Magazine article The American Prospect

Must Austerity Keep Winning?

Magazine article The American Prospect

Must Austerity Keep Winning?

Article excerpt

The EU's extreme version of budget cutting has pushed the European economy ever deeper into its worst recession since World War II. The United States, pursuing a bipartisan target of $4 trillion in budget cuts over a decade, is mired in an economy of slow growth and inadequate job creation. Our government's failure to give debt relief to indentured college students and underwater homeowners functions as a multitrillion-dollar twin drag on a feeble recovery. The smart money knows just how weak this economy is. Federal Reserve Chair Ben Bernanke had only to suggest that he might nudge interest rates up a bit, and markets panicked.

So austerity is the wrong medicine for the prolonged aftermath of a financial collapse. Case closed.

But hold on. Winning the intellectual debate doesn't matter, because

we keep losing the politics. Until we start changing the policies, or at least begin causing more political embarrassment for the budget hawks, austerity will reign, no matter how perverse its impact.

Why are we losing the politics? For one thing, the Wall Street view of austerity reaches deep into the Democratic Party. President Barack Obama and his advisers are still convinced that we need those trillions in budget cuts. That makes his rhetoric about infrastructure spending and other serious uses of public resources hollow if not cynical. And Obama is the left wing of what passes for mainstream debate. Obama's speeches since his re-election are a mishmash of bold calls for public investment (universal pre-kindergarten, an infrastructure bank) and genuflection to the conventional fiscal wisdom. ("The package I am offering includes some difficult cuts that I do not particularly like.")

Republicans, meanwhile, use any vehicle that comes along--the sequester, debt-ceiling votes, even the doubling of interest rates on Stafford college loans--to extract even harsher cuts. If the cuts damage the economy (and they must), so much the better for the GOP. They can blame the continuing slump on Obama and the Democrats and win the Senate in 2014 and the presidency, they hope, in 2016. With the president of the United States, a Democrat, having reinforced public myths about deficit cutting, it's difficult to pin the political blame on Republicans for sabotaging the recovery.

So what's a progressive to do?

One strategy is to bring tangible debt relief to students and homeowners, dramatically demonstrating that the problem is not public debt but private debt on the backs of those who can least afford it. …

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