"There is no evidence – and never has been – that austerity (cutting to grow) works in the fashion promised by those who support it so vehemently. Britain – used as a laboratory rat in order to prove that expansionary fiscal contraction works – is proof of that, as are the examples of Ireland, Greece and Portugal.
The UK experiment began three years ago [2010] when the coalition came to power. The timing could hardly have been better for the new breed of expansionary fiscal contractionists at the Treasury. The deficit was at a peacetime record, the economy appeared to be on the turn and, as an excellent new book by Mark Blyth shows, it was the time when the brief one-year dalliance with Keynesian economics had just hit the buffers."
Meaning, by "buffers," hit the wall of the austerity police in banking and government in the aftermath of the debt crisis that followed the economic recession in Europe in the late '00s. I happen to be reading Blyth's austerity book right now: Austerity: The History of a Dangerous Idea. It's a brilliantly plainspoken and illuminating history of austerity economics for dummies like me; i.e., readers enthusiastic about economic history but don't want to deal with too much math. Austerity is the stock position of capital, or rich elites, whenever the demands of workers or the environment threaten bottom lines, or whenever the tenor of the times is such that governments are contemplating raising taxes or imposing more regulations on business. Austerity always says the same thing: it costs too much; it being wage and/or benefit increases, climate change reforms, public infrastructure, etc. Spending increases budget deficits. Spending depresses growth. To expand economic growth we need to cut spending and cut taxes and regulations and let the job creators create jobs. Which is almost precisely the path the new admin is about to embark us all on, if I'm not mistaken. Cutting social programs to expand Billionaire profits, or that's the threat anyway. Ack!
I am not suggesting there isn't waste in government, or that efforts to reduce waste are always in bad faith, but I am saying conservative corporate rule efforts to reduce "waste" are almost always bad faith and really a now timeworn tactic to resist government or labor or environmental or any other claims on their wealth, no matter how legitimate or even economically pro-growth.
Krugman says the US economy is basically a massive insurance organization with an army. So much of what the government does is pass through insurance payouts for stuff private industry cannot or will not produce or pay for.
We know the military budget is where most the waste in the federal budget is but they'll cut more cancer research for children, as they've apparently already done, before even looking at the military budget. Or cut other absolutely necessary social safety net stuff: health care, social security, and other social programs and public infrastructure crucial to 70-80% of the population but wasteful "entitlement" spending to richies that can afford their own social insurance.
Some inequality in a big complex society is inescapable but some inequality is so bad it discredits society and the whole economy and rule of law. It makes such norms appear as mere shams and dysfunctional rackets. Billionaires and homeless encampments juxtapose like that.
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