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Mon Dec 30, 2019, 10:31 PM

Krugman: The deficit obsession of 2010-2015 did permanent damage.

The Legacy of Destructive Austerity

A decade ago, the world was living in the aftermath of the worst economic crisis since the 1930s. Financial markets had stabilized, but the real economy was still in terrible shape, with around 40 million European and North American workers unemployed. Fortunately, economists had learned a lot from the experience of the Great Depression. In particular, they knew that fiscal austerity — slashing government spending in an attempt to balance the budget — is a really bad idea in a depressed economy. Unfortunately, policymakers on both sides of the Atlantic spent the first half of the 2010s doing exactly what both theory and history told them not to do...

Why is austerity in a depressed economy a bad idea? Because an economy is not like a household, whose income and spending are separate things. In the economy as a whole, my spending is your income and your spending is my income. What happens if everyone tries to cut spending at the same time, as was the case in the aftermath of the financial crisis? Everyone’s income falls. So to avoid a depression you need to have someone — namely, the government — maintain or, better yet, increase spending while everyone else is cutting. And in 2009 most governments engaged in at least a bit of fiscal stimulus. In 2010, however, policy discourse was taken over by people insisting, on one side, that we needed to cut deficits immediately or we would all turn into Greece and, on the other side, that spending cuts wouldn’t hurt the economy because they would increase confidence.

...There are multiple explanations for the populist rage that has put democracy at risk across the Western world, but the side effects of austerity rank high on the list. In Eastern Europe, white nationalist parties came to power after center-left governments alienated the working class by letting themselves be talked or bullied into austerity policies. In Britain, support for right-wing extremists is strongest in regions hit hardest by fiscal austerity. And would we have Trump if years of wrongheaded austerity hadn’t delayed economic recovery under Barack Obama?

Beyond that, I’d argue that austerity mania fatally damaged elite credibility. If ordinary working families no longer believe that traditional elites know what they’re doing or care about people like them, well, what happened during the austerity years suggests that they’re right. True, it’s delusional to imagine that people like Trump will serve their interests better, but it’s a lot harder to denounce a scam artist when you yourself spent years promoting destructive policies simply because they sounded serious.

In short, we’re in the mess we’re in largely because of the wrong turn policy took a decade ago.

https://www.nytimes.com/2019/12/30/opinion/deficits-economy.html?action=click&module=Opinion&pgtype=Homepage

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Reply Krugman: The deficit obsession of 2010-2015 did permanent damage. (Original post)
BeyondGeography Dec 2019 OP
Paka Dec 2019 #1
OhNo-Really Dec 2019 #2
Backseat Driver Dec 2019 #3
dalton99a Dec 2019 #4

Response to BeyondGeography (Original post)

Mon Dec 30, 2019, 11:00 PM

1. K&R

So on target. The elites that control us all simply refuse to learn the lessons of the past. As long as that's the case, we will never get ahead.

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Response to Paka (Reply #1)

Mon Dec 30, 2019, 11:19 PM

2. Grinding all to desperation is the goal perhaps

Makes the unclean masses more malleable & the children more vulnerable.

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Response to BeyondGeography (Original post)

Tue Dec 31, 2019, 01:10 AM

3. I'm from an ordinary working family, a formerly lower middle class family, but...

"If ordinary working families no longer believe that traditional elites know what they’re doing or care about people like them, well, what happened during the austerity years suggests that they’re right."

1) It's not "or" - It's "and."
2) I don't remember anyone outside of MI ever voting for Gerald Ford for anything after crooked Nixon.
3) Not just the years cited; those wrong-headed GOP policies go back to the '80s.
4) Elites? You do mean GOP big business' corrupted cabals, and their lobbyists, Mr. Krugman?
5) Reagan's deregulations? Thank goodness his sick mind didn't do worse; oh wait, he had others do that.
6) Bushies' foreign policies from hell?
7) Trump's lies, delusions, and failures?

However, I do recall "How Carter Created Jobs, Fought Stagflation, and Brokered World Peace" - https://www.thebalance.com/president-jimmy-carter-s-economic-policies-4586571

I do recall Clinton's Presidency because it kept our family functional and employed: During his presidency: More than 18.6 million new jobs were created, more than any other president; unemployment dropped from 7.5 percent to 4 percent; home ownership was 67.7 percent, the highest rate ever recorded; the budget deficit dropped from $290 billion to a budget surplus of $128 billion; the poverty rate dropped to 11.8 percent. https://www.thebalance.com/president-bill-clinton-s-economic-policies-3305559

I know former President Barack Obama early on inherited the mess of the Great Recession and found the way forward; thereafter, he was blocked at every other legislative turn but still managed to provide more affordable access to health care.

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Response to BeyondGeography (Original post)

Tue Dec 31, 2019, 01:14 AM

4. Kick

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