Hey, I know, this is “a blog of progressive, religious themes.” My last post was pure economics, and now I’m going to say the same thing again, only different. There is religion here too, but it’s implicit–economic justice, care for the widow and the orphan, blessed are the poor, and more–but I’m not explicitly talking about that. Our national and world economies are about to pushed over a cliff, and we need to shout that as loud as we can.
My last post featured Economist Robert Reich who called for President Obama to “go big”, and I also mentioned Nobel laureate Paul Krugman. Today, it is Krugman’s turn to debunk austerity in favor of stimulus in a New York Times article entitled “Misguided Deficit Worries make Unemployment Worse”. Krugman writes,
And by obsessing over a nonexistent threat, Washington has been making the real problem — mass unemployment, which is eating away at the foundations of our nation — much worse.
Although you’d never know it listening to the ranters, the past year has actually been a pretty good test of the theory that slashing government spending actually creates jobs.
The deficit obsession has blocked a much-needed second round of federal stimulus, and with stimulus spending, such as it was, fading out, we’re experiencing de facto fiscal austerity.
State and local governments, in particular, faced with the loss of federal aid, have been sharply cutting many programs, and have been laying off a lot of workers, mostly schoolteachers.
And somehow the private sector hasn’t responded to these layoffs by rejoicing at the sight of a shrinking government and embarking on a hiring spree.
OK, I know what the usual suspects will say — namely, that fears of regulation and higher taxes are holding businesses back. But this is just a right-wing fantasy.
Multiple surveys have shown that lack of demand — a lack that is being exacerbated by government cutbacks — is the overwhelming problem businesses face, with regulation and taxes barely even in the picture.
Are Reich and Krugman merely lonely voices crying in the wilderness? Consider this from the United Nations Conference on Trade and Development (UNCTAD):
The pursuit of austerity measures and deficit cuts is pushing the world economy toward disaster in a misguided attempt to please global financial markets, the annual report of the United Nations economic think tank UNCTAD said on Tuesday.
The report, entitled “Post-crisis policy challenges in the world economy,” savaged U.S. and European economic policies and called for wage increases, stricter regulation of financial markets, including a return to a system of managed exchange rates, and a conscious break with market-led thinking.
“The message here is very pragmatic: we need to reverse our course quickly,” said UNCTAD Secretary General Supachai Panitchpakdi. [former head of the World Trade Organization]
And this from The Atlantic, in an article subtitled How a stubborn misreading of classical economists — combined with a hyper-partisan Republican Party — haunts the U.S. economy [emphasis added]:
The intellectual actions of these extreme free marketeers do not take place in a vacuum. They interact with a political structure comprised of lobbies and pseudo think-tanks to promote policies that, while wrapped in the cloak of promoting free markets, ultimately serve to redistribute growth to the top of the wealth scale. “Efficient market hypotheses” and “rational expectations”–the idea that absent government interference, market participants will make optimally efficient decisions–leads directly to supply-side tax cuts, deregulation of financial markets, the formation of financial bubbles, the acceptance of income stagnation, and disinvestment in public goods. And these measures, in turn, have delivered levels of income and wealth inequality not seen since the late 1920s, along with policy handcuffs that today have us arguing about how to reduce, rather than strengthen, regulations.
And here’s where I get around to religion.