The Destructive, Ideological Push for Austerity

Alan Blinder:

Alan Blinder: Stimulus Isn't a Dirty Word, by Alan Blinder, Commentary, NY Times: A debate now rages in Europe over whether fiscal austerity—that is, higher taxes and less spending—helps or hinders growth. ... Events in Europe seem to have dashed that idea. But a similar debate rages here in the U.S.—with the lone exception that our pro-austerity crowd abhors tax increases. ...

Many Democrats, including President Obama, want to help state and local governments maintain their spending, which has now dropped 6.4% since its 2008 peak—and is still falling. Most Republicans reject that idea, even when it saves the jobs of teachers, fire fighters and police officers.

Many Democrats also want to build and repair more roads, bridges, tunnels and the like—taking advantage of the rare combination of historically low government borrowing rates and historically high unemployment among construction workers. Most Republicans reject that idea, too, even though the argument for more public capital is the same as the argument for more private capital—each promotes growth.

Democrats also typically seek a growth strategy that boosts the incomes of the middle class, not just of the top 1%. Many Republicans counter that the most effective way to bolster middle-class incomes is via trickle-down from the rich—who start and grow businesses. ...

Republicans often focus on lowering the top income tax rate. ... But the evidence is against the GOP on this one. ...

Why in the world are we still arguing about this? ... If we are serious about an evidence-based program that spurs growth and improves the lots of average Americans, we should want a near-term jobs program, long-term deficit reduction, more spending on infrastructure, improvements in education, and a tax reform that clears out loopholes, returns to the 39.6% top rate, and protects the middle class.

Which candidate does that remind you of?

Too many members of the press aided and abetted the destructive push toward austerity without seeming to realize that the main driving force behind the austerity movement was ideological, not economics. -- a chance to move toward a reduction in the size of government. Never mind if it's critical services like education, fire, and police services. But the economists who led them to write these stories also deserve quite a bit of the blame (I'd assign all of the blame to the economists pushing for austerity and the harm that came with it, but journalists didn't have to listen to these voices, particularly since they have been largely wrong all along). Many of us were pushing for alternatives policies, aggressive jobs program, infrastructure spending, helping households to rebuild their balance sheets to name just a few (see the article for several more), but to no avail.

Watching all of this happen has been soooo frustrating, far beyond anything I ever would have predicted before the crisis hit. We could have done so much better.