Defeat the Austerity Threat

[Smilo]

The Challenge
We have a jobs crisis, but the media and political elite are focused on deficits and debt. How do we make the case that pursuing austerity only will deepen the jobs crisis and send us back into recession?
Make the Case With mass unemployment, declining wages and a sinking middle class, consumers are tightening their belts. Companies won’t create jobs without customers. We need the U.S. government to act. We have work to be done and people in need of work. And we can pay for it by insisting that the rich and corporations pay their fair share of taxes, bringing the soldiers home and investing the savings here at home, ending obscene subsidies to entrenched corporate lobbies like Big Oil, and borrowing at historically low interest rates.
Case In Point
To address the global slowdown over the last three years, Europe cut deficits and America increased deficits. The result: Europe’s unemployment rate has gone up, and America’s unemployment rate has gone down.
We learned this lesson 70 years ago in the Great Depression. President Franklin Roosevelt steadily reduced unemployment for five years in large part by investing in public projects. But when Roosevelt prematurely reversed course and cut spending in 1937, he sparked a new downturn. Only when Roosevelt really stepped on the gas during World War II, with massive public investment and the biggest budget deficits in American history, did the Depression truly end.
Counterpoint
When they say: We’re already in a debt crisis. If we keep racking up these deficits, we’ll turn into Greece, with soaring interest rates and inflation, a declining dollar and America’s credit ruined.
You can say: The U.S. becoming Greece? That’s a joke. Want a comparison? Think Great Britain. They inflicted austerity on a weak economy and sunk back into recession, with rising unemployment, spreading misery and a worsening debt burden. Right now we can borrow money at record low rates. Our basic infrastructure is decrepit and needs to be rebuilt. Our construction industry is flat on its back. Any business leader with a brain would leap at the opportunity to do work that we have to do at record low costs.
When they say
Government spending doesn’t create jobs.
You can say: Tell that to the teacher who gets hired at a newly built school, or the rail worker building a high-speed train line, or the steelworker making a wind turbine, or the veteran able to help restore our national parks or the teenager working at her first summer job.
When they say
By ignoring the ticking time bombs of the Social Security and Medicare trust funds, you are putting your head in the sand.
You can say: Conservatives pushing trillions in more taxes for the already rich aren’t worried about deficits. You want to cut spending, not deficits. And now you’re aiming at the core pillars of family security. Social Security is legally forbidden from increasing the deficit and Medicare has just been made more solvent thanks to the health care reforms in Obamacare. We don’t have to cut Social Security, Medicare and Medicaid to get our books in order. Over the long haul, we need more reform to reduce costs in the overall health care economy – and that will lower the costs of Medicare and Medicaid. You just are using this economic crisis as an excuse to destroy programs you never supported.
The Public Pulse
Americans are deeply concerned about deficits and spending, but when asked what they are most concerned about, Americans overwhelmingly say jobs and the economy, not deficits (Multiple polls, including most recently Bloomberg National Poll and New York Times/CBS News).

When asked in an August poll which is most important, increasing spending to improve the economy or avoiding a big increase in the deficit, respondents divided down the middle, 48 percent each (The Washington Post/Kaiser Foundation).
By 52 to 33 percent, participants in a September poll said spending on infrastructure projects is a better way to create jobs than cutting taxes (ABC News/Washington Post).
By a 3 to 1 margin, voters in the swing states of Ohio, Florida and Virginia, don’t believe Medicare and Social Security need to be cut to reduce our deficits (The Washington Post/Kaiser Foundation).

Tweet This - Last 3 yrs. Europe cut deficits, US increased deficits. Europe: unemployment up. US: unemployment down #smarttalk via @OurFuture

Learn More Austerity Watch: OurFuture.org's continuing analysis of austerity policies in the U.S. and abroad
Snapshots of Austerity: A special series on the effects of austerity economics

The Institute for America's Future - OurFuture.Org

[tama]

1. Superficial

When they say: We’re already in a debt crisis. If we keep racking up these deficits, we’ll turn into Greece, with soaring interest rates and inflation, a declining dollar and America’s credit ruined.
You can say: The U.S. becoming Greece? That’s a joke. Want a comparison? Think Great Britain. They inflicted austerity on a weak economy and sunk back into recession, with rising unemployment, spreading misery and a worsening debt burden.

The financial economy has to keep on growing, and for three decades the only way to grow has been debt on debt on debt. Bursting bubbles inflated again with even bigger and more alienated bubbles. As there is no more room to grow, the neoliberal system is forced to devoure it's former base of imperial power. IMF is now doing to EU what it was doing to Latin America in the good old days of neocolonialism. As long as the neoliberal logic and financial structure remains in power, Greece is the future of UK and US. UK and US were the originators of neoliberal cancer, but as long as the logic of cancer remains, when everything else is devoured and/or rejecting the cancer, the cancer will be forced to eat itself.

Keynes himself would be first to point out that "keynesian" policies are pipe dream as long as blind greed of banksters rule and government is nothing but a mafia collector of debts and interests and protection money.

[Lefty Thinker]

2. Monetary sovereignty is key

When they say, "We're turning into Greece!", ask, "When are we planning to divest Congress of the power to coin money?". It's right there in Article II, Section 8 of the Constitution. Greece did it when they joined the Eurozone along with all the other countries engaged in that destructive folly.

So long as the US retains monetary sovereignty (i.e. the federal government issues dollars and only borrows US dollars) our government will have the ability to satisfy any debt we incur. Doing so may, depending on real GDP, cause inflation but we will never as a nation "go under" as a business or individual might. Beware the false analogies that flow readily from the mouths of neo-liberal economists; remember that the federal government is not a business. No business can legally create more dollars to spend.

[tama]

3. Obfuscation

First, it's not federal government but Federal Reserve which is semi-private institution owned by private banks. A business that became pure Ponzi scheme after leaving Bretton Woods and gold standard.

Second, "monetary sovereignty" doesn't help if and when it is not accepted as international currency - ie. when you can't buy oil with dollars.

Third, the reason the question is not 'if' but 'when' is that USD like all other FIAT currencies is a humongous Ponzi scheme: system needs to constantly create more debt than can be paid.

[DavidL]

4. I guess you never studied economics very much

I might suggest some books for someone so misinformed about the basics of macroeconomics, and some of the more astounding moments in the last 100 years of world economic history, or the last 200 years of U.S. economic history, the several bank panics which forced the creation of the Federal Reserve, and the reasons behind it, but, I guess you've latched onto one or two of the crank libertarian economists and anchored your small dingy there in the (return to the gold standard?) backwaters.

But let's try a few facts, and see if you have any acquaintance with them at all.

The U.S. Dollar, since the Second World War, has been the most commonly respected and admired and accepted currency worldwide, yes, worldwide, and STILL IS! Ask any serious banker (not a currency speculator day-trader) in any nation in the world.

The size of the U.S. economy, and the comparison of that economy to a nation such as Greece, Italy, Spain or even the UK is like comparing a jet fighter to a Volkswagen, in size, speed and power. Both will get you from point A to B, but a Volkswagen alone doesn't do trans-oceanic travel, it needs a jet to get it overseas.

GDP of the USA: 15 Trillion (2010)


GDP of the UK: 2.2 Trillion

GDP of Spain: 1.4 Trillion

GDP OF GREECE: 330 Billion (one 45th the size of the US GDP)

Those are figures BEFORE the fall of Spain, Greece, and the UK, and the USA's GDP continued to grow slightly while Spain and Greece's are still shrinking between 10-15% each year in 2011-2012.

I don't know what your point is, but you seem to be hung up on the nature of a national sovereignty and you completely misunderstand the need for a relatively non-volatile non-cyclical currency within that sovereignty, (a currency that does not depend upon the volatile prices of commodities such as gold or oil or corn on world markets). That is what the U.S. has with a Federal Reserve system and what Europe was attempting to do, (prematurely and with some major obstacles such as uneven economies between member nations) with the Euro. The poorer nations within the European Union are simply slamming the brakes as their economies are already slowing down. That is contrary to all theories of macroeconomic stimulus in times of worldwide recession, it will not bode well for those nations and would do equally poorly or worse here in the USA.

[tama]

5. Are you an economist?

I don't know what your point is,

That was obvious from your post, as it had nothing to do with any of the three points and was nothing but rah rah of the extremely narrow view of the indoctrination into the economic dogma that economists are brainwashed with. If you want to continue discussion and understand what I said, first stop talking down to me.

[DavidL]

6. Please state your point in clear English, thanks!

You rambled on, and made vague references and comparisons to several apples and oranges items in macro-economics.

State your economics background and which theorists and economists you follow, then I will be more able NOT to have you feel you are being talked down-to. As of now, both your answers are insulting to other posters, ( e.g. "superficial" "obfuscation&quot .

(I'm not in the least insulted, by the way, because I really don't understand what point you are trying to make.)

I wasn't "talking down" to anyone, merely letting you know that facts go a long way farther if you're trying to make a point.

If you are so brilliant an economist,
Please explain why a Federal Reserve system was established and what reservations you have to it nowadays, since it manages to keep wages and prices and inflation relatively stable, (compared to smaller nations without such a system), and it avoids bank panics and other disastrous economic misfortunes.

Thanks in advance.

[tama]

7. "why are we being deliberately bled and de-jobbed in support of this fairy story?"

That is question by a fellow DUer in another thread, and the point is to participate in the discussion that seeks answer to that question. To liberate from misery we need to understand the cause of our misery. I don't follow any theorists or economists, I just participate in the discussion on peer to peer level as citizen of globe. My academic background is Classical Greek and general linguistics, so I know that etymologically 'economy' means taking care of home, and as this planet is our common home, the macroeconomic scale I start from is ecological and evolutionary biology and cultural anthropology. So I'm from the "think global act local" school of revolution against the "think local and act global" school of cancerous imperialism. Hope that helps, if you want to continue discussion, see:

http://www.democraticunderground.com/10021449077#post18
http://www.democraticunderground.com/10021449077#post2

[DavidL]

8. Thank you for your honesty. Allow me to

list a few books for you if you are at all intellectually curious.

The following, all free and online:

David Gordon, An Introduction to Economic Reasoning;

http://www.mises.org/etexts/EconReasoning.pdf

Essentials of Economics, Faustino Ballvé;

http://mises.org/books/ballve.pdf


Henry Hazlitt, Economics in One Lesson;

http://www.fee.org/library/books/economics-in-one-lesson/


Gene Callahan, Economics for Real People;

http://mises.org/books/econforrealpeople.pdf

Jim Cox, The Concise Guide to Economics.

http://conciseguidetoeconomics.com/

I see that you have retreated from your previous rather fanciful allegations and sought the quiet refuge as an individual unschooled in basic Economics, i.e. a liberal arts student. That's a comfortable place from which to begin a study of Economics, in that it shows some basic curiosity about history and about the precise meaning of language. However, to get very far in the study of Economics, you'll need a mathematical background and training in probability and statistics. However, I'm sure each of these books, (all free and on-line), can get you started. From there, I'd suggest you move to topics in monetary policy management. That might need a bit of understanding of probability and statistics, but you can pick that up along the way.

And here's my last bit of advice for you, should you choose to discuss worldwide management of macro-economies:

If you want to command the space ship, you first have to learn how to fly a plane.

[DavidL]

10. I'm sorry you find my helpful suggestions offensive.

I really had hoped for some adult discussion. I am honestly a bit disappointed.

[Lefty Thinker]

11. Please check my reference

I'll bet that, if you actually read Article II of the Constitution, you'll find that it does give the power to coin money to the Congress and makes no mention of the Federal Reserve. Yes, the Fed prints the paper money and there are legal distictions between paper money and coins that, operationally, make no sense but Congress does have the power to create money. Therefore our government has effective monetary sovereignty.

So long as there are people required to pay taxes in US dollars there will be a demand for them. So long as there is belief that such demand will continue to exist in a stable way the US dollar will maintain its value internationally. The greatest threat to the international value of the dollar would be failure by our government to rationally manage our economy.

Finally, tying a currency to a commodity has already failed. Bretton Woods fell apart because no country ended up wanting it. The Euro is almost an attempt to reestablish such a system, but it is experiencing some of the same difficulties that broke up Bretton Woods. A commodity-based currency puts inflation and deflation at the mercy of technological developments in production of the commodity, precluding government from effective action in the case of a demand shock. Fiat currency is desirable (IMO) because it puts resposibility for monetary matters on the shoulders of the government which, theoretically, represents the will of the people.

[DavidL]

12. Your reference is fine. There is evidently

someone posting here who objects to factual information and adult discussion of issues.