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Simon Johnson: Fiscal Austerity and America’s Future
... The financial crisis may be behind us, but the link to the likely intense debate this fall regarding fiscal policy is direct. We are told that fiscal austerity requires outright and immediate further cuts in the benefits previously promised to people at the federal, state and local level.
Never mind that this is simply not true - at least in the form currently presented (here are a primer on short-term issues and another on the longer-term perspective). A vocal class of people - including some at the upper end of the income distribution - incessantly insist that entitlements must be cut while refusing to address the real causes of both our recent surge in government debt (the financial crisis, caused by perverse incentives in the financial system) and the genuine longer-term issues we face (which are about controlling the future increase in health-care costs, not cutting the level of benefits today).
The self-described fiscal conservatives really cannot be taken seriously. In the financial reform debate, they either didn't show up or preferred to keep the existing system in place, and they refuse to put serious health cost-control measures on the table.
If the "conservatives" don't really want to reduce the shocks that have caused government debt to explode recently - or to deal with the underlying, longstanding health-care cost issues in a reasonable fashion - what exactly is going on?
That's a question they should answer for themselves, and hopefully they will be pressed on this in public debates during the campaign for November's elections. But there is a striking similarity between the longstanding stated intention to "starve the beast" (meaning to press for reduction in government by creating binding constraints, like a perceived crisis) and what we are seeing play out today.
And there is very real danger that this strategy will work, in the sense that the contours of a coming "fiscal crisis" - what will be discussed and how the issues are framed - will largely be structured by scaremongers who wish to cut pensions and health-care benefits for middle Americans in the years ahead and who will work hard to keep meaningful tax reform off the table.
People who push for this view are not being fiscally responsible, and they are well down the road to exacerbating developing world-type problems in the United States - and to creating the conditions for another financial crisis.
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6 Comments so far
Show All"Economist: Beware 'Fearmongers' Pushing the 'Austerity' Fix"
Economists are notorious for their disagreements with each other and for being wrong much of the time.
Yes, but some are wrong far more often than others. Wouldn't it be nice if those economists who have an above average track record of predictions were the ones getting most of the media exposure?
I agree, but I think track record for specific predictions is different from the theoretical disagreements.
"The Famous Economist correctly predicted nine out of the last four recessions".
gnken
When will Americans have the courage like they do in France and other Countries to STRIKE and stand up to Government. How long will people remain passive??? Discussing policy and what we should do won't work with the Republicans and Conservatives. Americans need to stand up and put the scare on Politicians and Lawmakers. As the late Woodie Gutherie once advised farm workers in the West is that you have to make the bosses nervous or you won't get anything. We need to draw a line in the Sand when It comes to things like SS and Medicare. WE NEED to take a HELL NO WE Won'T Budge Stand.
Simon Johnson: “A vocal class of people — including some at the upper end of the income distribution – incessantly insist that entitlements must be cut while refusing to address the real causes of...our recent surge in government debt...”
Simon Johnson insinuates that he is going to address the real causes of the surge in U.S. debt (corporatism, imperialism, militarism), and then proceeds to ignore them, in genuflection to the unwritten protocol in place at Pravda on the Hudson, as well as the rest of the MSM, that no journalist can even acknowledge the growing power of our oligarchy, let alone challenge it directly.
It’s absurd to talk about austerity for the middle class without discussing profligacy by the Pentagon/oligarchy, but political discourse in the U.S. corporate media is currently limited to similar political absurdities.
At least Mr. Johnson acknowledges that "the distribution of income in the United States is undoubtedly becoming more unequal."
I still cannot understand why so many people refuse to believe that ultra wealthy powers actively persue ways to make the lower classes poorer, thus further enriching themselves. The examples of this behavior are smaking us all in the face over and over, through financial and economic manipulation, income redistribution, assult upon social programs and the commons, elimination or off-shoring of jobs and stagnation of wages, among others.
It seems so perfectly clear, yet a large portion of the population can't grasp onto it. And many of them go on and on about how we have to do away with SS, (and if that happens, will I be getting a check for all of the money I have been sinking into it over the years), and how we need to lower taxes on the rich so they will create jobs, and how regulations are bad, and so are social programs, and blah blah blah.
So we have lowered taxes for 30 years, where are the jobs? Oh, they're not here, they went overseas. I believe we need to RAISE taxes on the rich. BIG TIME. The rich don't need to create jobs if they have plenty of money to gamble with on Wall St. Start taking that money away from them, and they will create jobs to fill their pockets back up. Why can't we try that for 30 years and see where it gets us? Afraid they will move their jobs overseas? Well, they have been doing that ANYWAY. Let em go. Impose some stiff tariffs on their stuff if they want to sell it here. Don't people think that there are other entrepreneurs who will step up and fill the vacuum?
Regulations get a bad name, but when done right, are they not safeguards against what wealthy powers would do to us without them? Even with them, is your water clean to drink? Air clean to breathe? Food free of contaminates? Drugs void of side-effects? Money in your bank account safe? What would it be like without regulations? Isn't it obvious that the wealthy powers hate regulations because they prevent them from screwing us even furhter?
And how do social programs and Socialism earn such a bad rap? What is wrong with having a decent society for all stakeholders? Why am I expected to frown on that? That does not make any sense.
Soemone please help me understand.