Wed Feb 27, 2013, 01:04 PM
BlueStreak (8,377 posts)
If austerity is the answer, what is the question?
We already knew that austerity never helps a recessionary economy. But it turns out, this sequestration will actually make our Federal deficit WORSE, so says Ben Bernanke
14 replies, 1236 views
If austerity is the answer, what is the question? (Original post)
|woo me with science||Feb 2013||#12|
Response to LiberalEsto (Reply #1)
Wed Feb 27, 2013, 01:39 PM
BlueStreak (8,377 posts)
4. We have all used the expression ...
"Socialize the risks, privatize the profits"
I think we need a companion expression: "Austerity for the masses to sustain opulence for the few"
Response to Fumesucker (Reply #5)
Wed Feb 27, 2013, 01:58 PM
OceanEcosystem (275 posts)
6. We can't afford to be shortsighted.
No doubt, spending more money now might create a few more jobs, but a $15+ trillion debt is a mighty large thing to be paying interest on for decades to come.
Response to OceanEcosystem (Reply #6)
Wed Feb 27, 2013, 02:19 PM
JaneyVee (19,877 posts)
11. What if I told you that we could end unemployment for $3Trillion more and pay off the deficit faster
You're right, $15Trillion is high, but it will continue to get higher as long as unemployment doesn't come down. It will linger for 20+ years. But with interest rates at an all time low the difference between $15T and $18T means decades of high unemployment or full recovery in 4 years. We'll be paying the deficit for a long time, but we can pay it faster with millions of new workers, small businesses, entrepreneurs, infrastructure, technology, and innovation.
Response to OceanEcosystem (Reply #9)
Wed Feb 27, 2013, 02:14 PM
JaneyVee (19,877 posts)
10. Huh? Sequester will layoff 800,000 workers in under 7months, most likely creating a new recession
You think another recession is good for the economy and the deficit? The reason the deficit is so high now is because of unemployment (besides 2 unfunded wars & tax cuts for the rich). There are PLENTY of other ways to pay down the deficit.
Response to OceanEcosystem (Reply #9)
Wed Feb 27, 2013, 03:45 PM
haele (7,295 posts)
14. It will have that effect in this case. Employment is the machine that keeps a fair economy going.
Read some history - in both our country and in other first world countries, successful deficit reduction has only happened when there is near full employment and fair wages are earned by at least a minimum 60 to 70% of the working (or monthly paycheck is their only real income) population.
The reason FDR had a rocky time with the New Deal during the late 1930's is that the "deficit hawks" - especially Salmon Chase (his banker Treasury Secretary) convinced him to stop spending and start deficit-reduction before private sector hiring started overtaking public sector hiring and wages stabilized.
Economists that aren't Austrian/Chicago school (i.e., free marketers who believe that there should be a meritocracy in economic leadership, totally ignoring the problems with inherited or monopolized wealth and the isolation from real world economics that brings about.) tend to agree that if the original New Deal policies had continued throughout 1939 instead of being drawn down in 1935, (causing another recession and almost bringing about Roosevelt's defeat in his second election) we would have gone into WWII with a strong enough economy that would have strengthened individually owned and localized businesses during the 1940's through 1960's rather than allowing corporate structures to eat up those smaller businesses and creating powerful monopolies as quickly as they did during the subsequent post-WWII recession cycles. Yes, the US SPENT ITS WAY OUT OF THE GREAT DEPRESSION, BECAUSE PRIVATE BUSINESS AND INVESTMENT ORGANIZATIONS WEREN'T WILLING TO INVEST IN THE US WORKFORCE. Roosevelt, Keynes - heck, Adam Smith in the 18th century - all knew that if private money wasn't able or willing to jump-start the economy, it will fail unless there are other forces that are willing to pour money in to prime the economic pump. The US would end up as an unregulated mercantile country - ownership of the government, the resources, and all the means of production only by those few who were able to hold on to most of the money, rather than a democratic government supported by regulated capitalism.
As it was, the monopolies that developed in the 40's through 60's created a stranglehold on innovation and reduced incentives for people to work and grow outside the corporate structure - meaning that while the boomers may have thrived, subsequent generations had fewer resources to build wealth. While a Bill Gates, Steve Jobs, or Mark Zuckerberg could grow wealthy on a mixture of luck, opportunity, and who they (or their parents) knew, most innovators were not able to build businesses from their innovations; they ended up collaborating with or selling their intellectual property to an established corporate "player" - an investor network - and hope they had enough proceeds from that collaboration or sale to pretend they were millionaires - until the money from the proceeds or their personal investments ran out.
Austerity during a recession has never worked other than to help the already wealthy - Austerity ensures they get paid first because they have a "contract" to stand in line and collect before any remaining money can be disbursed, rather than using a decreasing tax base to investment in the public sector or commons in ways that can keep money moving and help the general population.
Anyone who has been awake in even the 300-level economics and history of economics courses in college understands this. Macro-economics 101 just discusses theory and economic mechanisms, you know...
The ugly truth is that the wealthy and corporations - who keep 80% of their income or revenue set aside in a rarefied investment environment outside the public sphere - are are very rarely willing to "share the sacrifice" with people who's income is primarily spent in stores and businesses for goods and services and who usually have less than 10% left over to invest after all the spending to survive and/or thrive is completed.
Those with wealth don't usually understand the difference between surviving in comfort and living in comfort.
The "Fix The Debt" platform is big on telling someone making up to $55K a year, renting a two bedroom apartment in a working-class complex, owning an old car, a few appliances, owning a cell phone and cable, pay for a medical insurance policy and maybe being able to put 2% in a 401K if s/he is not paying off a BA/S loan or tech school loan they are exactly the same "middle class" as the manager/specialist making $550K a year with full company/corporate paid benefits package and bonus, paying a mortgage on a McMansion or luxury condo, golf-course fees, a twice a week plus special events maid, leases on luxury cars and motorized toys, a vacation time-share, minimum $500 a month on the post-graduate student loan, and still being able to put 20% of his/her salary in a 401K. By extention, that means they should pay the same tax rate with the same benefits and deductions.
If you work even a minimum wage job, are on an official contracted lease (even if it is being "on a lease" with others) with access to a refrigerator and stove, own a car or TV, and can buy enough food to last the month, you obviously aren't "poor". because poor to the "Fix the Debt" proponents means living in makeshift corrugated tin hut with no electricity or running water working odd jobs for quarters poor. Everyone else should be able to share the sacrifices equally.
Isn't there something wrong with this picture? Or is it okay that working people who don't have the luxury of family wealth or status to slip into the slums with the rest of the peons because they weren't smart enough or lucky enough in resources to stay afloat while the country "pays off a debt" and protects the wealth and feelings of the so-called job creators.
Especially when it is obvious that our deficit decreasing rapidly just due to the triumvirate of normal consumer confidence (i.e. the "market") - paired with GDP growth and increased employment.
Ask yourself this before you go any further. Why do the Very Serious People ( who also happen to be very wealthy) and "Fix the Debt" proponents still use 2009 deficit figures - the oh-so-scary 13 Trillion Dollars - when talking about the US debt instead of the 2011 deficit figures?
It couldn't possibly be that there might just have been over an $800 billion decrease, and that even if there was no ginned up budget crisis requiring drastic cuts to spending, or no added tax revenue we would still be looking at reaching a deficit amount well under 10 Trillion Dollars by the end of the year. And with just a bit of tax loop-hole closing, the deficit should be well under 5 Trillion - by 2016/2018 and should slide into surplus within another five years or so. The Reagan/Bush Trillion Dollar Deficit of 1990 was gone and into the Clinton Surplus before 10 years was over.
We should also be looking at 6% unemployment - and if history is an accurate indicator, there will be a large number of entrepreneurs who would be leveraging off government spending creating private sector jobs to take over some of the less essential, "nice to have" government services or building innovative businesses of their own. These businesses should drop unemployment to almost full employment, which is around 4.5%.
Then, and only then, should we be looking at spending cuts.
Unless, of course, you want the US economy and by extension, government to be run by a few powerful global businesses and their cronies...
(Currently getting my Bachelor's of Science in Business and Emerging Technologies - and would like to be an entrepreneur that has a happy, well-paid workforce someday...)
Response to BlueStreak (Original post)
Wed Feb 27, 2013, 03:13 PM
Jamaal510 (10,026 posts)
13. "As a non-rich person, what is the best way for me
to spice things up and make life more challenging for myself and my fellow Americans? I feel as though it is too easy to make money nowadays."