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Forum Post: Austerity, US Style, Exposed

Posted 1 year ago on Feb. 8, 2013, 6:52 p.m. EST by PeterKropotkin (1050) from Oakland, CA
This content is user submitted and not an official statement

By Richard Wolff

Austerity policies include various combinations primarily of government spending cuts and secondarily of general tax increases. Republicans and Democrats have endorsed austerity since 2010. Austerity was the result of their deal on taxes last December 31: increasing the payroll tax on wages and salaries from 4.2 to 6.2 percent. Austerity is what they are negotiating now in regard to federal spending cuts.

After 2010, with "recovery" underway for them following bailouts for them, large private capitalist interests focused on three key interests. First, they wanted to ensure that the bailouts' costs were not paid for by higher taxes on corporations and the rich. By stressing government spending cuts and broad-based tax increases, austerity policies serve that interest. Second, they worried about crisis-heightened government economic intervention and power and wanted to reduce them back to pre-crisis levels. Austerity's focus on reduced government spending lessens the government's economic footprint. Third, because big banks and other large capitalists are among the major creditors of the US government, they wanted signs that their crisis-increased holdings of US debt were safe investments for them. Austerity policies provide just those signs, as we shall show.

Austerity in the US, unlike in Europe, is renamed and packaged for the public as "deficit reduction programs" or "fiscal responsibility." Distractions such as "fiscal cliffs" and "debt ceilings" focus public attention on mere secondary details of austerity. Politicians, media and academics use such distractions to wrangle over whose taxes will go up how much and which recipients of government spending will suffer what size cuts. They do not debate austerity itself; that is, they do not debate very idea of raising mass taxes and cutting spending in a deep and long economic downturn. They do not explore the interests served and undermined by any austerity policy. So we will.

Austerity promoters repeatedly insist that the dominant economic problem today is government budget deficits. They ignore why those deficits occurred (the crisis plus bailouts). They demand that both parties and the media endorse austerity because cuts in government spending and increased taxes will reduce deficits. They hype austerity as the solution all must embrace. Otherwise, they fear, a different and dangerous logic might win popular support. In that logic, since capitalism regularly causes crises that cause deficits, another solution for deficits would be changing from capitalism to another economic system not beset by regular crises.

Austerity policies, we are told, will reduce deficits and thereby meet what "the credit market" demands. In other words, those who have lent to the US government (by buying its debt securities) want guarantees of interest and repayment. By cutting government spending and raising taxes, austerity policies redirect government funds to the government's creditors, thereby reassuring them.

Distracting references to an anonymous "market" avoid identifying the government's creditors. However, major creditors holding US public debt are easy to list: large banks, insurance companies, large corporations, wealthy individuals and central banks around the world. Austerity justified as satisfying "the market" in fact serves those US creditors first and foremost.

Austerity is thus the policy preferred by the private capitalist interests that (1) brought on the crisis, (2) secured the government bailouts almost exclusively for themselves, and (3) are that government's chief creditors. Led by major banks, those interests now threaten the government (that just bailed them out) with higher interest rates or no more credit unless it imposes higher taxes (mostly on others) and reduced spending (mostly on others) to lower its deficits. Distracting struggles over "fiscal cliffs" and "debt ceilings" serve nicely to disguise the reality that both parties' austerity policies represent and illustrate gross government subservience to large capitalists.

Austerity, US style, has its Keynesian economist critics. They point out that the United States has been able to borrow trillions at historically low interest rates through this crisis. US deficits have not worried "the market" at all. Policies should therefore not be driven by deficits. Keynesians insist that raising mass taxes and cutting spending during an economic downturn will reduce outlays on goods and services by taxpayers and government, thereby worsening unemployment. They thus ridicule the argument that austerity, by cutting deficits, will stimulate investment by capitalists.

For Keynesians, austerity is thus unneeded and counterproductive. They prefer to exit the crisis by more stimulus (lower taxes and higher government spending) funded by higher deficits. The resulting economic growth, they believe, will automatically lower government budgetary imbalance. The government can then later, if and when needed, impose tax increases and reduce government spending to shrink deficits. In a growing economy, austerity policies avoid the devastating effects they have in depressed economies (as shown by the recent histories of Greece, Portugal, the UK and others).

Setting aside the question of the validity of Keynesian arguments, they miss key purposes of austerity policies. Those policies do not primarily seek to overcome crisis or resume economic growth. Rather, as argued above, they aim chiefly to (1) shift the burden of paying for crisis and bailouts onto the total population, (2) reduce the economic footprint of the government, and (3) reduce creditors' concerns about rising US debt levels. If austerity policies achieve these objectives, their failure to end the crisis quickly is a price that corporations and the rich are more than happy to pay (or rather, have others pay).

That Republicans and Democrats concur on austerity and differ only on its secondary details testifies to what they share. Both depend financially on capitalist corporations and their top executives. Both serve and never question capitalism. For all the victims of capitalism today - the unemployed, those foreclosed out of their homes, those with reduced job benefits and job security, students with unsustainable schooling debts and poor job prospects, millions without medical insurance, and so on - supporting those parties perpetuates their victimization.

http://truth-out.org/news/item/14389-austerity-us-style-exposed

14 Comments

14 Comments


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[-] 4 points by beautifulworld (22162) 1 year ago

Here is what austerity really means to our government:

"According to a new report in The Washington Post, the median net worth of the current Congress rose 5% during the recession while it fell 39% for the average American. The wealthiest one-third of lawmakers saw their net worth rise 14%."

http://www.cnbc.com/id/49331792/Wealth_Gap_Widens_Between_Congress_Others_in_US

Easy for these greedy creeps to institute austerity for the rest of us.

If only more people would listen to economists like Richard Wolf.

[-] 4 points by PeterKropotkin (1050) from Oakland, CA 1 year ago

Good post BW

[-] 4 points by shadz66 (19985) 1 year ago

"America Has Now Become An Aristocracy Of Elites : Chris Hayes" ;

Extracted from bw's link & a ditto PK & good post re. http://rdwolff.com/ .

e tenebris, lux ...

[-] 2 points by DKAtoday (23978) from Coon Rapids, MN 1 year ago

Only the titles have changed - instead of Duke or Earl or what-ever else - it is COO CEO CFO etc ad-nauseum. What is the new title for kink - I mean king?

[-] 2 points by shadz66 (19985) 1 year ago

'Legal Corporate Persons' & 'Oligarchs' = New 'Kings' & also fyi :

multum in parvo ...

[-] 2 points by DKAtoday (23978) from Coon Rapids, MN 1 year ago

Thx

BTW - Tweeted

A Choice For Corporate America: Are You With America Or The Cayman Islands http://huff.to/12BdfKk via @HuffPostPol FOOD4Thought

[-] 2 points by DKAtoday (23978) from Coon Rapids, MN 1 year ago

Tomorrow, (Mon, Feb 11) Move to Amend's WE THE PEOPLE AMENDMENT will be introduced in Congress!

The We the People Amendment is the only amendment that deals with both Supreme Court doctrines that grant constitutional rights to artificial entities and that define spending money as free speech.

There are still many steps along the way, but this is a major milestone for the movement to amend!

Move to Amend will not now become a Congressional lobbying effort (not at this point). In fact now more than ever it is critical that we reach and educate the American people -- letting them know that there is a movement to get corporations out of our Constitution and big money out of our political process, and getting them involved.

What you can do:

On Monday go to http://WeThePeopleAmendment.org for photos, video and updates on the coverage of the amendment drop. SHARE THESE UPDATES WITH YOUR FRIENDS via Facebook, Twitter and email! Let's make this viral!

Ben Manski will be on Reddit.com at 1pm Eastern / 10am Pacific doing an "Ask Me Anything" interview about the We the People Amendment and Move to Amend. Tune in!

Ask your friends to sign the [Move to Amend petition](http://movetoamend.nationbuilder.com/petition?e=2ae135fada3068fbc9ccdd9b1d9214f03ddbbcaf&utm_source=movetoamend&utm_medium=email&utm_campaign=wtpa_announce&n=7&recruiter_id=18125 to get involved in the campaign.

If you're not already active in Move to Amend -- now's the time. Sign up to volunteer with an existing local MTA group or start one in your community.

Make a donation to Move to Amend to support our work. We are a grassroots organization supported by donations from individuals like you.

We are proud of this significant success, but you won't see us resting on our laurels in the weeks and months to come. We know there is still work to do to ensure victory and we know you are with us to see it through to the end. Thanks for that!

Yours for democracy,

Ashley Sanders, Ben Manski, Daniel Lee, David Cobb, Egberto Willies, George Friday, Jerome Scott, Kaitlin Sopoci-Belknap, Laura Bonham, Nancy Price

Move to Amend National Leadership Team

PS -- Don't forget to tune in tomorrow for coverage on the amendment drop at http://WeThePeopleAmendment.org. We need all hands on deck to help spread the word and make this announcement viral!

MOVE TO AMEND

PO Box 610, Eureka CA 95502 | (707) 269-0984 | www.MoveToAmend.org

We, the People of the United States of America, reject the U.S. Supreme Court's Citizens United ruling, and move to amend our Constitution to firmly establish that money is not speech, and that human beings, not corporations, are persons entitled to constitutional rights.

[-] 1 points by grapes (3552) 1 year ago

Diagnosis: COO CEO CFO etc. are all different grades of carbon monoxide poisoning (hold your throw-ups just a little bit longer). I venture a guess: Hairy Donkey Kong.

[-] 2 points by MattLHolck (16833) from San Diego, CA 1 year ago

the politicians have become richer while the people became poorer

[-] 3 points by PublicCurrency (1387) 1 year ago

This is such a good article. Thank you for posting it.

[-] 3 points by PeterKropotkin (1050) from Oakland, CA 1 year ago

You can see more articles just like it here.

http://www.democracyatwork.info/

http://rdwolff.com/

[-] 1 points by Ackhuman (-88) from Fairfax, VA 1 year ago

The biggest economic problem today is the economy. It functions far too well, and has fulfilled exactly its intended design goal of extracting as much as possible from the Earth, turning it into the most expensive possible products as cheaply as possible, and pushing as many people as possible into accepting that they need these things, and also need to work for them. It has fulfilled its design goal of keeping the post-agricultural social structure of a tiny, dominant, owning class and a huge, subservient, working class intact and is actually increasing this polarization. It has succeed in "improving standard of living", as measured by the amount of overengineered crap in people's houses, how big and far apart the houses are, and how much energy each person uses. It is top quality in its closed-environment abstraction, where every person is a perfectly rational homonculus and the Earth doesn't exist except as an infinite source of natural resources.

Now, there is no denying that REAL austerity, i.e., reducing consumption of market goods, consumption of non-solar energy, and emission of greenhouse gases, is a very good idea and one that will basically be inevitable within a few decades, anyway.

[-] 2 points by PeterKropotkin (1050) from Oakland, CA 1 year ago

Amen

[-] 0 points by DeathsHead1 (-111) 1 year ago

And who will pay for the opposite of austerity?