Delusion
And then something else came into the picture: Reality.
Cameron's austerity budget had a shattering effect on the already-struggling British economy. His government's financial stability was downgraded five times during his first year in power and retail sales had fallen 2.5 percent. Household income was projected to fall an additional 2 percent if his austerity plans were carried forward. Britain's modest employment gains were reversed, youth unemployment reached record levels, and income inequality was the worst it had been in more than half a century.
Anne Appelbaum's erotic dreams had become Great Britain's nightmare.
As Europe's ruling austerity class pushed forward with their plans, even the IMF tried to dissuade them. It was clear to anyone who wasn't blinded by ideology or political cynicism that austerity economics was a failed program. Even in countries like Greece, where government was far graver than elsewhere, the austerity programs imposed from outside threatened to destabilize society while other reasonable measures like improved tax collection were still not taken seriously enough.
And now the entire Eurozone hangs in the balance. Bankers became wealthy by treating governments as if they were mortgages, lending recklessly and pocketing their fees without considering the long-term reliability of their loans. European leaders insisted for months they were take the kind of sensible steps that should've been taken in the United States by requiring bankers to accept at least part of the losses for the bad loans they had issed.
That plan was quietly dropped last month. "Austerity economics" never calls for austerity from those who have gotten rich by being irresponsible, only from those who didn't benefit from it at all.
President Obama has dropped his austerity rhetoric, at least for the time being, but the Republicans have not. Listening to Mitt Romney discuss economics is like having a doctor wave a dead chicken over your head and saying he's decided to cast a spell on you rather than operate on that thing they found in your X-rays.
Aside from the bill introduced this month by the House Progressive Caucus to almost no media attention, there's no comprehensive plan for dropping this country's ineffective austerity strategy and replacing it with an agenda that works.
Rational solutions to our economic problems are being ignored. There won't be a real debate about alternatives to austerity until an entire political party, not just part of it, adopts this kind of program. Until then there will be chaos. And where there is chaos, austerity's powerful advocates can step in and take charge.
Austerity economics died in 2011 and is survived by the British, German, and French governments as well as the GOP and large portions of the Democratic Party. Instead of sending flowers, the family has asked the public to abandon all hopes of future economic growth.
Millions of employees in Great Britain mounted the first General Strike in many years today, after the country's coalition government threatened to impose more cuts in retirement benefits and pay for public workers.
It was a smash success. As many as two million strikers proved that the public's patience with the unjust fiscal regime known as "austerity economics" has its limits. It highlighted the important role unions can and must play in the fight for a more just and stable economy.
And it raised an important question for the United States: Could it happen here?
We Have Ignition
The Cameron government struggled to find the right messaging. It claimed that the strike was an inconsequential event involving a mere 960,000 strikers (as if that were a small number), instead of the two million reported in the press.
The Prime Minister even described the strike as a "damp squib." If you're like me you don't know what that means. But a quick Google search revealed that the phrase refers to a firecracker that has failed to ignite, perhaps because it was left out in the rain.
So the strike fizzled, says Mr. Cameron. But his government also accused unions of sabotaging something it described without any apparent irony as an "economic recovery." So which was it: A dud, or sabotage? Apparently consistency is not this government's strong suit.
What was the strike's real impact? As the Globe and Mail reported today:
"58 per cent of public primary and secondary schools are closed completely and only 13 per cent are fully staffed. Hospitals are only taking emergency cases, as most nurses are on strike. In fact, the school where Mr. Cameron and one of his top cabinet ministers send their children ... was largely shut down, with only two classes open ... At Manchester Airport, only 26 of 176 scheduled international flights arrived today ... Garbage collectors, social workers, street cleaners, and some workers at museums and children’s centres also closed ."
Fizzled? As some New York workers of my youthful acquaintance might have said: I got yer "damp squib" right here, pal.
Merriam-Webster's Dictionary defines "austerity" as "enforced or extreme economy," or as an "ascetic practice" - you know, like those wandering monks who starved themselves or slept on a bed of nails. "Austerity economics" is the practice of forcing others to sleep on a proverbial bed of nails, to pay for the financial disasters caused by those who sleep on silk and satin.
Soundlike class-warfare hyperbole? Consider this: Even as the Cameron government was cutting benefits for teachers, nurses, airport workers, and other public employees, new efforts were underway to rescue British and European banks yet again for their unwise lending practices, this time to European governments.
Hypocrisy? Well, yeah.
As Brendan Barber, the general secretary of the Trades Union Congress, observed: “This is a government that scrapped the tax on bankers’ bonuses.” While bankers revel in their government-subsidized riches, the poorest 10 percent of Great Britain's population saw their real income fall over the last decade, according to a recent report, while the "richest tenth of the population have seen much bigger proportional rises in their incomes than any other group."
You can't ask people to sacrifice their financial security without giving them an enemy to hate, so conservatives in the United States fingered public-sector union employees as the source of our economic misery. Millions of people actually believe that the country's financial problems were caused by bus drivers making $45,000 a year.
They're using the same playbook in the UK. While bailed-out bankers enjoying their usual round of bonuses and raises,public employees face a two-year pay freeze and a 3 percent increase in pension contributions. The end result could be net pay cuts of as much as 15 percent by 2014.
How does a government justify that? By using the well-oiled phrases of the parsimonious elite, honed by consultants and then echoed endlessly by politicians and journalists. In this case the phrase they've chosen is "gold-plated pensions." A Google search on that phrase comes up with nearly half a million results.
The phrase "gold-plated pension" appears 9,500 times on the Daily Mail website.
The Daily Mail is owned by a gentleman named "Harold Jonathan Esmond Vere Harmsworth, 4th Viscount Rothermere," whose net worth exceeds one billion US dollars. By contrast, the average public employee's retirement income in the United Kingdom is $4,650 per year.
The only thing 'gold-plated' about British pensions is the gold-plated BS that's being spread about them by self-serving (but hardly self-made) billionaire heirs like ... well, like "Harold Jonathan Esmond Vere Harmsworth, 4th Viscount Rothermere."
This Economy Will Self-Destruct in 10 Seconds
These austerity measures are brutal and unfair, and they punish innocent people for the mistakes of others. But at least they're working, right?
Wrong. Austerity is devastating the British economy. There are 3.8 million "workless households" in Great Britain, and 1.8 million children live in them. As of last August, retail sales had fallen 2.5 percent and household income was projected to fall another 2 percent under Cameron's austerity plan. As Paul Krugman explains, the British government is even defying the advice of the typically austerity-minded International Monetary Fund, which really, really thinks they ought to fix the economy before doing more of the budget-cutting that's making things so much worse.
Well, you heard it last night: Both Joe Biden and President Obama, talking about their beloved Simpson-Bowles plan. (Austerity! Shared sacrifice!) But here comes economics blogger Matt Yglesias pointing out just how pointless all this austerity talk is during a time of massive unemployment (and is a variation of Atrios' suggestion to give free money to the people who need it):
Matt Welch at Reason makes the good point that none of the downballot mayors and governors who spoke last night at the Democratic convention grappled with the reality that a lot of them have been dealing with the thorny-but-necessary work of closing budget shortfalls, rolling back pension promises, and trying to wrestle with the limitations imposed by public sector labor agreements. He then concludes on a terribly wrongheaded note:
One of the great ironies of this convention already is that speaker after speaker denounces Republicans for being unable to tell the truth or get their facts straight. Meanwhile, one of the most important truths of modern governance—we are well and truly out of money—sits neglected in the corner. This might be a great way to rally the Democratic base, but it's thin gruel for the majority of Americans who think, correctly, that the nation's finances have spun out of control.
As Mark Schmitt wrote last year regarding a book from Welch and co-author Nick Gillespie, this assertion that America is "out of money" has become an all-purpose crutch through which Reason can push an ideological agenda of skepticism about programs without actually making the case in its particulars. But it's simply not true that we're out of money. Many states and municipalities are up against hard budget constraints, but the US government has the ability to create US currency in unlimited quantities. It hasn't run out of money and won't ever run out of money. It would be nice for people to understand this point separately from controversies over whether public sector programs are wise or just.
In principle, the US government could print up or borrow a ton of money, hand it to state governments, and then have all the money used to cut taxes rather than to finance programs. This would not be possible in a world where the US government faced a hard budget constraint but, fortunately, we don't face any such constraint. The possible downside to a policy of greater reliance on money-finance or debt-finance is that it might make holding dollar-denominated financial assets less attractive to foreigners. That, in turn, would make imported goods more expensive domestically and American-made goods cheaper on foreign markets. If the United States were already at full employment that would be a very bad tradeoff, amount to a decline in average American living standards.
But at a time of mass unemployment, it looks like a pretty good tradeoff that should raise per capita output and average incomes. It'd be a bad deal for me personally (or for Welch) since there isn't going to be a writing-on-the-Internet export boom, I buy lots of stuff that's made abroad, and the DC regional economy that Welch and I participate in has no meaningful manufacturing sector. But for America as a whole it could be a boon.
But whether you think that would be a good idea or not, the important thing is that the question of whether we should be borrowing more is entirely separate from the question of whether the borrowing should finance additional spending or lower taxes.
Also good reading: "Seven Ways To End The Deficit Without Throwing Grandma Under The Bus."