Tag: Austerity

Disclaimer: This forum rules as do the moderators. You know who I am talking about.

And here we are again! It started in 2010. The Bush tax cuts were about to expire. There was leverage to negotiate a debt ceiling raise or to just let them expire. How do I know there was leverage? I know Republicans like tax cuts for the rich, and there was a deal for the purpose of extending them with Republican votes. It passed with those Republican votes, which led to this whole thing because there was no debt ceiling raise included.

Maybe others are unaware of this? I don’t know. It doesn’t matter though; the uninformed shouldn’t dictate fantasy as reality in a reality based community. This is the actual reality and why we are worried about a global financial calamity with regard to a possible political default on the public debt, which is a choice and otherwise impossible for a sovereign currency issuer.

Obama on the Debt Limit – December 2010

Q Mr. President, thank you. How do these negotiations affect negotiations or talks with Republicans about raising the debt limit? Because it would seem that they have a significant amount of leverage over the White House now, going in. Was there ever any attempt by the White House to include raising the debt limit as a part of this package?

THE PRESIDENT: When you say it would seem they’ll have a significant amount of leverage over the White House, what do you mean?

Q Just in the sense that they’ll say essentially we’re not going to raise the – we’re not going to agree to it unless the White House is able to or willing to agree to significant spending cuts across the board that probably go deeper and further than what you’re willing to do. I mean, what leverage would you have –

THE PRESIDENT: Look, here’s my expectation – and I’ll take John Boehner at his word – that nobody, Democrat or Republican, is willing to see the full faith and credit of the United States government collapse, that that would not be a good thing to happen. And so I think that there will be significant discussions about the debt limit vote. That’s something that nobody ever likes to vote on. But once John Boehner is sworn in as Speaker, then he’s going to have responsibilities to govern. You can’t just stand on the sidelines and be a bomb thrower.

You know, we on the left knew what this would lead to. You don’t trust John Boehner with the full faith in credit of the United States unless one is completely clueless or an economic nihilist. The resulting signs we are starting to see of a financial panic in response to the prospects of a default on top of the ongoing depression, the jobs crisis, the continuing climate and ecological crisis all converging into one huge Epochal crisis, point to a special kind of disdain for the public that all our elected leaders have for us.  I mean, we have enough problems without adding to them through a self induced global financial then economic crisis caused by the President’s pursuit of a deficit terrorist grand bargain whether through incompetence or outright corruption.  

This piece is a summary of a paper that I presented at the Left Forum in a panel organised by Geminijen. If you want to see a copy of the longer paper (which is being edited for English and clarity), send me a personal message here with your email and I will send it to you. Fran Luck who is the producer of the radio series “Joy of Resistance: Largest Minority” on WBAI was in the audience and asked us to appear on her show. If you would like to listen to Geminijen, Diana Zevala (who has written for the ACM on education), Barbara Garson and me, please click here: http://archive.wbai.org/files/mp3/wbai_130703_210001wed9pm10pm.mp3).

While in no way denying the impact of the introduction of austerity upon the working class, the disabled and the poor as a whole, there is no question that the impact of austerity on women is far greater. This is due to the job losses in the state sector where women’s labour is predominant, our historically lower wages due to the undervaluation of traditional women’s labour in a capitalist labour market leading to greater dependence upon the social welfare state, and our overwhelming responsibility for reproduction of the working class and how that impacts on our working lives.  The failure of the state to provide completely for social reproduction especially in childcare and care for the infirm and disabled has resulted in women having: 1) discontinuous working lives; 2) and the predominance of our labour in part-time employment.

With incomes falling in the advanced capitalist world as part of general economic policy, women face greater threats than men due to our responsibility as primary caretakers of children, the disabled and the elderly. Women are facing lower incomes, lower pensions, and an increasing reluctance for the state to support women in the workplace through provision of child-care and after-school programmes and shouldering carer responsibilities for the elderly and infirm. Given the transformations in general employment possibilities towards increasingly underemployed and part-time labour, we will begin to face competition from men for the jobs we have normally held while benefits are increasingly run down.



We face increasing economic insecurity without sufficient state assistance to ensure that our children and families can have a decent standard of living provided through employment. Women can no longer depend upon the fact that our labour is of sufficient value to capitalists as men also face increasing precariousness in their employment, and in the absence of a strong labour movement or left-wing movements, can serve the same role of an easily intimidated low-paid work force.

The destruction of the public sector enabling the weakening of the last bastion of trade union organisation to force through even lower wages and a reduction in social subsistence levels of wages along with a further deterioration in working conditions on the basis of non-competition with emerging and peripheral economies is nothing less than a race to the bottom and women will be the first, but not the last, victims of neoliberal economics in the advanced capitalist world.

This piece will be divided into 3 parts. The first is composed of some general statements on austerity. The second part will discuss the women’s labour market in Britain and the impact of austerity. The third part addresses the attack on the universal social welfare state in Britain and its impact upon women.

The June employment report from the Bureau of Labor Statistics reported that the US added 195,000 jobs but the unemployment rate remained at 7.6%. This better than expected number, along with upward revisions of the April and May jobs numbers led to some speculation by Wall Street analysts to speculate that the Federal Reserve would start to back away from part of its stimulus program.

But hold your horses on the optimism. The reality is that this an anaemic recovery with flat growth and low productivity, as Dean Baker points out in his article:

First, it is important to remember the size of the hole the economy is in. We are down roughly 8.5 million jobs from our trend growth path. We also need close to 100,000 jobs a month to keep pace with the underlying growth rate of the labor market. This means that even with the relatively good growth of the last few months, we were only closing the gap at the rate of 96,000 a month. At this pace, it will take up more than seven years to fill the jobs gap.

It is easy to miss the size of the jobs gap since the current 7.6% unemployment rate doesn’t seem that high. However, the main reason that the unemployment rate has fallen from its peak of 10% in the fall of 2009 is that millions of people have dropped out of the labor force and stopped looking for jobs. These people are no longer counted as being unemployed. [..]

This gets to the type of jobs that have been created in the upturn. Over the last three months, three sectors – restaurants, retail trade, and temporary help – have accounted for more than half of the jobs created. These sectors offer the lowest-paying jobs, with few benefits and little job security. [..]

Workers take these jobs when there are no better alternatives available.

There is also the impact of sequestration that has yet to have its full impact on the economy and Congress seems content to leave in place with one side blaming the other. There is little chance that a budget or any significant legislation will get through this Congress:

Do you see the problem here? The president’s adversaries lament his lack of warmth and his remote intellectualism; his supporters see the same quality as an analytical and cool-headed virtue. This could be a cute “the president is from Mars, Republicans are from Venus” thing – if it weren’t for the fact that several important issues this summer, including the budget and food-stamp funding, hinge on whether these two crazy kids will ever figure it out. At the base of their problem is an absence of mutual respect and a lack of legislative sportsmanship.

Until the players figure this out – and there’s no sign they ever will – we’re going to be stuck in an endless loop of revisiting these unhelpful battles that drag on for years. This summer is the last chance for any legislation to get through. Starting in the fall, the campaigns for the 2014 midterm elections are going to start, and the window for serious legislative action will have closed – at which point you can kiss any progress on major bills goodbye. [..]

the sequestration cuts are not a question of “one side” winning or losing. They’re a question of the nation, the economy and the American people losing. They’re a question of poor people losing: Meals on Wheels will suffer, as will those living in federal housing.

No one, so far, is winning at all. Even more concerning, it’s not abundantly clear that anyone in Washington knows how to play the game anymore.

Voters need to start making greater demands on their congress critters and start threatening to throw them out for ones who will represent the people and not Wall Street and their own self-interests.

In the real world and the reality based community, there is talk about austerity from people who understand the nuances of it and macroeconomic accounting identities. They point out the undeniable fact that there is austerity in the UK, the Eurozone, and yes, the United States. This interactive chart will show this, though I can’t embed it here. So instead, I will add a small snapshot of some of the data.

Net spending in the United States has steadily declined since it rose from 2008 to 2009 when the inadequate stimulus(only $500 billion of direct spending at about 1.5 percent of GDP) was passed. Stimulus packages don’t exist in a vacuum, and you have to count all government spending, which basically shows how exactly the numbers, including the stimulus as this does, didn’t close the output gap. And since the numbers didn’t, that is actually austerity. After all, spending went up in the UK and Eurozone from 2008 to 2009 as well, and since then, their spending has declined. Even though it is on a higher level, it is being cut at an even more alarming rate with its fate set to go below our miserable level by 2017.

I have pointed this out before. Sometimes I get frustrated, and point this out harshly, because some pride themselves on denying this established data to support whatever a politician in their party says or does. I don’t know why. Denying reality is not going to give resources to people who need them. There is a reason my last diary has been cited by the reality based Post Keynesian MMT community, in which I am truly grateful for and humbled by; it is the truth.

The real economy of jobs and wages continues to go nowhere thanks to the lack of deficit spending and an illogical debate in DC about how much austerity we need to appease the invisible bond vigilantes and confidence fairies. It is neoliberal deficit terrorist economic insanity based on lies. And on that note, it is my pleasure to republish a piece by someone in the reality based economic community whom I can now proudly say is a friend of mine, Post Keynesian MMT economist John T. Harvey. He, once again, brings clarity to these matters in a way that only he can.  

We learn in this week segment of Up‘s “What We Know Now” with host Steve Kornacki that Minnesota Gov. Mark Dayton signed marriage equality passed by the Demcratic held state legislature. Also, Jason Richwine resigned from the Heritage Foundation after revelations about his doctoral dissertation. In the aftermath, Pablo Pantoja, the director of the RNC Florida Hispanic Outreach, resigned and became a Democrat.

Democratic nominee for the vacant Senate seat in Massachusetts, Ed Markey dis-invited  former Georgia Democratic congressman Ben Jones from a fundraising event over Jones’ support of the displaying the Confederate flag public events.

According to Public Policy Polling, hipsters are no longer “in.”

Telling us what they have learned this week are Steve’s guests: Patricia Ireland, former President of the National Organization for Women; Anu Bhagwati, executive director and co-founder, Service Women’s Action Network; Goldie Taylor, MSNBC contributor, managing editor, The Goldie Taylor Project; and Jessica Hinves, former U.S. Air Force member, board member of Protect Our Defenders (a group that works to being attention to military sexual assault).

Minnesota Legalizes Gay Marriage: Gov. Mark Dayton Signs Bill Into Law

from Huffington Post

Minnesota officially became the 12th U.S. state to approve same-sex marriage May 14 when Gov. Mark Dayton appeared before a jubilant crowd to sign a marriage equality bill into law.  [..]

Dayton’s signature came just a day after the state Senate approved it with a 37-30 vote, the Associated Press reported.

“Life, liberty and the pursuit of happiness should certainly include the right to marry the person you love,” he noted.

Echoing those sentiments was State Rep. Karen Clark and Sen. Scott Dibble, who are both openly gay.

Jason Richwine Resigns From Heritage Foundation After Dissertation Controversy

by Luke Johnson, Huffington Post

Jason Richwine, the co-author of a Heritage Foundation report on immigration who came under fire this week for arguing in his Harvard dissertation that Hispanic immigrants to the U.S. have substantially lower IQs than whites, resigned Friday. [..]

The report put the cost of immigration reform at a whopping $6.3 trillion. Though Heritage’s 2007 report was one of the reasons an earlier immigration bill failed, the 2013 report was widely mocked, even by Republicans the foundation hoped would support it.

Harvard accepted Richwine’s 2009 dissertation for a doctorate in public policy. In it, he spoke of the “growing Hispanic underclass.”[

Pablo Pantoja Turns Democrat: RNC Florida Hispanic Director Cites GOP ‘Intolerance’ In Making Party Switch

by Chris Gentilviso, Huffington Post

Less than two months after the Republican National Committee announced a multi-million dollar campaign to improve minority outreach, one of its state Hispanic directors is leaving the Republican Party altogether.

In a letter released by The Florida Nation on Monday, RNC State Director Of Florida Outreach Pablo Pantoja announced that he is changing his political affiliation to the Democratic Party.

“It doesn’t take much to see the culture of intolerance surrounding the Republican Party today,” he wrote. “I have wondered before about the seemingly harsh undertones about immigrants and others. Look no further; a well-known organization recently confirms the intolerance of that which seems different or strange to them.”

Ed Markey Disinvites Ben Jones From Campaign Appearance Over Confederate Flag Beliefs

by Pam Lavender, Huffington Post

Rep. Ed Markey (D-Mass.) disinvited former Georgia Democratic congressman Ben Jones from a fundraising event after learning of Jones’ support for the Confederate flag. [..]

Jones defended the Confederate flag as a symbol of Southern culture in 2012 when NASCAR canceled plans to have professional golfer Bubba Watson drive the General Lee — the car from “The Dukes of Hazzard” which features a Confederate flag on its roof — at Phoenix International Raceway. Jones called the cancellation of the event “an extraordinary insult to rural Southerners.”

Hipsters trail in the polls but survey’s worth called into question

by Adam Gabbatt, The Guardian

Public Policy Polling claimed 42% of Americans viewed hipsters unfavourably but methodology and purpose of poll questioned

A US polling company claimed on Monday that a shocking 42% of Americans have an unfavourable opinion about hipsters – in a telephone poll conducted among people who only have landlines.

Public Policy Polling was widely mocked for its survey, both for the frivolity of the poll, and for using a methodology that seemed guaranteed to produce the result that emerged.

Austerity was thoroughly trounced by a couple of university grad students who discovered major omissions in the much touted study by a couple of Pete Peterson’s paid cronies. So why are we still even talking about it? Good question that no one so far has asked our fearless leader in Washington.

Up host Steve Kornacki discussed whether the elite consensus on austerity has started to shift and if there is any effect on the opinions in Washington. His guests Josh Barro, Columnist, Bloomberg View; Jared Bernsein, former economic adviser to V.P. Joe biden; Lori Montgomery, Economic Policy Reporter, The Washington Post; and Heather McGhee, Vice President, Demos; examine the lessons that can be learned from Europe’s austerity experience and what the US economy will look like if it continues on the austerity path. The panel also discussed how conservative have backed away from cuts to Social Security shifting their focus to tax reform, controlling spending through cost efficient measures and the roadblocks to getting it done.

That’s right. Remember my last diary where I did prove without a shadow of a doubt that the austerity that this administration has put forth right now, and in effect right now, does not make this President a Keynesian? I provided a lot of reference material on Keynes proving each point I made, because that’s what we encourage on this site. That’s called backing up one’s assertions with facts and data. I did.

The same facts were put forth by economist Jared Bernstein who used to work for VP Joe Biden and is now a senior fellow at the Center for Budget and Policy Priorities. As a Post Keynesian MMT proponent, I don’t have the same outlook on economics, to say the least, as the CBPP on a number of things, especially on public debt and deficits. However, there’s no reason to doubt the data in this paper from Richard Kogan; it is clearly well sourced from the CBO and the President’s own Office of Management and Budget analyzing the Budget Control Act of 2011 signed into law by the President.

CONGRESS HAS CUT DISCRETIONARY FUNDING BY $1.5 TRILLION OVER TEN YEARS: First Stage of Deficit Reduction Is In Law

This proves without a shadow of a doubt that anyone who shows up in every thread and types that “cuts only happen in the future” must not be very intellectually curious. After all, as most can see with thier own eyes, the 70% of recommended cuts from Bowles Simpson going into effect this year, the year 2013, occurring until the start of fiscal year 2023 actually happen every year accumulating up to 1.5 trillion in real cuts. These are the indisputable facts.

Now that the academic and evidentiary support for austerity is shot full of holes, President Obama has an opportunity to perform a face-saving extrication from his position.  Will he do it?

A recent study by a grad student at the University of Massachussets has pointed out critical errors in celebrated Harvard economists Carmen Reinhart and Ken Rogoff’s study which has been the much-cited intellectual underpinning of the austerity movement.  In short R-R’s study showed a correlation between high levels of national debt (with a stated critical threshold point at 90% of GDP) and slow economic growth.  The results of the study have been often stated as proof that debt at 90% GDP causes slow economic growth and that austerity measures must be employed to bring down debt.  

Reinhart-Rogoff quickly achieved almost sacred status among self-proclaimed guardians of fiscal responsibility; their tipping-point claim was treated not as a disputed hypothesis but as unquestioned fact. For example, a Washington Post editorial earlier this year warned against any relaxation on the deficit front, because we are “dangerously near the 90 percent mark that economists regard as a threat to sustainable economic growth.” Notice the phrasing: “economists,” not “some economists,” let alone “some economists, vigorously disputed by other economists with equally good credentials,” which was the reality.

Many prominent economists had previously pointed out another major error in the way that the study has been used by those who favor austerity:

There were good reasons for not accepting the Reinhart and Rogoff results even before this error was uncovered, as many of us had argued. Most importantly there is a serious issue of the direction causation. Countries tend to have high debt levels because their economies are doing poorly.

Unfortunately, there was not much press notice of the causation problem in R-R’s study, probably because it’s the kind of story that the media find too difficult to explain.  But when the grad student from the University of Massachussets discovered spreadsheet errors in their work, now there was an issue that our news media could latch onto with confidence that it was within their ability to explain it.  Consequently it has gotten quite a bit of coverage and R-R’s study has been discredited.

Paul Krugman wrote about the human tragedy of the economic policy failures of the Obama administration which has prioritized deficit reduction over putting people back to work. The impact of those failures can be seen in New York City where, as reported in the New York Times, the racial wealth gap has widen since the recession:

The Urban Institute study found that the racial wealth gap yawned during the recession, even as the income gap between white Americans and nonwhite Americans remained stable. As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth – as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances – white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute’s analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.

   The dollar value of that gap has grown, as well. By the most recent data, the average white family had about $632,000 in wealth, versus $98,000 for black families and $110,000 for Hispanic families.

The two factors that contributed to the gap were the housing downturn and loss of retirement savings that hit black families the hardest due a number of elements: predatory lending in minority neighborhoods; a higher proportion of their wealth invested in the home; higher unemployment rates and lower incomes among blacks; and the need to borrow out of retirement finds in a depressed market, “leaving them out in the cold as the market recovered.”

An article written by the editors of The Nation pointed out this chilling fact:

Here is New York in 2013: a city of dazzling resurrection and official neglect, remarkable wealth and even more remarkable inequality. Despite the popular narrative of a city reborn-after the fiscal crisis of the ’70s, the crack epidemic of the ’80s, the terrorist attack of 2001, the superstorm of 2012-the extraordinary triumph of New York’s existence is tempered by the outrage of that inequality. Here, one of the country’s poorest congressional districts, primarily in the South Bronx, sits less than a mile from one of its wealthiest, which includes Manhattan’s Upper East Side. And here, a billionaire mayor presides over a homelessness crisis so massive that 50,000 men, women and children sleep in shelters each night. More New Yorkers are homeless these days than at any time since the Great Depression.

The numbers tell the story. Between 2000 and 2010, the median income of the city’s eight wealthiest neighborhoods jumped 55 percent, according to the Fiscal Policy Institute. Meanwhile, as the cushy precincts got even cushier, median income dipped 3 percent in middle-income areas and 0.2 percent in the poorest neighborhoods. [..]

The money pouring in at the top of the income brackets has simply pooled there, without trickling down to the bottom or even the middle. This great pooling has occurred as median wages have fallen, the cost of living has increased, and the poverty rate has risen to 21 percent-as high as it was in 1980. As a result, America’s most iconic city now has the same inequality index as Swaziland.

The article goes on to say that this isn’t entirely NYC’s fault with the economic shift over the last thirty years to finance but it also pointed out that Mayor Michael Bloomberg’s policies were a largely contributed to the problem.

[..]  the stewards of New York City-its mayor, legislators and other influencers-could have made choices to counter this trend: “New York City’s government is significant enough in its breadth…that the policy tools exist and the wherewithal exists to do something at the margins to lessen inequality.” The choices, however, that might have corrected some of the skew-within education, economic development, labor rights, poverty policy, budgeting-have largely been ignored in favor of creating a very different model of metropolis. [..]

Bloomberg himself expressed this vision in a March 2012 piece in the Financial Times bearing the title “Cities Must Be Cool, Creative and In Control,” in which he wrote:

For cities to have sustained success, they must compete for the grand prize: intellectual capital and talent.

I have long believed that talent attracts capital far more effectively and consistently than capital attracts talent. The most creative individuals want to live in places that protect personal freedoms, prize diversity and offer an abundance of cultural opportunities.

Then he added, “Economists may not say it this way but the truth of the matter is: being cool counts.” [..]

In essence, Bloomberg’s is a vision of the city forged primarily around the care and feeding of thought leaders, professionals and strivers-with little concern, and sometimes active contempt, for the ones who do the care and feeding. (In 2011, 400,000 New York workers, many of whom toil in service sector jobs, were not paid enough to hoist themselves out of poverty.) This is a fundamentally two-tier style of urbanism, one in which a cool, creative and well-managed metropolis glitters like something lovely, its radiance drawing attention away from the dimmed surroundings.

Yves Smith at naked capitalism observes:

But you can see more signs of stress even in the more insulated parts of New York City. Retail vacancies are up, even on the well-trafficked shopping streets, the worst since the post-2009 period. More restaurants seem to be taking a hit too, which suggests that non-expense-account diners are cutting back. And if ZIRP-supported NYC is looking a bit less robust, how well can the rest of the country be faring?

h/t to Yves for the video

The rich get richer and the poor get poorer, but ain’t we got fun?

Former Greek Prime Minister of Greece George Papandreou inherited a failing economy when he was sworn in on October 9, 2009. He resigned two years later during failed talks of a bailout with the “troika” of the International Monetary Fund (IMF), the European Central Bank and the European Union. Mr. Papamdreou discussed the cost of austerity with Chris Hayes, the host of “All In,” economics journalist Chrystia Freeland, managing director and editor of Consumer News at Thomson Reuters, and  economics professor Radhika Balakrishnan,  executive director of the Center for Women’s Global Leadership at Rutgers University.

In the news today, Greek Finance Minister Yannis Stournara announced that Greece had reached an agreement on economic measures for the release of €2.8bn in the coming weeks, followed by a further €6bn in May. The cost to bail out the banks: some 15,000 employees would be fired by 2015 with 4,000 redundancies by the end of the year.

Meanwhile Greek unemployment has reached a record high:

Greece’s unemployment rate reached a new record of 27.2 percent in January, new data has showed, reflecting the depth of the country’s recession after years of austerity imposed under its international bailout. [..]

The jobless rate has almost tripled since the country’s debt crisis emerged in 2009, and was more than twice the eurozone’s average unemployment reading of 12 percent. [..]

Unemployment among youth aged between 15 and 24 stood at 59.3 percent in January, up from 51 percent in the same month in 2012.

Despite the “happy talk” from Prime Minister Antonis Samaras about this deal showing that the six years of austerity was paying off, the people of Greece are not very optimistic and are still suffering under the weight of EU demands for more austerity.