News Flash! – AUSTERITY DOESN’T WORK!

If the GOP does regain the seats of power following the fall elections, it will be the results again of a successful campaign by the power brokers in this country to keep the public uninformed about issues that negatively impact their own self interests.


 

We have been pumped so full of smoke up our backsides for the last couple of years by GOP/TeaPartiers and their media mouthpieces about how a policy of “austerity”, through government spending cuts, would reduce the deficit and stimulate economic growth, without having any real evidence that such a tactic honestly works.  Raising taxes of course would not  be necessary in the GOP/TeaParty way of looking at solutions because the lowering deficits, vis a vis lower government spending, would instill confidence in the free market.  This confidence would then encourage the business community in this country to start expanding their business and create jobs.  This would have the added benefit, they claim, of generating the revenue we need to pay down our deficit rather than raising taxes to tackle this nasty, lingering problem – wink, wink.

Well set aside any doubts or assurances you may have had, depending on your politico-economic perceptions, and observe some reality based evidence that shows the austerity method of the GOP/TeaPartiers is NOT a fiscal plan of action that will do a better job at economic recovery than what Obama and his administration have been doing thus far.  In fact, it will most likely have the reverse affect.  Paul Krugman points out that “Keynesians have been completely right, Austerians utterly wrong — at vast human cost.”

 

Let me set the record straight here too.  I am not saying that what Obama has been doing has been been spot on.  It hasn’t.  It’s weakness is that what stimulus got passed back in early 2009 was way too small because the new administration was making too many concessions to the GOP/TeaParty who have been touting austerity policies since the President took office.  Rather than making the stimulus package bigger, Obama kow-towed to the shrills of the GOP and invested too little to generate a more vigorous, sustaining recovery.

But had he not listened more to the Keynesian views of those within his Party and caved completely to the advocates of the economic views of Milton Friedman and Ayn Rand, who opposed governments intervening to aid economic recovery, our economic disaster would have sunk even deeper into the abyss, creating even higher unemployment rates and greater loss of homes and retirement savings.

So where’s this evidence that brings home the salient point of austerity’s failure?   Across the pond in Great Britain.

LONDON (Reuters) – Britain’s economy slid into its second recession since the financial crisis after official data unexpectedly showed a fall in output in the first three months of 2012, piling pressure on Prime Minister David Cameron’s embattled coalition government.

The Office for National Statistics said Britain’s gross domestic product fell 0.2 percent in the first quarter of 2012 after contracting by 0.3 percent at the end of 2011, confounding forecasts for 0.1 percent growth. – SOURCE

Since taking over the British government in May 2010 here’s what the conservatives have achieved with their deep spending cuts to deal with their recession.

  • GDP continues to drop.  The economy has only grown by 0.4 percent since the government came to power
  • the biggest fall in construction output in three years
  • Britain’s service sector which makes up more than three quarters of GDP continues to make no substantial ground
  • Industrial output and construction have shrunk to levels not seen since Q1 2009

Even though the Bank of England has warned that there is a risk of another contraction in the second quarter of 2012, Prime Minister Cameron, a favorite of American conservatives, intends to stay with his austerity program by not providing “further monetary stimulus through quantitative easing asset purchases.”  This means “Britain will continue on a death spiral of self-defeating austerity”, says Krugman.  

This is what the leaders of the GOP/TeaParty have in store for this country if they can convince voters to put them back in control of both houses of Congress and the White House

… the [Republican] party has spent almost three years demanding immediate and painful austerity measures. The GOP put [Rep. Paul Ryan (R-WI)] in charge of ‘committing us’ to a “Path” of sharp, short-sighted cuts that economists say would make unemployment worse, as the IMF says austerity policies have always done.   SOURCE

 

How quick this news spreads to all voting blocs in this country will be interesting to watch.  Many on-line services are already posting on this immediately following it’s release early Wednesday by Britain’s Office for National Statistics.  But what will be critical is how quickly AND how frequently this economic reality gets played out on the MSM networks.

I suspect that what we will see is what we have been seeing for years.  That corporate-owned media outlets who support austerity programs will give this very little to no attention.  Though business profits have done very well under Obama’s economic policies there are those ideologues within the GOP that insists killing public sector jobs is the only sure road to a more rapid and full recovery.

 

Austerity during a serious recession is economically insane. It is a pro-cyclical policy that makes the recession more severe.”  - Bill Black

Related Article:

Europe’s austerity recession 

Austerity is Killing Europe

Jobless Rate Hits New High in Euro Zone

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7 responses to “News Flash! – AUSTERITY DOESN’T WORK!

  1. I did my own austerity program, and it doesn’t help here in my house either. Okay, that was sort of a lame joke but I don’t see how making more people suffer is for the good of the country. When you deny people food, medicine, jobs and an education, how can this help the US grow. It demoralizes and defeats the human spirit. The only human spirit not destroyed are the ones with the money in the first place. I think it is all about keeping the power and wealth for a few, and no country can survive long term with that philosophy.

    • “I think it is all about keeping the power and wealth for a few…”

      It does seem to play out that way Donna. But I think what we have here are some very wealthy people like the Koch brothers and Richard Mellon Scaife who actually think that free market principles alone will ultimately afford an opportunity for EVERYONE to escape poverty. They won’t be millionaires but neither will they suffer malnutrition or the lack of adequate health care, it’s believed. It’s a preposterous notion that has been shown over and over again to be a failure. Einstein’s theory of insanity though is always in play with them about doing the same things over and over again and expecting different results.

  2. I really don’t understand how people can honestly buy into this austerity business. Even if you cut spending to zero, if you don’t have an income on the other side of the equation, the deficit will never be reduced. I believe it was Warren Buffet (who I would argue knows a thing or two about money management) who said something along the lines of “if the government needs money, it should get it from the people who have it.” It boggles the mind.

    • Yep.

      People like Buffet also know that the small increase that would occur if the Bush tax cuts were ended will hardly have any real impact on their personal or business well-being. The entire austerity bill of goods is being sold by a Libertarian mindset that has it locked in that government attempts to stimulate the economy are somehow blasphemous acts based on purest ideological views of how “free markets” work.

  3. Well said! Look at Europe…..austerity is NOT working there but some want us to believe that it will somehow be different here…..a fallacy.

  4. I’m on the PTA at school and we’re upset that the local school board has decided to outsource custodial work because the custodian unions won’t give up benefits. That last cartoon reminds me of that — those overpaid janitors are the problem! *eyes rolling* Austerity doesn’t work, but higher debt when your debt to GDP ratio gets to 100% creates other problems. I’m at a loss on how to rebalance the economy – I think Obama’s mix of investment and reprioritizing the budget is a good approach, but at this point that’s being blocked too.

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