Austerity is like having spinach shoved down your throat

[Addison]

John Aziz from azizonomics.com

Michael Kinsley’s argument for immediate austerity is about “paying for out past sins”:

Krugman also is on to something when he talks about paying a price for past sins. I don’t think suffering is good, but I do believe that we have to pay a price for past sins, and the longer we put it off, the higher the price will be. And future sufferers are not necessarily different people than the past and present sinners. That’s too easy. Sure let’s raise taxes on the rich. But that’s not going to solve the problem. The problem is the great, deluded middle class—subsidized by government and coddled by politicians. In other words, they are you and me. If you make less than $250,000 a year, Obama has assured us, you are officially entitled to feel put-upon and resentful. And to be immune from further imposition.

Austerians don’t get off on other people’s suffering. They, for the most part, honestly believe that theirs is the quickest way through the suffering. They may be right or they may be wrong. When Krugman says he’s only worried about “premature” fiscal discipline, it becomes largely a question of emphasis anyway. But the austerians deserve credit: They at least are talking about the spinach, while the Krugmanites are only talking about dessert.

To Kinsley, austerity is the necessary spinach. I don’t really understand this. In the United States a crisis in shadow finance spread into the banking industry leading to a default cascade throughout the financial system, which resulted in a wider crisis throughout the economy, and ever since 2008 even after the banking sector was propped-up, unemployment throughout the wider economy has been rife, economic output has fallen far below its long-term trend line, and bank deposits are soaring as the weak economy has damaged confidence and convinced possessors of money to save and not spend or invest.

So many activities in the boom — from home speculate, to NINJA loans, to subprime securitisation, and ultimately the 40-year cycle of total credit growth that led to the Minsky Moment in 2008 — proved unsustainable. But a huge cost has already been paid for those unsustainable activities in the form of the initial crash, and depressed growth, and unemployment, etc. The structure of production has been irrevocably changed by the bust. But are the people suffering the unemployment, the depressed real wage growth, etc, the people who created the total debt growth? No, of course not.

. . .

http://azizonomics.com/2013/05/24/paying-for-our-past-sins/

[unblock]

1. i think austerity is like making people freeze in winter because coats make you sweat in summer.

it's all about timing. ideally, you run a deficit to stimulate the economy when the economy is weak, then you run a surplus, or at least a much smaller deficit, when the economy is strong.

austerity is all about saying that we need to run a smaller deficit when the economy is weak.

just as you should wear coats in winter when mother nature isn't providing enough warmth and t-shirts in summer when the sun is hot.

so our economy is in winter but the austerians insist on making us all wear t-shirts and freeze.

[xtraxritical]

2. Paul knows his economics and is right in all his prognostications.

Austerity is a hoodwink proposition foisted by uber capitalists to take over government assets at fire sale prices. It's a .01% scam.
The economic situation we're in now is EXACTLY equivalent to the great depression of the 1930s and has the same causes and the same solutions. Hoover's austerity was a complete bust.

[jmowreader]

3. Calling austerity "paying for past sins" is pretty strange

If you have a minister, call that person (if you don't have one, the phone book is full of them) and ask how to absolve yourself of sin. The minister will, almost invariably, tell you to first stop sinning. You have to stop being an adulterer before the baby Jesus will forgive you for the sin of adultery, correct?

Same deal with the economy. If your big problem is buying $100,000 artillery rounds that won't ever be fired, ordering F-35 fighters that will never fire a shot in anger, paying ag subsidies to people who have never farmed and repeatedly bailing corporations out, taking away Grandma's grocery money and closing national parks won't solve the problem.

What will?
First, close the biggest loophole there is. Every dollar given to a church is tax deductible and every dollar received by a church is tax free. A church is a mix of charity and society similar to...oh, say an Elks lodge. Your Elks dues are not deductible so why is your tithe?

Next, start cutting defense spending.

Then raise taxes. To Kennedy levels.

[bemildred]

4. Nothing else will be fixed until the Congress gets fixed.

The current mess is no accident.

[packman]

5. Nothing wrong with spinach

I like spinach. Wilt it in a pan, sprinkle it with a good vinegar, add crumbled egg and bacon to it and it becomes something special. Spinach is very palatable , if served correctly. Austerity applied judicially and with correct economic forethought such as addressing energy needs , fixing a faltering and outdated interstructure and curtailing military spending may be the spinach this country needs.