Radio commentator and writer Thom Hartmann, among other progressives, has correctly observed on a number of occasions that there is no evidence whatsoever that austerity measures have ever helped to bring a market economy out of a recession or a depression. Because the U.S. is a consumer driven economy, "We cannot cut our way to growth," he has noted.
In this lingering Great Recession, high unemployment in the private sector and the loss of nearly one million jobs in the public sector have enfeebled consumer demand and significantly stalled a robust economic recovery. It is a basic axiom of modern macro-economics that, when consumer demand has collapsed because of high unemployment (and tax revenues have declined at the federal, state and local levels) the federal government - through fiscal policy (pump-priming) - then becomes the only remaining, viable agent that can stimulate the economy since the wealthy have already hunkered down to await better days.
Anyone who doubts that validity of this basic proposition as originally put forth by John Maynard Keynes in his General Theory - and which has been reconfirmed by three generations of mainstream orthodox economists including John Kenneth Galbraith, Gardner Ackley, Paul Samuelson, Paul Krugman and Joseph Stiglitz - need only consider the present examples of Spain, Portugal, Ireland, Greece, Italy and Cyprus. The austerity demands of the German bankers and their equally myopic surrogates have exacerbated the economic travail and misery of ordinary citizens in those E.U. countries.
In the United Kingdom, which still maintains its own currency and does not belong to the E.U.'s monetary union, the Tory Party's austerity measures are having an equally devastating effect. John Cassidy, in a February 7, 2013 post for the New Yorker ("U.K. Lesson: Austerity Leads to More Debt"), describes a new study from the Institute of Fiscal Studies, a London-based think tank. In its annual report on of the U.K.'s finances, the I.F.S. observed that out that the budget deficit, because of the austerity measures in place, would still be so large that next year the Chancellor, George Osborne, will be required to borrow about sixty-five billion pounds more than he had anticipated - or about four per cent of the U.K.'s G.D.P.)
Cassidy quotes the Jeremy Warner of the British Daily Telegraph to the effect "This is a truly desperate state of affairs that demands swift and decisive action. We seem to have the worst of all possible worlds, with nil growth, some very obvious cuts in the quantity and quality of public services, but pretty much zero progress in getting on top of the country's debts."
Cassidy further notes that when Prime Minister, David Cameron and the Tory Party assumed office in May, 2010, and chose to implement an extensive program of austerity measures, the U.K. economy was slowly recovering from the Great Recession. By the final quarter of 2011, the U.K.'s economy had fallen back into a recession, from which it has yet to emerge.
Here in the United States, the insistence upon austerity measures has continued to choke off an economic recovery. More than a quarter of the population has descended into poverty; and long-term joblessness, particularly among older workers, has become intractable. At the same time recent college graduates, burdened by massive debts, are condemned to menial jobs as waiters and independent contractors. The pernicious policies of the balance-budget advocates and the effects of the sequester have begun to further chill the economic climate. Simultaneously, the 1% - those employed in the financial and technology sectors and in the multi-national corporations that have de-industrialized the economy and shipped middle class jobs overseas - have continued to amass unparalleled wealth.
As the gap between the many and the very few has continued to widen, those who have been to emulate the lifestyle of Nick Carraway in this country's Second Golden Age would be wise to heed Yeats' prophetic warning in the Second Coming.
Those politicians and pundits who urge austerity measures fail to understand the long-term consequences: The middle class will continue to erode as the safety net contracts. That trend, if not reversed, could, in a worst-case scenario, precipitate the collapse of this country's consumer-driven, market economy. An increasingly impoverished population will, at some point, become too poor to shop even at Wall-Mart.
The philosopher George Santayana reminds us that "Those who cannot remember the past are condemned to repeat it." The lessons from those countries struggling in Europe today and the lesson of 1937 when Franklin Roosevelt prematurely sought to reign in the stimulus of the New Deal and to address budget deficits (which thereby deepened the Great Depression) are proof positive that austerity measures are counter-productive. They are prescriptions for prolonged misery and suffering.
President Obama and Democrats in the House and the Senate need to stand firm and to challenge the economic Neanderthals in their midst. The kind of know-nothing-trickle-down-tax -incentives-for-the-wealthy-no-increase-in-the-minimum-wage-free-trade-and-out-sourcing-good-and-unions-for-workers-bad economics that the1% and their elected GOP surrogates are now trying to foist upon a gullible public represent the kind of policy proposals that a more economically literate public would immediately recognize for what they are: The nutty mutterings of individuals who in decades past would have been committed to asylums instead of having been elected to United States Congress.
