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Why Is Austerity The Priority While So Many Americans Are Suffering?

Is it something in the Potomac water? Why are so many politicians so blind to the economic suffering of Americans, and so consumed with austerity fever? Dan Froomkin with an excellent piece: For the weeks leading up to the agreement, Democratic

Is it something in the Potomac water? Why are so many politicians so blind to the economic suffering of Americans, and so consumed with austerity fever? Dan Froomkin with an excellent piece:

For the weeks leading up to the agreement, Democratic and Republican leaders were essentially trying to out-austere each other. It's that bipartisan enthusiasm for reducing the government's budget -- and the speed with which both parties abandoned a job-creating agenda -- that left-leaning analysts say demonstrate how beholden elected officials from both parties have become to the rich, and how out of touch they are with the problems of the poor and the middle class.

"If these people were rational policymakers, they would not focus on deficit reduction right now," said Neera Tanden, chief operating officer at the Center for American Progress. "They would focus on stimulus right now."

"What's crazy about Washington is that the only thing we talk about is deficit reduction; that nobody talks about jobs," Tanden said. "It's borderline insane."

To liberal economists like University of Texas professor James Galbraith, the explanation lies in what he calls the Washington elite's "deficit hysteria."

From this perspective, the spending cuts signed into law Tuesday were the culmination of the investment of hundreds of millions of dollars by moneyed interests into the development and inculcation of a specific Washington consensus that anyone who doesn't believe the government is dangerously overextended -- and who doesn't consider the danger of deficits as very, very serious -- is a wild-eyed radical.

"The rich have drawn a political box around what can be done here," said Damon Silvers, policy director for the big umbrella union AFL-CIO. "They are gutting the modern state in order to avoid a real conversation about taxes."

[...] Davig, the investment banker, said economic growth is not the most significant issue for Wall Street.

"Everyone can live with a little bit of fiscal drag if there's a little bit more stable macro landscape," he said. "They're happy to live with a little bit of fiscal drag."

And Galbraith said he thinks some of the super-rich out there, sitting on all that cash, are actually hoping for the economy to crash and burn.

"The strategy of pursuing a deflationary strategy is a strategy that greatly benefits people with cash," said Galbraith. "If you're interested in deflating asset values, and you have cash with which to buy assets when things hit rock bottom, then you have a powerful interest in a deep depression."

"That's certainly consistent with the banks holding 1.4 trillion [dollars] of reserves, which is absolutely unprecedented," said Pollin, who backs a tax on excess reserves. "That's 10 percent of GDP."

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