I don’t know why we fall for really stupid economic theories, but it may have something to do with the huge amount of money being spent to convince 99% of Americans that it will be good for us to give all our money to the 1%. First it was “trickle down economics” until that was soundly discredited. But rather than give up on it, they just came up with another name, “austerity”. Austerity is nothing like trickle down economics. In austerity, we have to reduce spending severely in order to cut taxes (which mainly benefits the very rich).
See the difference? Well, neither do I.
But we keep hearing about austerity. Greece has to cut spending even more than they already have. Retired people have to give up a big part of their pensions, and there will be big cuts to education. Why? So Greece can pay money back to their rich creditors who stupidly invested in Greece when they knew it was becoming insolvent. Sound familiar?
Which is why it is a good thing that the LA Times has published an article about what should be obvious to everyone: “The evidence piles up: Austerity poisons economic growth“:
Why has the post-recession recovery been so slothful, both here in the U.S. and abroad?
The answer has been plain for years: Government leaders pursued policies of austerity, cutting public spending with the fanaticism of moral crusaders. The almost universal result was a stifling of economic growth.
Resistance to public spending hobbled the U.S. recovery and has had even worse effects in Europe, which embraced austerity more.
We made the same mistake after the Great Depression, and only fully climbed out of that when WWII forced us to seriously increase spending. Yes, that drove the federal deficit up for a few years until growth picked up dramatically and the resulting economic boom cut the national debt to a quarter of what it was at its peak.
If that weren’t enough evidence, today we have states like Kansas, Wisconsin, and Louisiana, which fully embraced austerity and tax cuts (promising the resulting economic growth would make everything better), only to see their economies get worse instead of better:
Things have gotten so bad in Louisiana, where budget cuts have Louisiana State University contemplating the equivalent of bankruptcy, that Republican legislators are pleading to be relieved of their earlier no-tax pledges.
Now here’s the ironic part. Even though the wealthy stand to gain the most from austerity, in reality they lose too.
Crumbling roads and bridges cost business owners dearly in transport costs; underfunded educational systems raise their cost of finding or training qualified workers; poverty and unemployment cause social unrest, which leads to attacks on their property.
In Kansas, Wisconsin, Louisiana and other fanatical tax-cutting and government-shrinking states, the signs are emerging that austerity isn’t even its own reward. High-income taxpayers may feel flush for a while when their rates are being slashed, but when the consequence is shuttered universities, understaffed schools, and unemployment spreading among what should be their customer base, everyone is impoverished.