I and others have argued for what feels like an eternity that reducing deficits is not the answer. Yesterday bobswern pointed out that Then again, as I've also been saying for almost three years, it's been a slow motion trainwreck in the excellent diary Krugman Is Calling It: "The Third Depression."
I have argued many times we need to be thinking in terms of another trillion dollars short term and an additional four trillion moderate term to deal with unemployment and do some of the things that need doing. Things like build better transportation networks; rebuild the infrastructure; address global warming; most importantly improve education dramatically; rebuild the gulf; and on and on.
Despite this I see people arguing that we cannot increase deficit spending. This is so much Bull Shit that I hardly know where to begin. Then we have the John Maynard Keynes didn't know what he is talking about crowd. They don't seem to remember Keynes correctly predicted WW II based on the economic conditions imposed on Germany. They don't seem to remember that FDR started to pull the USA out of Great Depression until the deficit hawks forced cut backs in government spending. The don't seem to remember WW II pulled the country out of depression through massive deficit spending, and that despite the destruction technology developed for the war found civilian uses. They do not seem to realize that after the war we had this great investment in education that paid off for over a generation of new research and development. These dolts think that reducing deficits is the solution. Well folks they are ass backwards.
All they need to see that austerity will fuck us royally is to look at Ireland. Not so long ago the Irish economy was going gang busters (okay it was twenty years ago). Major corporations were moving manufacturing to Ireland and life was excellent for the Irish. Then came the great realization that republicans from Nixon until the last President Bush royally fucked up the economy through deregulation, tax breaks for the rich, and spending cuts for all non defense related government spending.
Ireland was faced with the same problems as the rest of the world, only more so just like Greece, Portugal and Spain. The solution was austerity in an attempt to convince people to invest in Ireland. As In Ireland, a Picture of the High Cost of Austerity we see what happens when stupidity rules.
Nearly two years ago, an economic collapse forced Ireland to cut public spending and raise taxes, the type of austerity measures that financial markets are now pressing on most advanced industrial nations.
"When our public finance situation blew wide open, the dominant consideration was ensuring that there was international investor confidence in Ireland so we could continue to borrow," said Alan Barrett, chief economist at the Economic and Social Research Institute of Ireland. "A lot of the argument was, ‘Let’s get this over with quickly.’ "
Rather than being rewarded for its actions, though, Ireland is being penalized. Its downturn has certainly been sharper than if the government had spent more to keep people working. Lacking stimulus money, the Irish economy shrank 7.1 percent last year and remains in recession.
Austerity lead directly to a shrinking economy. A shrinking economy does not increase tax receipts one iota. Indeed the deficit increases. This further discourages investors. Unemployment in Ireland is above 13% with many out of work for more than a year. Yeah the USA is in bad shape with a little less than 10% unemployed, but with our "deficit hawks" we could reach Irish levels in no time. As the G20 tries austerity, (see World Leaders Agree on Timetable for Cutting Deficits all of the G20 will become Ireland. The unfortunate result is that as government demand decreases people will lose their jobs and demand will decrease again. Sounds to me like the recipe for a Greater Depression with unemployment reaching more than 20% and the deficit will balloon as we all free fall to earth.
President Obama is stuck with a senate that will filibuster any proposal he has to increase spending. He cannot even get 50 billion dollars to save the states from firing teachers, police, firemen, . . . (See Obama pleads for $50 billion in state, local aid). Despite his best efforts there is no way he can convince the G20 that more short term spending is necessary when the insane republican senators filibuster a tiny amount of short term spending in this country. And these mentally ill Republicans kill Senate jobless aid measure.
Tell me what is right about this. The answer is not a dam fucking thing is right about republicans screwing us over yet again. We need 66 votes in the Senate and to make certain that voters realize how insane the "Drill Baby Drill" crowd are. Work hard to elect Democrats, particularly in the Senate.
As Bob Herbert said today in Wrong Track Distress
It would take an extraordinary exercise in leadership to rally the country behind a full-bore jobs-creation campaign — nothing short of large-scale nation-building on the home front. Maybe that’s impossible in the current environment. But that’s what the country needs.