Wednesday, March 23, 2011

Austerity is no Surprise

This extract comes from The Confiscation of Economic Prosperity. It serves as a reminder that this crazy demand for austerity should not come as a surprise.

Besides, the problem is not the size of the deficit but the policy changes that the right wing can engineer by stoking fears about the disaster that deficits can create. The idea is that with the government facing seemingly unmanageable deficits, the public will be stampeded into a wholesale slashing of government spending.

As a result, regulatory policies that inconvenience the corporate sector as well as social programs that might benefit ordinary people will disappear. The right wing gleefully refers to this situation as the starve-the-beast strategy -- by depriving the government of adequate revenue, its regulatory powers will necessarily shrink.
Traditionally, Republicans represented themselves as the party of fiscal sobriety, insisting that balanced budgets were essential to solid economic performance. In the 1980s, a new strategy began to emerge. Conservatives began to welcome huge deficits.

For example, in 2001, President George W. Bush expressed his support for this tactic, reporting that the government's fast-dwindling surplus (created by his own tax cuts) was "incredibly positive news" because it will create "a fiscal straitjacket for Congress" (Sanger 2001). Similarly, California Governor Arnold Schwarzenegger said that he wanted to use his budget plan to "starve the public sector" without raising taxes, "because we don't want to feed the monster" (Delsohn 2005).

Nobody has been more adamant about pursuing this strategy than our old friend, Grover Norquist, who told an interviewer: "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub" (Norquist 2001). Conservative economists, such as Milton Friedman, agree, although in less colorful terms. They applaud growing federal budget deficits created by tax cuts, which will eventually create pressure to cut social programs and regulation (Friedman 1988; 2003).

In reality, all except a handful of principled libertarians have no interest whatsoever in thoroughly starving the beast. To the extent that government subsidizes and protects business, conservative class warriors welcome the governments' engagement with open arms. Only when the government lends support to the poor and disadvantaged does the right wing regard state spending as an abomination.


wellbasically said...

Why did Obama's deficit commission project growth of 2.1% for the forseeable future, when the historical growth rate of the USA in the 20th century was over 3%, and a 3.5% growth rate would solve all our entitlement problems?

I know the right is bad. Everybody knows that. They want to attack broad-based social programs.

Why does the left want to accept weak growth too? They want to attack the middle class by raising taxes and destroying savings through inflation.

michael perelman said...

Oh my God. You have discovered the secret plan to destroy the nation!

hapa said...

"Only when the government lends support to the poor and disadvantaged does the right wing regard state spending as an abomination."

i don't think the wisconsin fight is about aid programs

michael perelman said...

Exactly. Well-pensioned legislators with plenty of other benefits call for everyone ELSE to make sacrifices.

trucker said...

wellbasically said, "Why does the left want to accept weak growth too? They want to attack the middle class by raising taxes and destroying savings through inflation."

The answer is that MONEY value is of great interest to those who control large piles of money. The "value" of productive labor is inversely related to the "value" of money. Hence, dollar devaluation hurts the money hoarders more than the producer class. And when the "left" speaks of tax increases, they speak of a more steeply progressive income tax that does NOT heavily tax the producer class. It will be observed that the Democratic tax code of 1993 produced a robust economy with capital gains rates at 28% and ordinary income taxed at 39.6% in the upper brackets. The 1993 tax code was not a tax on the producer class. It was a tax on the rich.

wellbasically said...

Sometimes your view of the world is as screwed up as the wierdest goldbug. Money value is important to people who are getting a fixed wage or salary too!

As for taxes, Bill Clinton also signed into law tax cuts on capital gains which those on the left predicted would lead to huge losses in revenue and big deficits!

trucker said...


The _FACTS_ concerning money are as they are: Those who work for money are better off if money is devalued in relation to labor and REAL stuff such as the natural environment (land). This can be done by printing additional money and INVESTING it in infrastructure, while taxing the rich who already have most of the money. Why do these _FACTS_ seem to escape so many people?