Austerity has never in the history of economics been a proper response to national insolvency. And yet we keep practicing it, as though Albert Einstein’s quote is meaningless: “Insanity is doing the same thing over and over again and expecting different results.”
And yet we continue, having learned nothing. Why do you suppose that is?
Class Warfare by a Softer Name
The short answer to that is because those who have usually run off with the national assets were never called to account. It’s class warfare by a softer name. Who can possibly complain about the common sense behind “living within one’s means?
Yet when governments demand austerity, it’s the poor who lose their healthcare to “balancing the budget.” Likewise with the strangling of schools, slashing of social benefits, evictions from public housing and a myriad of small cuts to everything that makes life livable for those in the bottom third of society.
In the current circumstance of international economic fragility, Covid-19 holds a sword to America's economic neck.
Doing the Right Thing Wrong
In these troubled circumstances, Congress and the Federal Reserve are pretty much throwing money at job losses and business failures, which is absolutely the correct thing to do. Yet, as per usual, the approximately $3 trillion thrown so far, was mostly gobbled down in the first hour of availability by the big Wall Street players.
A habitual solution in a political climate corrupted by money. We've seen it in every financial crisis since Reagan. The airlines pocketed $50 billion. You and I got $1,200. How does that old song go?
There’s nothing surer, the rich get rich and the poor get poorer…
But mark my words, Congress is going be held accountable for this charade. The airlines will not recover, nor will we poor chumps who probably went out and blew our cash on a single month’s rent.
And then the fun will begin…
The Tired Old Historically Useless Call for Austerity
…the voices of reason will ring though the Capitol corridors. Austerity, they will chant in lock-step as lift their well-fed heads from the chow-line of political largesse and march against their constituency. “We can ill-afford to feed the hungry or clothe the shivering masses while the Pentagon absorbs 42% of the national budget. China is a huge threat and if they’re not a huge threat, we’ll nominate someone huger. Sorry as hell about those lost jobs and crushed dreams, but we need armaments because we get lots of money from lobbyists and no one pays us shit for lost dreams.”
And so we will become Greece or Argentina or whoever is the current poster-boy for austerity. Shit, we are halfway there...probably a damnedsite more than halfway.
But Not Socialism
Of course not. We would never suggest that in a nation that abhors socialism. We are perfectly happy to socialize the costs of that fifty billion to the airlines (which will not save them) and privatize the payback of that giveaway to ourselves as taxpayers. A redux of 2008. “Socialism” is in the eye of the beholder and served for decades as a convenient bugaboo for the political right to invoke whenever its interests were threatened by progressive legislation or liberal advocacy.
Are you willing to do away with such benefits as Social Security and Medicare? How about the nationwide electric grid, our interstate highways, primary schools, Medicaid, unemployment insurance, the school lunch program, the Children’s Health Insurance Program, the Earned Income Tax Credit and the refundable component of the Child Tax Credit? They all rate as social programs and what are social programs but socialism?
We Flightless Birds Who Pay Our Taxes
Yep, that's you and me, the flightless-birds who actually pay our taxes through payroll withholding. We're so used to that that we don't even talk about salary anymore, we only care about take-home pay and benefits. That's not an accident. Taxes were designed that way so there would be some money to run the country, while Verizon, Bank of America, Citigroup, Pfizer, FedEx, Honeywell, Merck and Corning pay no taxes. That's just a small part of the list, but think of that next time FedEx drops off a package or you visit the drugstore.
And Amazon? Nah, too defenseless a target, let’s not go there.
So, the working your way out of debt argument for austerity fails on the simple fact that austerity falls unequally on the shoulders of those least able to pay. The first things lawmakers cut when they finagle an austerity budget is those things that do not affect them personally, such as all aspects of what we have come to know as the social-net; food stamps, free school lunches, aid to dependent women…and on and on.
Those most able to pay are effectively out of the picture, either through offshore residency or various tax-free investments. Don’t ask the Walton family to chip in. America’s wealthiest family is too busy cutting salaries and benefits for workers at Walmart.
Austerity and Boycotts
In an interesting comparison, national austerity has very much the same effect as imposing boycotts on other nations. When we ‘punish’ Russia, Iran or North Korea with a boycott, the ruling oligarchy is mostly unaffected. There's still plenty of caviar on their table. It’s the poor who starve.
So then what’s the answer? The answer is now (and has always been) to spend a nation’s way out of hard times. But there are two flavors of spending and only one of them works without explosive inflation.
Throwing money at a problem that has no physical return is a no-no. That’s why fifty billion to the airlines or another of our endless tax reductions to the rich never works. All we get back for that is a bunch of zombie airlines struggling a little longer to downsize or die alongside the further widening of an already too wide income gap.
Spend on Assets, Avoid Liabilities
Spending on programs such as the Green New Deal will work because they put tens of millions of Americans to work and spit out product in the form of clean energy, bridges, highways, schools, an upgraded power-grid and inner-city infrastructure such as sewers, parks, bike lanes and water systems.
None of those jobs can be off-shored to China and paying union wages across the entire system we will go a long way toward rebuilding a solid middle class.
Zombie airlines are an expense and infrastructure is an investment Everyone knows the difference. An expense is taking a holiday—it may be nice, but there’s nothing at the end but a memory and some videos. An investment is putting a new roof on your home and upgrading the heating system.
Austerity Is for Losers
Pretty simple. With one you have nothing tangible at the end and with the other there’s an asset you can touch and feel. Don't take my word for it. Nobel winners for economics Joseph Stiglitz and Paul Krugman would tell you the same...with considerably more elegance and reputation.
Austerity is for losers.
Cover image by Peter Damian at Wikipedia