Home > Uncategorized > What austerity preachers do not get

What austerity preachers do not get

from Lars Syll

We are not going to get out of the economic doldrums as long as we continue to be obsessed with the unreasoned ideological goal of reducing the so-called deficit. The “deficit” is not an economic sin but an economic necessity …

idle all around us.



The administration is trying to bring the Titanic into harbor with a canoe paddle, while Congress is arguing over whether to use an oar or a paddle, and the Perot’s and budget balancers seem eager to lash the helm hard-a-starboard towards the iceberg. Some of the argument seems to be over which foot is the better one to shoot ourselves in. We have the resources in terms of idle manpower and idle plants to do so much, while the preachers of austerity, most of whom are in little danger of themselves suffering any serious consequences, keep telling us to tighten our belts and refrain from using the resources that lay der Hamilton once wrote “A national debt, if it be not excessive, would be for us a national treasure.” William Jennings Bryan used to declaim, “You shall not crucify mankind upon a cross of gold.” Today’s cross is not made of gold, but is concocted of a web of obfuscatory financial rectitude from which human values have been expunged.

William Vickrey

  1. March 8, 2018 at 12:17 am

    Endless war and military empire are built on austerity and wage slave debt labor.

    Democracy is more than a check mark for candidates. Autonomous democracy outside of governments might find a path to healthy survival.

  2. March 8, 2018 at 5:15 am

    Yeah, the fact that higher public debt levels are not anywhere near as bad as unemployment is one thing that austerity preachers do not get. But it is far from being the most important economic truth they do not get.

    Far more important is the fact that raising taxes on rich people during a recession is a very powerful way to stimulate the economy that does not add even a penny to the public debt.

    Incredibly, it seemingly never occurs to most economists—including those who are very much opposed to austerity, like Paul Krugman—to recommend a more steeply progressive income tax as a way to fund an increase in government spending. Why?

    Why indeed? After all, the Balanced Budget Multiplier, which is mentioned in nearly every introductory economics textbook, is an example of precisely this point. So why do academic economists not advance that familiar argument when the preachers of austerity are wailing and gnashing their teeth over debt levels?

    Well, apparently, anti-austerity economists accept without question the specious argument voiced by conservative economists that, “Oh my! Any tax increase is going to result in a drop in consumption spending and that would hurt the economy!

    Completely ignored—by everyone—is the fact that the INCREASE in government spending that the increase in taxation would fund would be greater than the decrease in consumption spending that would also occur. This, because a significant percentage of the money that the government would collect from rich people would otherwise have been removed from the economy by them (i.e., saved).

    Any time the government is able to increase its spending, by using money that would otherwise have been removed from the economy, a net increase in aggregate spending is going to occur. By definition, that is an expansionary fiscal policy., and that is precisely what tax increases on the incomes of economy’s biggest savers (the top 1%-4% of income earners) would do.

    Sure, some reduction in the spending of rich people (on luxuries & assets) would occur in the short term, but those sales would quickly recover once prices drop a bit. In the mean time the government’s spending will grow by the amount of taxes collected, and that will be significantly greater than the amount that is lost to the pathetic “marginal propensity to spend” of rich people.

    Of course, fans of MMT will argue, “Why raise taxes at all? Why not just ‘print’ the money?” My response is: if there is a better chance, politically, of getting the MMT ‘fix’ enacted into law than to pull off an increase an increase in the tax “burden” of rich people, then by all means let’s go there and do it.

    I do believe there are some important reasons why the tax increase approach would be preferable, but there is no doubt that either approach would pull an economy out of recession without increasing debt.

    Let both be argued and see which one has more political traction, but please let us stop acquiescing to the false notion advanced by austerity preachers that tax increases during a recession will have a negative impact on economic growth, when precisely the opposite is true…

  3. March 8, 2018 at 2:15 pm

    You economists (haha) should study the booms. Study the bubbles. Seriously. In a bubble, the economy is doing amazingly. Builders build, techies invent, founders start up, employees are employed, consumers consume. There are some environmental or ethical red lines (men literally spending their money on booze and women) but for the most part, during the bubble, the economy is firing on all cylinders. What’s not to like? We should take the bubble periods, slightly tempered, as the norm for how the economy should run all the time.

    Ridiculous, some say. The bubbles are *fuelled* by debt or by the cash of investors who are foolish. That cannot be sustained because the money will run out eventually. Perpetual bubbles? How stupid.

    But readers of this blog should know better. You know full well that money is not fuel that drives the economy. It’s just a token exchanged between people, a claim on stuff and an incentive. It’s not that you need to burn 1bn of money to physically make 1bn of GDP. During a bubble, people get carefree about collecting money but they still produce stuff. The people and machines in the real world have the capacity to produce all that stuff, evidently, because we see them produce it while they are irrationally exuberant. The economy is capable of bubble levels of production, if only belief in money and accounting is suspended. If we’re not constrained by making profits or balancing the books, we can always produce the stuff.

    Austerity is not a weakness of the economy or even a lack of money, it is a desire by the rich to have money sequestered after it was widely shared. It’s banks pulling back debts, creditors calling in foreclosures, firms hoarding profits. It’s stopping the flow of money to keep score and gain the upper hand, destroying the real economy in the process. Austerity is to the economy as some fool who stands up in the theater and says “she’s not dead, they’re just pretending.” To get the show going again, we need to bring back optimism and suspension of disbelief.

  4. March 8, 2018 at 2:40 pm

    All seem to agree- “What austerity preachers do not get”…’AUSTERITY is a WMD’ when used against its own people.
    Why not use the recapture of the $12 trillion accumulated trade deficits for Infrastructure investment or to INCREASE Social Security and Medicare ? Money that is owed (a debt) to any other sovereignty MUST be paid.Period. Money that is owed to the members of the sovereignty (an asset) needs to be paid ONLY UPON DEMAND.
    BBC News – Republicans ‘extremely worried’ by Trump’s metal tariffs plan http://www.bbc.com/news/world-us-canada-43290969 What happened to their concern about the “catastrophic NATIONAL DEBT” ?

  5. March 8, 2018 at 6:37 pm

    Deficits are beneficial because they move stagnant money (funds from treasury buyers) into the active economy. Additionally, what happened to the point that money in the economy is equal to the national debt?

  6. March 9, 2018 at 9:42 am

    The construct “culture of poverty” was created in 1959 to explain why people were poor. The culture of poverty concept describes factors associated with poor people’s behaviors and argues that their values are distinguishable from members of the middle class and the wealthy. The persistence of poverty per the construct is explained by the reproduction of this “way of life,” as values of the poor are passed down generationally. Initially, the term was primarily applicable in Third World countries and in those nation-states in the early stages of industrialization. By the 1960s it was in common usage by social scientists in the US. Culture of poverty proposes that about 20% of poor people are trapped in cycles of self-perpetuating behavior that caused poverty. More specifically, 70 behavioral traits or characteristics are identified with those who have a culture of poverty. These characteristics include weak ego structure, a sense of resignation and fatalism, strong present-time orientation, and confusion of sexual identification. The construct has many defects. Including a focus on individuals only, with no notion of the societal relationships. It has little empirical foundation and is wholly inconsistent with liberal democracy. Also, its urban-centric focus tended to place poverty only within cities. Thus, African-American, and other minorities living in cities were spotlighted. But this new construct was combined by many “conservative” and “reactionary” politicians and ideologues with long-standing aspects of American culture to make a powerful scolding ethos in America. This ethos combines racism, Protestant notions of righteous punishment for sinners, blaming the poor for not being rich, and ensuring that people receive only what they’ve earned and deserve. A powerful system to direct and subjugate a large part of the American population. Austerity is just one of its many presentations.

    • March 9, 2018 at 3:16 pm

      YES, K.Z. The ONLY… “self-perpetuating behavior that caused poverty” and will always continue to cause poverty is the deliberate withholding of the “license to live”- now known as M-O-N-E-Y. As Soddy stated, “Since, in all monetary civilizations, it is money that alone can effect the exchange of wealth and the continuous flow of goods and services throughout the nation, money has become the life-blood of the community, and for each individual a veritable licence to live at all… (Free download-“The Role Of Money”)

      • March 10, 2018 at 11:00 am

        Carmen, I agree. The focus of my comment is the processes through which this change happened. After WWII even conservatives (e.g., Ronald Reagan) supported all necessary sharing to help the poor and relieve their suffering. After all, as Reagan noted the US is the richest nation in the world. Such help is expected and morally necessary.

  7. March 9, 2018 at 3:22 pm

    “What austerity preachers do not get”-
    Austerity is a way and means to withhold money.
    It is the deliberate withholding of the “license to live”- now known as M-O-N-E-Y. As Soddy stated, “Since, in all monetary civilizations, it is money that alone can effect the exchange of wealth and the continuous flow of goods and services throughout the nation, money has become the life-blood of the community, and for each individual a veritable licence to live at all… (Free download-“The Role Of Money”)

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