Banks Get Bailouts, We Get Shared Sacrifice (Marshall Auerback, New Deal 2.0)

[chill_wind]

Banks Get Bailouts, We Get Shared Sacrifice
Saturday, 11/13/2010 - 12:04 am by Marshall Auerback

It all started so innocently: deficit hawks wanted to restore their credibility in the face of the global financial crisis and the comprehensive discrediting of their ideology. They slowly emerged from their caves, trying to re-engage in the policy debate by appearing reasonable. They started saying that “now we should have deficits,” but soon (unspecified) “we will need surpluses” to “pay back the excesses.”

As time progressed, however, the comeback attempts became outrageous and outright distortion entered the picture. Figures such as Robert Rubin and Alan Greenspan (along with a whole host of Wall Street economists, whose employers had been large, albeit misdirected, beneficiaries of government largess) began to launch revisionist efforts to deny that fiscal policy had any positive impacts. Some went as far as asserting that government intervention actually worsened the recession by virtue of creating great “uncertainty”, which allegedly held back business investment.

This latter development has now gathered pace and found its fullest expression through the US National Commission on Fiscal Responsibility and Reform (an Orwellian title if ever there was one) established by President Obama. The Commission has proposed a $3.8 trillion deficit cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks, including the mortgage-interest deduction. Yes, there are token cuts in Defense spending in the interests of “fairness”, but the cuts are heavily skewed toward middle class entitlements. (Which is a deceiving word because it implies that we’re just a bunch of weak supplicants, dependent on the graces of the government. Why don’t we call these programs “enablements”?) The priorities laid out by the Commission are truly symptomatic of the degeneracy of our governing class compared to the days of the Great Depression. Grand projects started then are still delivering value to communities and private business interests some 80 years after their completion.

The financial crisis delivered significant empirical blows to mainstream economics, which has consistently downplayed the effects of fiscal policy. Along with the usual ideological hatred of government spending (except, of course, when it favored their particular industries), most of the supporters of this commission continue to trot out the usual fantasies of excessive government spending “crowding out” the private sector. They also cited the perverse idea of “Ricardian equivalence“, which says the reason that the private sector is not spending is because it expects higher taxes in the future due to budget deficits, which will have to be paid back sometime — so they are saving up to pay those bills. And anybody who has the nerve to challenge their ludicrous assumptions is castigated as being “stridently opposed” to any reforms at all.

the rest: http://www.newdeal20.org/2010/11/13/banks-get-bailouts-we-get-shared-sacrifice-26885/