Austerity for you, and for you, and for you
by David Atkins
One of the things progressives could be grateful for in recent years is that the United States had so far avoided much of the foolish austerity mania that has sent Europe into an economic spiral. No longer:
For years, some American economists have been scolding countries in Europe for engaging in too much austerity during the downturn — that is, enacting tax increases and spending cuts while their economies were still weak.A lot of people like to say that government is run purely for the rich. But that's not entirely true. It's not true in many European nations where austerity is being enacted, anyway. And most of the rich don't actually benefit from a double-dip recession.
But after the fiscal cliff deal, the United States is now on pace to engage in at least as much fiscal consolidation in 2013 as many European nations have been doing in recent years — and more than countries like Britain and Spain.
A back-of-the-envelope calculation shows Congress has enacted roughly $355 billion in tax hikes and spending cuts for the coming year, an austerity package whose total size comes to about 2.1 percent of GDP.
What seems more likely is that the current economic, ecological and political system is broken and unsustainable. Globalization creates downward pressure on labor, which pushes wealth upward and depresses wages, which forces policymakers to incentivize asset growth over wage growth while decreasing the cost of goods and increasing consumer debt. That in turn becomes impractical and creates wobbly, crash-prone economies even as middle-classes disappear. Birth rates decline due to lack of economic opportunity and insanely long periods of educational indenture for young people, which causes developed economies to turn to immigration for demographic balance, which in turn causes social unrest. Nation-states are powerless to stop multinational corporations from blackmailing them over "jobs" and buying their governments, and struggle to find coherent ways to deal non-state-actor crises such as international terrorism and climate change. Meanwhile, ecological and crises are abundant, guaranteeing a slowing of economic growth absent some significant paradigm shift.
The answer to all of this in elite circles seems to be for policy makers and their wealthy, comfortable friends to put their heads in the sand and hope it will all work out for the best if we just keep the current system hobbling along for a few more years. They see a looming fiscal crisis, realize it would be a lot more work to try to tax the rich to resolve it rather than take the complex and proactive steps necessary to deal with it, and simply decide to enact austerity measures through broader tax increases and dumb spending cuts. Anyone who doesn't see it the same way tends to be shunned from the more elite social circles.
Breaking this mold is going to require some revolutionary and proactive thinking about what a sustainable economy for the 21st century would look like.