I noted the damage that austerity has done to the recovery here, and as Paul Krugman notes today, Jared Bernstein has been pushing the same point. As I wrote:
Austerity is Holding Back the Recovery: ...premature austerity -- cutting spending before the economy is ready for it -- is taking a toll on the recovery. The fall in government spending reduced fourth-quarter growth by 0.93 percent...
This is the opposite of what the government should be doing to support the recovery. We need a temporary increase in government spending to increase demand and employment through, for example, building infrastructure. That would help to get us out of the deep hole we are in. Instead, the government seems to be trying to make it harder to escape.
We do need to address our long-run budget problems once the economy is healthy enough to withstand the tax increases and program cuts that will be required. But the idea of "expansionary" austerity has failed. Austerity in the short-term simply makes it harder for the economy to recover and delays the day when you can finally address budget issues without harming the economy. The lesson is that government needs to support the recovery, not oppose it through a false promise that contraction of one sector in the economy will be expansionary. And given how far we still have to go before the economy is healthy again, it's not too late to put that lesson into practice.
As Jared Bernstein emphasizes, the main driving force behind the cuts in government spending has been declines at the state and local level. Here's a story from the local paper illustrating the harm this is doing not just to our present, but also to our future:
Eugene's Halls of Not Learning, by Susan Palmer, The Register-Guard: It’s a little after 1 p.m. at North Eugene High School and the lounge areas are filled with clusters of students. At one table, a group of junior and senior boys plays Magic, a complicated card game.
When asked, they say they’d rather be in class. “Don’t depict us as being lazy,” said Walker Squires, a junior. “We’re not doing it out of idleness. If I could, I would be in class.”
But this is the new normal at Eugene School District high schools. Students arrive late, leave early, or find something to do in the middle of the day because they can’t get all the classes they need or want.
Cuts that have reduced the district’s general fund budget by more than $20 million over the past three years mean fewer teachers and fewer course offerings in the high schools.
Michael Anderson, a junior at North, would be taking Advanced Placement physics and chemistry this term if he could, but there is no room in those classes for him.
“It’s frustrating when you actually want to be in school,” Anderson said. He had hoped that high school would allow him to go more deeply into the sciences that captivated him when he was younger, but there just aren’t enough classes, he said. The problem is widespread across all Eugene district high schools. ...
Posted by Mark Thoma on Sunday, January 29, 2012 at 09:40 AM in Budget Deficit, Economics |
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