In his latest column for The New York Times, Nobel Prize-winning economist Paul Krugman writes that the case for economic austerity has collapsed, though that hasn’t stopped the pro-austerity faction from continuing to push for deep spending cuts. He points out a number of reasons why this group is not calling for a reversal of the “destructive turn toward austerity,” including that “austerity soldiers” are beholden to wealthy creditors while those who have made the case for austerity simply don’t want to be wrong.
Krugman then floats another obstacle of resistance: Many people who are pushing for decreased spending believe that the federal government can’t change course once it enacts stimulus. This, he says, is “sheer fantasy.”
“Ending stimulus has never been a problem—in fact, the historical record shows that it almost always ends too soon,” Krugman writes. “And in America, at least, we have a pretty good record for behaving in a fiscally responsible fashion, with one exception—namely, the fiscal irresponsibility that prevails when, and only when, hard-line conservatives are in power.”
The Times columnist goes on to debunk the claim that stimulus programs don’t go away.
“In the United States, government spending programs designed to boost the economy are in fact rare—F.D.R.’s New Deal and President Obama’s much smaller Recovery Act are the only big examples,” Krugman writes. “And neither program became permanent—in fact, both were scaled back much too soon. F.D.R. cut back sharply in 1937, plunging America back into recession; the Recovery Act had its peak effect in 2010, and has since faded away, a fade that has been a major reason for our slow recovery.”
He continues: “What about programs designed to aid those hurt by a depressed economy? Don’t they become permanent fixtures? Again, no. Unemployment benefits have fluctuated up and down with the business cycle, and as a percentage of G.D.P. they are barely half what they were at their recent peak.”
Krugman turns his attention to the group that he sees as a major problem for our present financial circumstances: fiscal conservatives. He notes that before President Obama took office in 2009, seven of the 10 previous presidents left the Oval Office with debt ratios lower than when they entered it. The three who did not: Ronald Reagan, George H.W. Bush and George W. Bush.
“So debt increases that didn’t arise either from war or from extraordinary financial crisis are entirely associated with hard-line conservative governments,” he argues, adding the reason for this is that the political right has long adopted policies to try to “starve the beast,” that is to cut taxes that would otherwise go to the government to fund popular programs. Krugman notes that these are the same hard-liners who complain that we can’t run deficits in times of economic hardship because politicians won’t pay down the debt when times are good.
“And who are these irresponsible politicians they’re talking about?” Krugman asks. “Why, themselves.”
Paul Krugman via The New York Times:
To me, it sounds like a fiscal version of the classic definition of chutzpah — namely, killing your parents, then demanding sympathy because you’re an orphan. Here we have conservatives telling us that we must tighten our belts despite mass unemployment, because otherwise future conservatives will keep running deficits once times improve.
Put this way, of course, it sounds silly. But it isn’t; it’s tragic. The disastrous turn toward austerity has destroyed millions of jobs and ruined many lives. And it’s time for a U-turn.
—Posted by Tracy Bloom.