Down the Austerity Rabbit Hole

Over the past two years, European leaders have been zealously implementing deep public spending cuts in a quixotic attempt to stabilize and grow their economies. The results have been disastrous. Not only are the cuts harming the most vulnerable citizens and striking at the heart of the education and health systems, but the promised debt reduction – let alone economic stability – hasn’t materialized. Quite the opposite, the debt crisis has worsened and social upheaval runs rampant through much of the continent. To put it mildly, austerity just isn’t working.

So naturally U.S. lawmakers have been running away from these policies, not wanting to duplicate the same miserable record here at home, right? Of course not. In fact, leaders at the state and national level have been turning a blind eye to the mess in Europe and are touting austerity – combined with exorbitant tax cuts for the wealthy – as the best way to improve the U.S. economy.

State lawmakers have slashed public education and other critical services, resulting in mass layoffs of public employees. This policy has dragged down the economic recovery and helped keep the unemployment rate stubbornly high. Over the last three years, at least 700,000 state and local government employees have lost their jobs.

The private sector may not be “doing fine” necessarily, but it’s the public sector – educators, law enforcement and health workers – who continue to shoulder a crushing economic burden.

For politicians such as Mitt Romney, a job isn’t a job unless it was generated in the private sector, an attitude that partly explains why – in the face of mounting evidence that the assault on the public sector has slowed down the economy – lawmakers continue to pursue austerity.

At a recent forum at the Center for American Progress in Washington D.C. called “Assessing the Austerity Experiment,” policy analysts and economists discussed why these measures continue to be popular. Panelists included Jared Bernstein of  the Center on Budget and Policy Priorities and former economic adviser to Vice President Joe Biden, Menzie Chinn of the University of Wisconsin, and Carlos Mulas-Grenados, Executive Director, IDEAS Foundation in Spain. They were joined by Massachusetts Governor Deval Patrick who addressed how a focus on growth, not austerity, has worked in his state.

Austerity, Bernstein commented, has never had a good track record.

“Austerity has never worked anywhere at any time in history,” Bernstein said. “In those instances when economies grew and debt was reduced, it was usually because something else happened – like interest rates came down a ton. But by itself, slashing public spending does not reduce debt because it increases unemployment.”

Source: The Center for American Progress

“Stimulus works,” Chinn said. “The U.S. economy is growing, The United Kingdom, on the other hand, is not.”

The Obama administration’s Economic Recovery Act, passed in early 2009, helped steer the nation away from economic catastrophe, although the recovery has been shaky. The stimulus money also helped save 400,000 education jobs. But that wasn’t enough to prevent layoffs, which only increased since the money began running out. Since then, the GOP leadership in the House of Representatives and Senate have blocked President Obama’s jobs bills, instead calling for massive austerity measures embodied in the Ryan Budget.

Governor Patrick urged lawmakers to seek  an alternative to governmental austerity, and pointed to his state’s investment in education, innovation and infrastructure as a strategy that has worked for Massachusetts — and can work at the federal level as well.

Both Bernstein and Menzi warned, however, that many right-wing politicians are not going to be swayed by data demonstrating austerity’s failure because the debate is being driven largely by anti-government ideology.

“Drastic cuts in public sector jobs is being presented as economic policy but it really comes down to an ideological opposition to government,” Chinn said.

Poor economic results be damned, what better way to reduce government than abolish hundreds of thousands of jobs?

“Once you strip away the slogans and the sound bites,” Gov. Patrick added, “all that congressional Republicans are saying is that if we just shrink the government, cut taxes, crush unions and wait — all will be well. Of course history has proven that thesis wrong time after time after time.”

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Read the Center for American Progress Policy Brief, “Austerity is Hammering State Economies”