Tag Archives: austerity

The Way Out of Shutdown Shenanigans

Today, I received an e-mail from the Friends of (the very popular with progressives) Senator Bernie Sanders. In it the Senator says:

I’m joining with the members of Progressives United to send a clear message to President Obama that we will stand with him when he vetoes Republican legislation that attacks the well-being of the struggling middle class.

Join me and members of Progressives United to urge the president to VETO any Republican legislation that attacks working families.

NO to cuts in Social Security. NO to cuts in Medicaid. NO to converting Medicare into a voucher program. NO to new trade legislation that sends our jobs overseas and hammers our middle-class workers. NO to cuts to nutrition programs, education or environmental protection.

YES to raising the minimum wage. YES to a massive jobs program rebuilding our crumbling infrastructure. YES to transforming our energy system away from fossil fuels. YES to pay equity for women workers. YES to overturning Citizens United.

We already know what “compromise” will mean from a Republican Congress: their way or the highway. In order to win in the future, President Obama must stand strong for the American middle class, and we must support him.

Tell President Obama: Standing firm is the only option, and that means committing to VETO legislation that attacks working families, and fighting for legislation that defends their needs.

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The New York Times Misses the Irony of Austerity and Economic Illiteracy

By William K. Black

The New York Times published a story by Liz Alderman dated November 17, 2014 entitled “As Japan Falls Into Recession, Europe Looks to Avoid It.” The article begins with a burst of (unattributed) economic illiteracy.

“Japan looked like the model for economic revival. Growth was back on track. The stock market was surging. Inflation, which had eluded Japan for decades, was even returning.

But Japan’s grand economic experiment, a combination of fiscal discipline and monetary stimulus, is collapsing. On Monday, the country unexpectedly fell into recession, a downturn that has painful implications for the rest of the world.

Japan’s unorthodox strategy was supposed to offer a road map for other troubled economies, notably Europe. Fiscal belt-tightening and tax increases, while leaning on the central bank to pump money into the economy, was expected to help overcome a malaise.”

In a prior column I gave mock praise to Alderman because after editorializing for eurozone austerity for years in her columns she finally admitted that “many economists” criticized those policies. I cautioned, however, that the NYT reporters, including Alderman, assigned to cover the eurozone “are austerians to the core.” Here comments about Europe and Japan prove my point. First, Japan did not look like “the model for economic revival” when it endorsed austerity through sharp increases in its sales tax. It looked like a model for a gratuitous recession. The stock market surge and moving towards achieving desirable levels of modest inflation occurred in part in response to the fiscal stimulus that the new Japanese government decided to replace with fiscal austerity. But other government policies were more important in explaining these results – and explaining why they were artificial. By announcing the rise in the sales tax from five to eight percent in advance the government spurred a sharp increase in consumption of durable goods prior to the increase. By moving government funds from safer investments to stock purchases the government spurred a rise in the stock market.

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Germany’s Passive-Aggressive “Stimulus” Program

By William K. Black
Kilkenny, Ireland: November 7, 2014

Kilkenomics, being a festival of economists and comedians, has long reflected the economic consensus that austerity in response to a Great Recession is economic malpractice akin to bleeding a patient to make him healthy. One of the great changes in Europe in the last month is that the number of economic voices willing to make this same point have grown rapidly. Germany’s “there is no alternative” (TINA) to austerity claims were always absurd, but now many more European voices are willing to point out that there are superb alternatives – in Germany. A recent Irish Times article provides a good example.

“Leading economists have criticised Germany on its public investment restraint which, at 18.4 per cent of GDP, is below the EU average of 19.2 per cent. A study by Berlin’s DIW economic think tank suggests a €1 trillion backlog has built up in Germany since 2000.”

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Piketty’s Neoliberal Capital

Let’s get this out of the way. I agree with Piketty’s overall conclusion in Capital about inequality, that: the distribution of wealth in many industrial nations is highly unequal, wealth concentration has been increasing; and there is a high likelihood that the extent of wealth inequality will continue to grow unless appropriate fiscal policy is used to reverse current trends. However, I don’t agree with:

— the framework he uses to define and specify “capital”;

— the way he looks at Government finance and net worth; and

— the fiscal policy proposals he offers to reduce Inequality and put a stop to current trends of growth in the capital to income ratio.

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The New York Times Finally Allows Competent EU Commentators

By William K. Black

As my regular readers know, the NYT coverage of the EU financial crisis has been shameful, economically illiterate, and harmful. In the last two weeks, however, that coverage has finally begun to mention the concept of inadequate demand, the fact that governmental spending can provide demand, and that austerity is not the only available choice. In the last 10 days the coverage even began to quote economists who made the point that austerity is the problem rather than the solution. This modest improvement has taken six years, two gratuitous Great Recessions, and Great Depressions for about one-third the eurozone’s population.

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EU Ideologues “Crowd Out” Sanity

By William K. Black

It is often the small things that best illustrate insanity.  On October 13, 2014, EU Economic and Monetary Affairs Commissioner Jyrki Katainen spoke to emphasize one message:

“[The EU’s leaders] ‘don’t want the [European Investment Bank] EIB crowding out private investment.’  He said the EIB should be used to leverage money from the private sector, ‘and play a part in big infrastructure projects,’ notably ones that have been delayed.”

It’s helpful to situate this smaller example of economic insanity within the broader context of the insanity of austerity inflicted by those same EU leaders.  The general insanity is that the EU politicians are the most economically illiterate and extreme member of the troika.  I just wrote a column explaining that they are bitterly attacking Mario Draghi, the head of the European Central Bank (ECB) for (in their warped interpretation) becoming apostate on the subject of austerity.  The IMF, at least many of its professional economists, left the one truth faith of the austerians long ago when it began publishing research showing that fiscal stimulus was a great success and even its leadership began to warn against austerity. 

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Beware of Policies and Legislation Based on the Generational Accounting Scam

The Peter G. Peterson Foundation (PGPF) and its allied army of associated deficit hawks want the Congressional Budget Office (CBO), the General Accountability Office (GAO), and the Office of Management and Budget (OMB) to do fiscal gap accounting and generational accounting on an annual basis and, upon request by Congress, to use these accounting methods to evaluate major proposed changes in fiscal legislation. Generational Accounting is an invalid long-range projection method that doesn’t take into account inflation, the projected value of the Government’s capability to issue fiat currency and reserves in the amounts needed to fulfill Congressional appropriations, and re-pay its debts, the projected non-Government assets corresponding to government liabilities, the likely economic impacts of Government spending, surpluses, and deficits, the impact of accumulating errors on projections, and the biases inherent in pessimistic AND contradictory assumptions. It is a green eye shade method that ignores both economic and political reality.

If you want America to end deficit terrorism and austerity, and to have the fiscal policy space it needs to begin to restore the American Dream, then you need to defeat proposed policies or legislation which puts building blocks in place to bias fiscal policy towards austerity and the economic decline it will surely produce for ourselves, our children, and for their children. Proposed policies and legislation of this kind must be defeated for the following seven reasons. Continue reading

Paul Krugman Still Believes That “the debt” Can Be a Problem for the U.S.

The deficit is now down to under 3% of GDP, and in contemplating that fact, Paul Krugman asks why the deficit hawks aren’t celebrating the precipitous fall from nearly 10% of GDP a few years ago. He then explains that:

Far from celebrating the deficit’s decline, the usual suspects — fiscal-scold think tanks, inside-the-Beltway pundits — seem annoyed by the news. It’s a “false victory,” they declare. “Trillion dollar deficits are coming back,” they warn. And they’re furious with President Obama for saying that it’s time to get past “mindless austerity” and “manufactured crises.” He’s declaring mission accomplished, they say, when he should be making another push for entitlement reform.

All of which demonstrates a truth that has been apparent for a while, if you have been paying close attention: Deficit scolds actually love big budget deficits, and hate it when those deficits get smaller. Why? Because fears of a fiscal crisis — fears that they feed assiduously — are their best hope of getting what they really want: big cuts in social programs.

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Equality, MMT, Real Fiscal Responsibility, and Re-inventing Democracy

Inequality and MMT

For some time now, MMT has been receiving criticism from self-identified progressives charging that MMT economists and advocates aren’t concerned about one of the most pressing problems in modern democracies and especially in the US, namely, increasing and often extreme inequality. MMT supporters have responded by citing much previous work on inequality, a lot of it done at the Levy Institute, by pointing out their great concern over the problem, and their work in advocating for a Federal Job Guarantee that would do more than perhaps any other single piece of legislation to ameliorate both poverty and inequality.

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Germany Demands Greater Austerity Because Three Recessions in Six Years are not Enough

By William K. Black

Things are going badly in the eurozone – as they have for six years due to Germany’s demand that “there is no alternative” (TINA) to austerity as the response to the Great Recession.  Austerity caused a gratuitous second Great Recession throughout the eurozone and threw nations with one-third of the eurozone’s total population into Great Depression levels of unemployment.  Austerity has now forced Italy into a third recession in six years and produced overall stagnation in the eurozone.  Germany, whose budget surplus has produced economic stagnation, has found a solution to the latest crisis caused by self-destructive austerity – greater austerity.  Better yet, as a Reuters column relates, Germany’s leaders are enraged that anyone would dare to question why it makes sense to reduce further already inadequate demand through austerity.

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