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If a household reduces its spending because its income falls during a recession there is a negligible effect on the Nation’s economy. If a national government cuts spending because a recession reduces its income it directly reduces public sector demand and indirectly reduces private sector demand. A recession occurs when demand is seriously inadequate. Governmental austerity inflicts a far more severe recession on the nation by further reducing demand. A household and a Nation should follow the opposite strategy when their incomes fall sharply.
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More below about how some of our progressive brethren having fallen under the neo-liberal spell, need to check the gestalt of their facts.

A little bit of economics can be a truly terrible thing, for the introductory classes in micro and macro-economics are the most dogmatic and myth-filled part of the neo-liberal curriculum. Dogmas that have been falsified for 75 years (such as austerity) are taught as revealed truth. The poor indoctrinated student is then launched into the world “knowing” that austerity is the answer and that mass unemployment and prolonged recessions are small prices to be paid (by others) to achieve the holy grail of a balanced budget. Students are taught that national budgets are really just like household budgets. These dogmas are not simply false, they are self-destructive and cruel. Neo-liberal economics is so bad and has gone downhill at such a rapid rate that it now worships the economic analog to bleeding patients – austerity – as a response to a Great Recession. Millions of people are indoctrinated annually into believing this long-falsified nonsense, and that includes people who consider themselves progressives.

The remarkable aspect of neo-liberal economics is that the power of its myth has survived for many progressives even after its failed dogmas caused massive economic destruction, massive elite fraud with impunity, and crony capitalism so corrupt that it cripples democracy. Indeed, the brainwashing they received is so effective that even after the eurozone ran a massive experiment with austerity that proved (again) to be a catastrophic failure they remain neo-liberal acolytes. This column discusses three examples that exemplify the problem.

Read more at http://www.nakedcapitalism.com/...

Originally posted to Bluehawk on Fri Dec 28, 2012 at 05:24 PM PST.

Also republished by Money and Public Purpose.

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With factory utilization at 60% and the Deficit at 21% of GDP the Government Should

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