By Michael Hoexter
The success of the austerity campaign in capturing the American and European political process is remarkable considering that it prescribes exactly the opposite of what factually grounded economic analyses would recommend. Leading politicians and their advisors are pushing governments to curtail spending at a time of economic weakness and doing so in the post gold-standard monetary era where currency-issuing governments have no affordability constraint on spending. The focus on public debt is leading the political process away from economic growth and full employment, despite the fact that all major actors in this process claim that their preferred policies are the way to lasting growth. In the current American “fiscal cliff” negotiations, the leadership of both sides of the negotiation are pushing for different forms of austerity, with no effective organized force in government working against this economic madness. Continue reading
