Austerity Watch

Austerity Doesn't Reduce Deficits

Terrance Heath — Thu, 01 Nov 2012 15:10:01 -0400

Austerity is back in the news, and the news about austerity is never good. We've only had de facto austerity on this side of the pond. So as usual, the news is from Europe, where the austerians are going full-tilt boogie. Our homegrown austerians, like their European counterparts, tell us that the kind of severe austerity underway in Europe is necessary to reduce the deficit. Everything from food stamps to Medicaid and Medicare — everything except defense spending — must be cut in order to reduce the deficit.

The thing is, it hasn't worked. In Greece, Europe's austerity poster child, austerity has shrunk the economy and increased the national debt.

Greece's draft budget for 2013 has forecast a deeper recession and worse debt problems than previously thought.

The economy is expected to shrink by 4.5% next year, and government debts to rise to 189% of economic output.

Greece held inconclusive negotiations with its rescue lenders on Wednesday over the economic reforms needed to release further bailout funds.

The government also faces opposition to the reforms from coalition partners and unions have called a general strike.

Finance Minister Yannis Stournaras held a conference call on Wednesday with his counterparts from the Eurogroup of eurozone finance ministers, as well as representatives of the International Monetary Fund and European Central Bank.

The German Finance Minister Wolfgang Schaeuble said afterwards that Athens still needed to do more.

Austerity is literally killing Greece. Yet the austerians demand more.

Austerity only increased inequality in Portugal. Now, after painful austerity measures that hit ordinary Portuguese and public sector workers hardest failed to reduce the deficit, Portuguese citizens are planning to rally against new tax increases.

Anti-austerity protesters in Portugal are planning street rallies as the country's parliament is expected to approve big tax rises in a new budget.

The centre-right government in Lisbon is hoping to reduce its budget deficit as part of the 78bn-euro (£63bn; $101bn) EU-IMF bailout deal.

However, the proposed 2013 budget could face a challenge in court.

Portugal has already cut public sector wages and raised taxes, triggering a series of street demonstrations.

Unemployment in Portugal is at a record high, and people have faced sharp reductions in their incomes. None of it seems to have made a dent in Portugal's debt problem. Yet the austerians demand more.

Austerity has been disastrous for Ireland, which once made the top ten on the Heritage Foundation's Index of Economic Independence.

The Central Statistics Office released its yearbook of Ireland, giving a comprehensive picture with facts and figures on key areas of life, including population, education and the economy.

It revealed that the look of the labour market worsened in 2011, with jobs and pay still in decline since the recession.

The number of people in work fell to 1.821 million since 2010, while those unemployed rose 3.7 per cent to 304,500.

… A staggering 23 per cent of people had hit the deprivation rate by 2010 and were experiencing two or more types of poverty.

In September, Spain braced for further austerity measures even as hungry Spaniards foraged in trash bins for food. But Spain's economy contracted for a fifth quarter, because of austerity-driven inflation.

Spain’s economy contracted for a fifth quarter, undermining efforts to plug the budget deficit that’s pushing the nation closer to a bailout, while austerity measures kept inflation at a 17-month high.

Gross domestic product declined 0.3 percent in the three months through September and 1.6 percent from a year earlier, the National Statistics Institute said today, compared with an Oct. 23 estimate from the Bank of Spain of a 0.4 percent contraction. Consumer prices, based on European Union methodology, rose 3.5 percent from a year earlier, INE said.

The deepening of Spain’s five-year slump, which is prompting record loan defaults at the nation’s banks and job cuts at companies including Gamesa SA, adds to pressure on Prime Minister Mariano Rajoy as he resists requesting international aid. While tax hikes he’s implementing as part of his austerity program are depressing consumption, they are also spurring inflation, which threatens to add 3 billion euros ($3.9 billion) to the country’s pension bill.

All across the EU, austerity has driven joblessness to a record high.

The jobless rate in the euro area climbed to a record in September as the fiscal crisis and tougher austerity measures threatened to deepen the economy's slump.

Unemployment in the economy of the 17 nation single currency area rose to 11.6 per cent from 11.5 per cent in August, the European Union statistics office Eurostat said today. That's the highest since the data series started in 1995.

Some 18.5 million people were unemployed in the euro area in September, up 146,000 from the previous month.

At 25.8 per cent, Spain had the highest jobless rate in the currency bloc.

Portugal's unemployment rate was at 15.7 per cent, while Ireland reported a jobless rate of 15.1 per cent. France's jobless rate was at 10.8 per cent.

Italy's jobless rate rose to its highest point in 13 years, at 10.8 per cent on a seasonally adjusted basis.

Yet the austerians demand even more.

Americans should pay attention to the saga of austerity in the EU, for a couple of reasons. First, because conservatives here at home are committed to the same agenda that's failed in Europe.

If Mr. Obama wins, he’ll presumably go back to pushing for modest stimulus, aiming to convert the gradual recovery that seems to be under way into a more rapid return to full employment.

Republicans, however, are committed to an economic doctrine that has proved false, indeed disastrous, in other countries. Nor are they likely to change their views in the light of experience. After all, facts haven’t gotten in the way of Republican orthodoxy on any other aspect of economic policy. The party remains opposed to effective financial regulation despite the catastrophe of 2008; it remains obsessed with the dangers of inflation despite years of false alarms. So it’s not likely to give up its politically convenient views about job creation.

And here’s the thing: if Mitt Romney wins the election, the G.O.P. will surely consider its economic ideas vindicated. In other words, politically good things may be about to happen to very bad ideas. And if that’s how it plays out, the American people will pay the price.

Second, if good things end up happening to bad political ideas here in the U.S., we may need to follow the example of Europeans who are standing up and saying "No," when the austerians keep demanding more.

IMF Agrees: Austerity Bites

Robert Borosage — Thu, 11 Oct 2012 15:53:40 -0400

Sen. Todd Akin calls for abortion on demand and free distribution of condoms. The CEO of Exxon decries global warming and demands an end to oil company subsidies along with new public investment in renewable energy. Arizona Sheriff Joe Arpaio calls for amnesty for undocumented workers.

Not likely, right? But the equivalent of these improbables just took place in international economics. The International Monetary Fund, for decades famed for inflicting harsh austerity policies on developing nations, now says, "Never mind," essentially admitting it got it wrong.

IMF Director Christine LaGarde is calling on European nations to ease austerity measures before they cause another global recession. "The fund warned earlier this week that governments around the world had systematically underestimated the damage done to growth by austerity," the Financial Times reports.

This extraordinary recognition of reality by the IMF raises an obvious question: Will Republican presidential candidate Mitt Romney and Republicans get a clue? The IMF's call is a direct repudiation of the harsh austerity policies it has been peddling. Just like the IMF, Romney is passionate about deep cuts in federal spending as well as tax reforms that do not lower revenues. (He claims now that he wants to lower rates across the board, but pay for them completely by closing loopholes.)

In addition, Romney and his running mate, Rep. Paul Ryan, rail against the Federal Reserve for printing money, for taking extraordinary measures to keep long-term interest rates low. They wax hysterical about the inflation ogre that is about to materialize at any moment and lay waste to the economy.

Romney even sent out a fundraising email savaging the Fed, claiming its newest round of "quantitative easing" was "another bailout." That "Barack Obama is at it again -- spending your tax dollars to bail out his failed economic plan... money we can't afford for jobs we will never see."

Now, all of this is simply nonsense. Barack Obama has nothing to do with the Fed policy. The Federal Reserve is notoriously independent of the administration and Congress (and its chairman, Ben Bernanke, is a Republican economist who is basically pursuing what conservative guru Milton Friedman advocated: an aggressive monetary policy to counter recessionary currents). And the Fed isn't "spending your tax dollars." In fact, the Fed has been paying billions in profits back into the Treasury, reducing deficits – not adding to them. And we don't have to "afford the money" because the Fed is basically printing it.

Romney's combination of slashing spending and hiking interest rates would drive up unemployment, spread poverty and probably end up adding to deficits, as the economy moves back towards recession. Romney argues that the "confidence" that would come from his election would counter these effects. Don't bet the store on that. (There are precious few businesses that will bet even a new salary on it.)

Getting it Right

Last fall, President Obama called for passage of the American Jobs Act, which included investments in rebuilding schools and infrastructure, rehiring teachers and cops, and a jobs corps for veterans, among other things. It would be paid for by tax hikes on the wealthiest Americans. Independent analysts, such as Macroeconomic Advisers, estimated that it would create 2.1 million additional jobs.

Republicans – committed to slashing spending and austerity – killed the bill in the House, and filibustered it in the Senate.

The IMF turn is a big deal. If nothing else, it should be a wake-up call to governments and candidates across the world. The IMF is saying, essentially, that Obama got it right.

Will Romney, Ryan and Republicans get it? Will the "Gang of Eight" senators meeting with Alan Simpson and Erskine Bowles, the Archdruids of austerity, take another look? Will Democrats stop plotting a grand bargain and start talking once more about how to get people back to work and the economy moving?

The Real Deal

In its latest World Economic Outlook (PDF), the Fund explicitly warns against "excessive fiscal contraction in the short term," while reiterating calls for a plan -- including tax and entitlement reforms – that places "government debt on a sustainable path in the medium term." Contrary to Romney and Republican's braying on deficits, the U.S. doesn't have a short-term deficit crisis. We aren't Greece, and won't ever be.

The U.S. has to get the economy moving and then take sensible measures to makes its projected debt sustainable. That should involve progressive tax reform, raising taxes on the wealthy to produce more revenue. That's just the reverse of the Romney plan to lower rates, eliminate the estate tax and sustain the capital gains and carried interest tax loopholes that benefit the very wealthy (and enable him to pay a 14 percent tax rate).

And it should involve reforms to get our health-care spending, the driver of our long term debt problems, under control. Here, too, Romney and Ryan just get it wrong. This isn't about gutting Medicare and Medicaid. It's about fixing health care. Ryan's budget slashes Medicaid and turns Medicare into a voucher, doing nothing to control rising costs, only pushing more and more of them onto the very people least able to afford them: seniors, the disabled, the poor, the dying.

What we must address is reform of our broken health care system, which otherwise will bankrupt everything – companies, governments and families. That requires continuing on the path begun with Obamacare, which started to change how we deliver health care and put limits on insurance company excesses. Eventually, after exhausting all other alternatives, we'll get to where every other industrial country has ended up, with exactly what Republicans go nuts about: a "government takeover" of health care. Either through far more extensive regulation (think negotiating bulk discounts for prescription drugs, for example) or through extending a Medicare-like system across the population, we'll get there. If we spent what other industrial countries spend per capita on health care (with better public health results), we would RIGHT NOW be projecting surpluses as far as the eye can see.

The bastion of high finance, the IMF, has come out against austerity. Can Mitt be far behind? Look forward to the next debate, when Romney's new "etching" will no doubt have him denouncing the president for his jobs program, while suddenly offering up his own version to get the economy going.

Punitive Austerity

Digby — Fri, 28 Sep 2012 13:11:33 -0400

Paul Krugman today:

So much for complacency. Just a few days ago, the conventional wisdom was that Europe finally had things under control. The European Central Bank, by promising to buy the bonds of troubled governments if necessary, had soothed markets. All that debtor nations had to do, the story went, was agree to more and deeper austerity — the condition for central bank loans — and all would be well.

But the purveyors of conventional wisdom forgot that people were involved. Suddenly, Spain and Greece are being racked by strikes and huge demonstrations. The public in these countries is, in effect, saying that it has reached its limit: With unemployment at Great Depression levels and with erstwhile middle-class workers reduced to picking through garbage in search of food, austerity has already gone too far. And this means that there may not be a deal after all.

Much commentary suggests that the citizens of Spain and Greece are just delaying the inevitable, protesting against sacrifices that must, in fact, be made. But the truth is that the protesters are right. More austerity serves no useful purpose; the truly irrational players here are the allegedly serious politicians and officials demanding ever more pain.

He goes on to explain. once again, that Spain had no budget deficit until the crash and that while there is no way to escape a period of hard times without leaving the Euro (which hes says nobody wants) the cruel austerity measures the bankers and European officials are insisting upon are purely punitive --- and unnecessary. In fact, because they are putting such stress on the populace, which is understandably agitated, the country is having trouble borrowing to pay its bills --- because bankers are worried about the political instability they are causing.

It's a mess.

Why, then, are there demands for ever more pain?

Part of the explanation is that in Europe, as in America, far too many Very Serious People have been taken in by the cult of austerity, by the belief that budget deficits, not mass unemployment, are the clear and present danger, and that deficit reduction will somehow solve a problem brought on by private sector excess.

It sounds as though if you were to compare the US to Europe in this matter (always a very dicey proposition) you would call the Germans the Villagers:

Beyond that, a significant part of public opinion in Europe’s core — above all, in Germany — is deeply committed to a false view of the situation. Talk to German officials and they will portray the euro crisis as a morality play, a tale of countries that lived high and now face the inevitable reckoning. Never mind the fact that this isn’t at all what happened — and the equally inconvenient fact that German banks played a large role in inflating Spain’s housing bubble. Sin and its consequences is their story, and they’re sticking to it.

Worse yet, this is also what many German voters believe, largely because it’s what politicians have told them. And fear of a backlash from voters who believe, wrongly, that they’re being put on the hook for the consequences of southern European irresponsibility leaves German politicians unwilling to approve essential emergency lending to Spain and other troubled nations unless the borrowers are punished first.

Of course, that’s not the way these demands are portrayed. But that’s what it really comes down to. And it’s long past time to put an end to this cruel nonsense.

All of our political and financial elite believe this garbage too. And they are selling this 47% trope as a way to divide this country in similar ways. Keep in mind that the Grand Bargain is predicated these days on "avoiding Europe." You know, we'll avoid it by doing it.

And if we aren't lucky enough to avoid another recession, they'll do the same thing that the Europeans are doing to Spain. This is a global illness and we've got it too.

But it'll all turn out ok in the long run, so no worries. The wealthy will maintain their fortunes, which is the most important thing. And as Andrew Mellon told Herbert Hoover:

"liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate… it will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people."

See? It's all good.

Austerity Is The New Greek Tragedy

Terrance Heath — Tue, 25 Sep 2012 22:44:48 -0400

In my previous post this morning, I noted that the U.S. is starting to look a lot like Greece, at least in terms of austerity-driven suicides. This week, Greece's austerian nightmare seems to have metastasized into a full-fledged tragedy. Thousands of Greeks who still have jobs are joining a general strike this week in another attempt to ring down the curtain on the whole show.

No one, it seems, is going to work in Greece this week. Teachers, doctors, lawyers, journalists—even tax collectors—have walked off the job to protest the country’s biting austerity measures. Judges, protesting a 38 percent pay cut, are only hearing cases nearing the statute of limitations. Bus drivers are parked, protesting longer work days and pay freezes. There are limited garbage collectors and few animal-control workers on the job to protest cuts in benefits like pension contributions. Firefighters left their posts Monday, ambulance workers did not work Tuesday, and police officers have warned that may turn a blind eye to what could be chaotic protests as the country’s labor unions and private-sector leaders join the fray on Wednesday for the largest national strike since the June elections that launched Antonis Samaras into a dubious position of power.

While Greeks take to the streets, their coalition cabinet will be holed up working the numbers to try to shave off a whopping €11.5 billion from the 2013-14 budget. Government leaders have been entertaining European Union inspectors all week, trying to prove that they are working diligently to meet the requirements of the €31 billion bailout loan due from the European Central Bank (ECB) and International Monetary Fund (IMF). And Germany’s Der Spiegel broke the news that the “troika”—the European Union, the ECB, and the IMF—won’t release funds that are needed to keep the country from defaulting unless Greece actually doubles those cuts to close an estimated €20 billion budget gap.

...The austerity measures are brutal no matter how much they have to cut to get the aid they so desperately need. Unemployment already hovers at around 25 percent—and nearly 55 percent for those under 29. Since June 2011, nearly 1,000 jobs have been lost every single day. The retirement age will have to be raised from 65 to 67; many workers will have to work a six-day week; the country will have to raise the cost of public transportation and cut public-sector jobs. In a recent poll by MRB, over 90 percent of Greeks feel that the austerity cuts are unfair to the poor. Nearly 80 percent of the population says the country is headed in the wrong direction with austerity cuts.

For ordinary Greeks — particularly those public sector employees who keep Greek society functioning, austerity has been all pain and no gain.

Unemployment in Greece has hit Depression era levels, and is only likely to get worse.
Along with the rest of Europe, Greece risks a "lost generation" as young people face a 55% unemployment rate, and little hope for better in the future.
The old fare no better that the young, as Greek pensioners face looming poverty amid pensions reduced by more than half, increased taxes and the collapse of support networks. Many join the growing ranks of the homeless and destitute. Others, facing the prospect of poverty in their golden years, opt for suicide — as Dimitri Christoulas did.
Austerity has brought the Greek health care system to its knees, as public health funding is slashed by 25 percent — $12 billion. Doctors and nurses have seen their pay reduced more than a third. Lacking staff, basic equipment, and supplies, hospitals are rationing vital drugs and procedures.
Greece's financial crisis has led to a surge in intravenous drug use and drug overdoses, as well as increases in prostitution and HIV infections. Meanwhile, programs focused on needle exchange, condom distribution and drug rehab have faced severe cuts under the country's austerity measures.
Greeks are facing a crime wave in their streets, as the economic crisis put many out of work, austerity measures reduced support services for immigrants, and cuts to the public sector reduced the number of police officers.

Austerity is killing Greece's economy, and taking Greek citizens down with it. Forty percent of Greece's GDP comes from the public sector — represented by the workers going on strike this week. Cuts to the public sector must eventually impact the private sector negatively, as more people are out of work, and can't or don't pay bills.

Is it any surprise that most Greeks are pessimistic about their futures? Should anyone wonder that four in ten Greeks expect life to be worse in five years than it is right now? Chris Jones, writing from the rural Greek island of Samos, sums up the hopelessness austerity has brought to many Greeks.

I am aware that much of the Left elsewhere in the world seems to be full of admiration for the radical currents that run through Greek society and urge their own publics to be inspired by the Greek resistance. Maybe if I lived in Athens I might share some of this optimism. But for Samos and the vast rural reaches of Greece I am not so convinced and feel that too often sympathetic observers of Greek society confuse austerity consciousness and survival with something more grand and progressive. When your income is cut or simply evaporates; when the tax burden cripples the poor and working class; when you see on a daily basis that the rich and wealthy are left free to plunder with impunity; when you see the much vaunted bail outs for Greece providing nothing for the people but everything for the banks.... it is hardly surprising that vast numbers here come to see that they live under a social and economic system which is only for the few.

That's not true of all Greeks, however. Greece's super rich have maintained lavish lifestyles, and low profiles.

Scudding across the turquoise waters of the Argo-Saronic gulf, Ioannis Arnaoutis singled out the pearl-white sands of a little bay. The shore glistened in the midday sun. "It was especially imported from Asia by the owner of the mansion above the bay," said the boatman, one hand on the steering wheel of his water taxi, the other pointing in the direction of the cove. "It's a private beach, which is why there is only one umbrella on it."

Nearly three years into their country's worst crisis in modern times, life goes on as normal for Greece's super-rich. As the sun sets, oligarchs, shipowners, singers and media stars gather at the Poseidonion hotel on the island of Spetses opposite the little bay. They tuck into a menu that includes pasticcio laced with foie gras. Among them is a middle-aged man in a T-shirt proclaiming: "More is less".

Three days before Greeks cast their ballots in a make-or-break election, their country could not be more divided. Here there is no talk of the pain of crisis – the only topic of conversation elsewhere in Greek society. The destitution and despair of Athens is a world away – and for many quite clearly it is best kept that way.

Those "few" that Jones mentioned may very well prefer to avoid talk of the pain austerity is inflicting on the rest of their countrymen. After all, it can still seem a world away if you don't speak of it. But it's not likely to stay that way.

It should at least raise a plucked eyebrow or two among Greece's super rich, when the police warn that they may turn a "blind eye" to increasingly chaotic protests. That alone should be a clue that they are living in what what Robert Reich calls a "tinderbox society."

What's end of the line for austerity? We've gone through despair, desperation, and indifference. The latter feeds the first two, creating what Robert Reich calls "a tinderbox society," as "those collecting capital gains" demand austerity, resulting in "rising frustration over the inability of most people to get ahead. That frustration, Reich notes, is fanning the flames of public anger in Europe, fueling student revolts in Chile, and could plunge China into turmoil.

Where austerity goes, violence and unrest follow. The danger lies in the unpredictable nature of public anger, once ignited. When sparks fly, there's no telling where they catch fire or who will get burned.

It's a combustible concoction wherever it occurs: Increasing productivity, widening inequality, and rising unemployment create tinder-box societies.

Public anger and frustration can ignite in two very different ways. One is toward reforms that more broadly share the productivity gains.

The other is toward demagogues that turn people against one another.

To borrow a line from Bonnie Tyler's 1983 hit single, austerity means "we're living in a powder keg, and giving off sparks.

Except there is no more "we," anymore. As austerity-engineered scarcity makes day-to-day survival, people see their fates as divorced from one another. Solidarity gives way to detachment, an "everyone for him or herself" becomes the general rule, if you want to survive.

In Greece, all the ingredients for a tragic outcome are in place. Public anger is rising, in the face of unyielding austerity measures that demand the most of those who have the least, and almost nothing of those who have the most. Increasing restlessness among Greeks has given rise to "demagogues that turn people against each other," as the Golden Dawn party — a far-right, neo-Nazi political organization — casts its shadow over the Greek populace and its government, having won seven percent of the vote in June's elections. Some Greeks say Golden Dawn speaks to their insecurity under sever austerity. And who could be more insecure than Greece's large population of unemployed, hopeless youth?

The situation seems tailor-made for disastrous outcome — and not just for the Greek middle-class and working class. If not compassion, then self-interest should motive idle rich — whether lounging in private beaches, or sitting in "quiet rooms" at beach-side hotels and not talking about the austerity-driven inequality that's shaking Greece to its foundations — to at least start paying attention. Joseph Stiglitz explained why in Vanity Fair, in May of this year.

From the left, meanwhile, the widening inequality often elicits an appeal for simple justice: why should so few have so much when so many have so little? It’s not hard to see why, in a market-driven age where justice itself is a commodity to be bought and sold, some would dismiss that argument as the stuff of pious sentiment.

Put sentiment aside. There are good reasons why plutocrats should care about inequality anyway—even if they’re thinking only about themselves. The rich do not exist in a vacuum. They need a functioning society around them to sustain their position. Widely unequal societies do not function efficiently and their economies are neither stable nor sustainable. The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price.

Ordinary Greeks are already paying a steep price for austerity and inequality. When the spark is lit, the bill may yet come due for Greece's own one-percenters.

Death By Austerity

Terrance Heath — Tue, 25 Sep 2012 03:35:22 -0400

Americans now stand a greater chance of dying from the effects of austerity than being killed in a car crash. At least that's what a new report suggests, if you read between the lines. The study, authored by a West Virginia University professor and published in the American Journal of Public Health last week, says that suicide now kills more Americans than car crashes. While the study doesn't draw a direct connection between the recession and the spike in suicides over the last ten years, it really doesn't have to.

More Americans now commit suicide than die in car crashes, making suicide the leading cause of injury deaths, according to a new study.

In addition, over the last 10 years, while the number of deaths from car crashes has declined, deaths from poisoning and falls increased significantly, the researchers report.

"Suicides are terribly undercounted; I think the problem is much worse than official data would lead us to believe," said study author Ian Rockett, a professor of epidemiology at West Virginia University.

...For the study, Rockett's team used data from the U.S. National Center for Health Statistics to determine the cause of injury deaths from 2000 to 2009.

The leading causes of unintentional deaths were car accidents, poisoning and falls, and for intentional deaths they were suicide and homicide.

Deaths from intentional and unintentional injury were 10 percent higher in 2009 than in 2000, the researchers noted.

And although deaths from car crashes declined 25 percent, deaths from poisoning rose 128 percent, deaths from falls increased 71 percent and deaths from suicides rose 15 percent, according to the study.

Can it be a coincidence that the rise in U.S. suicides occurred simultaneously with America's biggest economic crisis since the Great Depression — when millions of Americans found themsleves suddenly facing foreclosure, long-term unemployment, homelessness, and hunger? Possibly, but a significant increase in suicides doesn't "just happen," anymore than do economic meldtowns. As with any other socio-cultural trends, there are likely to be one or more factors driving it.

You don't have to be a college professor to connect the dots. Back in April, I began writing a series of posts about the human costs of austerity in Europe, after the suicide of 77-year-old Green pensioner Dimitris Christoulas made headlines around the world. Christoulas set his suicide in the context of the devastating conesquences of austerity for Greek citizens when he chose to take his in a public square located near Parliament, and left a suicide note directly blaming the government's austerity measures for the desperation and despair that pushed him to take his own life.

Christloulas' public suicide, and his posthumous indictment of the Greek government's austerity measures sparked protests from middle- and working-class Greeks who bear the brunt of Greece's austerity-shrunken economy, and its 21% unemployment rate (51% for Greeks between the ages of 15 and 140). It also reflected an increase in suicides not just in Greece, but across Europe — in every country caught in the vice grip of austerity.

Austerity has brought another change to Greece. Prior to 2007, suicides among Greeks under 65 fell sharply. In face, Greece had the lowest rate of suicides. Not surprising since suicide is so deeply stigmatized in Greece that the Greek Orthodox Church rejects the bodies of suicides for burial.

The economic downturn reversed that trend, as suicides increased among people under 65 increased between 2007 and 2009. The increase coincided with a 35% increase in suicides across the EU, with the sharpest increases in Greece, Ireland and Latvia — three countries in which people live under severe austerity policies. Of the three, Greece leads the pack with the fastest rising suicide rate in the EU — a 20% increase from 2007 to 2009.

Austerity has added its impact to the that of the economic crisis, to overcome the cultural stigma against suicide. Greece's suicide rate has increased 40% since 2009. Perhaps what made Dimitris Christoulas different from so many others was that he chose to meet his end, not in some quiet room, but practically on the doorstep of Greece's government.

As I wrote back in April, America is not Greece. Americans' have yet to experience the soul-crushing brand of austerity that has become the "new normal" for Greek citizens.

Since imposition of austerity upon Greece, there has been no shortage of news stories the impact on ordinary Greeks.

In Athens, police spent five hours talking Lambrousi Harikleia down from a ledge. Harikleia threatened to jump from the the Labor Housing organization building, after another harsh round of cost cutting threatened to lay off workers at the agency where she and her husband worked.

Last month, 61-year-old father of two Dimitrios Manikas shot and wounded his former boss and another worker, and took a third worker hostage at a small factory in Greece. Manikas, who had been laid off from his job about seven months earlier, was said not to have eaten for four days, and demanded back pay the company said was not owed to him.

Just before Christmas, a teacher in Athens found a note attached to one of her pupils. It read, "I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry. Her mother." This is not an isolated incident, but is becoming more common because austerity has left many Greek parents too poor to care for their children.

In the City of Perama, things have gotten so bad that some are calling it a humanitarian crisis. Almost 60% of the population is unemployed, nearly triple the national average. Thousands are unable to buy food, parents often send children to school hungry, and some families have been without electricity for five to eight months.

Greek doctors report seeing more sick children, as parents are unable to pay for health care. Drug shortages have made common drugs like aspirin increasingly harder to find.

Thousands of Greek workers have left the country in the past year. Applications for work permits to countries like Australia and Canada have doubled. For many, returning to Greece is not on the horizon. One worker put it bluntly: "There is no work, there are no services. What is there to stay for? …Even if we do find jobs, there is no way to earn a sustainable living any more"

Support for Greece's mentally ill has disintegrated after two years of austerity. Staff shortages and facility closures have left many mentally ill stranded on the streets. Many remain there because their families can't afford to help them.

The Guardian's Jon Henley travelled through Greece and recorded his experiences in a searing series of reports he titled "Greece on the Breadline." Reporting a mixture of fury and solidarity among Greeks, hears from them how austerity has changed their lives. In Athens, a woman who uses her professional experience to coach the unemployed asked, "[W]hat kind of society have we become, that we are kicking homeless pregnant women on to the streets?" He finds the school children of Athens are too hungry to underfed to do P.E. In Thessaloniki, a student postponed lessons to get in line for potatoes. Young people in Athens — raised with an emphasis on education and a "career mindset" — spoke of living with their parents again, taking odd jobs just to survive, and declared "We've watched our futures go up in smoke." Across the country, "savage cuts" in Greece's health services budget have allowed HIV/AIDS and malaria to make a comeback. Newborn testing for up to 40 diseases like cystic fybrosis and sickle cell are "effectively grinding to a halt, ensuring that children will die from diseases that are easily detected and treated.

Is it any wonder that desperation times have led some Greek citizens to commit desperate acts?

Given the impact of recession on the lives of millions of Americans, it's a wonder we haven't seen more people taking the kind of desperate measures on the rise in Europe.

We have been surrounded by the results so long that — except in cases like the Tuscon shooting — we can easily miss them, because they are becoming our "new normal," of "anxiety, distrust and an array of mental and physical ailments."

A majority of Americans, 57%, cited economic conditions as a cause of stress in their lives.

The Substance Abuse and Mental Health Services Administration reported that 1 in 5 Americans had some form of mental illness in 2009, a slight increase over the previous year.

Meanwhile, states facing budget crises are cutting back on mental health services. (Such was the case in Pima County, AZ, where the Giffords shooting occurred, and which dropped nearly 50% of its mental health services.)

Drug and alcohol consumption are proving recession-proof. Americans' drinking habits have not only remained steady during the recession, but more people are drinking, and more doing their drinking at home, alone. Meanwhile, illegal drug use has increased, particularly marijuana, ecstasy, and prescription drugs.

In states like Oregon, suicide and drug and alcohol help lines have experience marked increases in calls, along with other mental health services, at the same time that state have fewer resources to support such services.

We may not know for some time exactly how much the recession has fueled suicides or suicidality, but early data suggests that suicides have risen during the recession. In many cases job loss or financial devastation were cited as "last straw" events.

Foreclosure-related suicides became regular news items, as waves of foreclosures spread across the country.

Likewise, reports of workplace violence became more common during the recession, as unemployment rates remain at record highs.

Family-related violence seems to have gone up, with increases in reports of domestic violence and child abuse.

Combine all of the above with the easily obtained firearms, plus the 250 million already in private hands, and even with out the addition of inflammatory political rhetoric, it's almost a miracle that we haven't seen more violence events like the Tucson shooting — a miracle, or just an run of incredibly good luck. All it takes is a spark, after all.

Conservatives claim they are not to blame if someone who may be mentally unstable takes their rhetoric "the wrong way," and acts out violently. But they are accountable, as all politicians should be, for using rhetoric responsibly, and dousing the fire when the ballots are counted and the results finalized — before the flames grow into a destructive force.

Yet, Americans have shown similar symptoms of austerity-driven desperation.

To anyone paying attention, the link between the recession and body count on Main Street, is as obvious as the wailing sirens, flashing lights, and crime scene markers that may be coming to a neighborhood near you. The stories of foreclosure driven suicide are as old as the once headline-making suicides of Raymond and Deanna Donaca, Carlene Balderama, the attempted suicide of Addie Polk, and the Karthick Rajaram murder-suicide. It's also a new as stories of foreclosure-driven "suicide-by-cop" in the cases of James Ferrario and Kurt Aho.

As early as 2008, seven in ten Americans were worried about maintaining their standard of living in the midst of economic crisis. As CAF noted at the time, in a report titled "The Stress Test," seven years of conservative economic policies leading up to the crisis left living standards under stress after the crisis hit. Nearly four years later, foreclosures are a symptom of our untreated economic sickness, and the American Psychological Associations Annual "Stress in America" report, indicates that money, work and the economy are the most frequently cited causes of stress for Americans — and have been for the past 5 years. It's also making us mad. The APA reports that "irritability or anger" tops the list of reported symptoms of stress, followed by "feeling nervous or anxious," and "feeling depressed or sad."

Foreclosure suicides are just one indicator. "Going postal" has been a frightening reality in American workplaces at least since the term was first coined in 1986, but experts see the recession playing a role in recent incidents of workplace violence like the 2010 shootings in Manchester, Connecticut, and St. Louis, Missouri.

Thus far, Americans have been spared a full-tilt, Euro-style austerity debacle. Instead, we've had the next-worst thing; what Paul Krugman called a "de facto austerity", in the form of "huge spending and employment cuts at the state and local level." This "de facto" austerity is largely the result of conservatives obstructing of any and all job creation bills — including proposals to keep teachers, police officers, and fire fighters working — and demanding cuts that would cost hundreds of thousands of state and local jobs. The result is a loss of some 440,000 federal, state, and local government jobs, accounting for more than half of jobs lost in many states.

At the state level, government accounted for more than half of all job losses for industries that lost jobs since Aug. 2010 in 27 states, and made up 100 percent of losses for industries that lost jobs in Arizona, Idaho, Massachusetts, North Dakota, Oregon, Pennsylvania, and Texas. Government losses also made up more than 50 percent of losses in seven of the 10 states with the largest number of jobs lost, and six of the 10 states with unemployment rates above 9.5 percent.

Of course, the private sector will absorb some of these losses and thankfully we have seen a positive net change in employment for most of these states since Aug. 2010. But make no mistake, the idea that drastic cuts to public budgets would somehow spur private-sector growth is a myth that has undermined recovery efforts both in the United States and in Europe. In reality, cuts to public-sector budgets have a significant negative private-sector impact. As my colleague Ethan Pollack has demonstrated, "for every dollar of budget cuts, over half the jobs and economic activity will be lost in the private sector." Net change in employment since Aug. 2010 may be positive for most states, but it's frustrating to think how much better these job numbers might be if we hadn't spent the past 16 months shooting ourselves in the foot.

How much worse can things get if the result of the election is an economic agenda that slashes public sector spending, bleeds the public sector even more, increases unemployment, hobbles what currently passes for a recovery, aand primarily benefits Wall Street and the one percent? Take a look at what's happening in Europe, and what starting to happen here, and it isn't hard to guess.

The New Austerity Campaign

Digby — Mon, 13 Aug 2012 12:12:42 -0400

I see that the New York Times is helpfully reframing the election away from jobs and the economy. Here's the headline on the dead tree version:

"Romney chooses Ryan, pushing fiscal issues to the forefront"

Huzzah. As Tristero points out below, this would be a lot less scary if the debate wasn't going to be between the moderate centrist plan for a "balanced approach" that slashes vital government programs in exchange for some ephemeral tip money from millionaires in the middle of an historic slump and a radical right wing plan that simply slashes vital government programs in the middle of an historic slump. In my view, that's a losing debate no matter who wins.

The idea that this election will now be about deficit reduction is almost impossible for me to believe, but the Obama campaign believes they can win on this turf and I assume that's correct. After all, Ryan is an extremist on these issues and it's going to be impossible for Romney to disavow his extreme plan. The problem is that the Obama balanced approach is a terrible alternative.

We are in the midst of a long and painful economic downturn. It's barely improving and the rest of the world is likely going to be a further drag on it as it goes back into recession, largely as a result of their idiotic austerity programs. Interest rates are at historic lows and the United States can borrow as much as it needs. It's insane to be talking about deficit reduction at a time like this.

I just don't know if we're better off having a national discussion about it on the off chance that Democrats feel bound to publicly defend the government programs people depend upon or whether it was better to leave it up to the elites to do their backroom deals in the lame duck and spring it on the people as a fait accompli. The first would seem to be preferable, but I loathe the idea that the president will be able to rally the people behind his "balanced approach" as part of the electoral bandwagon to defeat something worse. The one thing we might have had going for us was the people's unwillinginess to sacrifice their own futures on the rotting corpse of the confidence fairy. If the president gets a mandate, I fear the worst.

But the Peterson runaway train was gaining speed, so maybe there's just no stopping it anyway. Which is also nuts. After all, we don't actually have to pass a deficit reduction plan right now and even if we did it wouldn't actually have to degrade the social safety net. So maybe it's worth taking the chance that the Democrats will be forced into a corner by the demands of the election and defend the people's interests.

But sheesh. When we look back this will be seen as a time when the everyone in the corridors of power fiddled while their countries burned.

Here's Krugman with a reminder of how well all that's worked so far:

A further thought on the observation that Britain’s slump has now gone on longer than the slump in the 1930s: it’s worth remembering the rapturous reception the Cameron austerity program received here, not just from the right, but from centrists. Here’s David Broder:

Cameron and his partners in the coalition have pushed ahead boldly, brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.

Heh heh, silly economists. Broder went on to urge Obama, after his salutary midterm defeat, to “do a Cameron” and agree to sharp cuts in the welfare state.

And he did. It's just that the Tea Partiers refused to take yes for an answer. Perhaps the defeat of the Romney-Ryan candidacy will make them even less inclined to do it after the election. But that's a very thin reed to hang on to.

Fear, Loathing & Austerity In Ireland

Terrance Heath — Thu, 31 May 2012 14:53:14 -0400

Before Greece, before Spain, before Germany, France, or even Britain there was Ireland. Just two years ago, the Heritage Foundation placed Ireland in the top ten of its "Index of Economic Freedom." That was two years after the "Celtic Tiger" that was the Irish economy had been effectively neutered. After a bubble-driven boom similar to ours, Ireland became the first Eurozone country to enter a recession in 2008 — its first in 25 years. What Heritage called "sharp economic adjustments" in 2010 turned out to be the first step down Ireland's road to ruin, and the beginning of "Disaster Capitalism's" catastrophic success in Europe (also known as "austerity").

Whether the American conservatives keep referring to to Ireland as a "success" because or in spite of the above, it Ireland may yet join the Eurozone's austerity backlash. Then we'll find out if the "Celtic Tiger" has been declawed as well as neutered, and just how catastrophic austerity's "success" has been for the Irish.

It looks like the Irish are going to get what the Greeks did not — a say in their own destiny. Serious changes to the constitution in Ireland require a referendum, and the Irish are going to get one.

So far, five countries have ratified the Fiscal Treaty — the agreement pushed by Chancellor Angela Merkel, and given a preliminary nod in December — requiring countries to limit their deficits and debt, or else face heavy penalties.

This week the Irish get to have their say. While the other countries simply need parliamentary approval, in Ireland the decision is being made via a referendum. In February the Attorney General advised the government that a public vote was needed, as any significant changes to the constititution in Ireland require a referendum.

Unlike the votes on the Lisbon and Nice Treaties, both of which the Irish rejected on the first go, there is no veto this time. The Fiscal Treaty comes into force when 12 of the 17 euro zone members ratify it.

The latest polls indicate that the Irish are going to vote in favor of austerity, bucking the recent voting trend in Greece, France and even Germany. But that doesn’t mean that the Irish are enthusiastic adherents of Merkel’s belt-tightening fixation.

As much as anything, the Irish referendum could be described as a battle between fear and anger.

Much like the stages of coping with grief — denial, anger, bargaining, depression, and acceptance — coping with austerity comes with its own stages, including desperation, despair, detachment, and indifference. (In fact, today austerity often acts as a catalyst for the kind of life-changing events —sickness, death, divorce, and unemployment — that usually kickstart the cycle of grief.

As with grief, countries may go through the stages of coping with austerity in random order, linger in some stages, and skip others altogether. In the last month or so, a number of Eurozone countries have entered the "anger" stage of coping with austerity; a stage I like to call "defiance." That anger has found expression in protests and demonstrations that have toppled governments as citizens stand in defiance of what Dr. Adnan Al-Dani calls "The Economics of the Madhouse."

I do not know about you but I am finding myself baffled, irritated and confused by the World Bank, the European Central Bank (ECB), the IMF and a few other acronyms that seem to dominate the news. I did not vote for any of these organisations, so why do they have such an influence on my life, the lives of the rest of the British public, and the lives of hundreds of millions across the globe. They seem to be running the world. How did it come to this?

What sort of a system have we created that gives so much power to these people? How is it that these people, who are entrusted with the money made by working people, end up gobbling up the money for which people have laboured so hard? How were they ever allowed to have such a stranglehold on the lives of millions?

Where were the people we elected to look after us when such a distorted, corrupted form of capitalism was being developed? Were they incompetent, or have they become part of an oligarchy that enriches them as well as the gamblers of the market? Money exists to make it easier for the real wealth creators to serve society: those who labour by brain and brawn to enhance and improve our existence. How is it that such a basically simple operation of distributing our money to wealth creators became so complex? Of course we know why; this complexity is the method through which the public are deliberately hoodwinked for the “moneymen” to siphon off the money for themselves.

The Irish, this week, will choose which stage they will enter next: "anger" or "acceptance." As the Salon article above says, it's an important vote, not just for Ireland, but for the fate or Eurozone austerity itself. Which way Ireland goes will depend on what motivates the Irish more: anger over the devastating impact of austerity, or fear of the consequences of rejecting austerity and losing access to the Eurozone's permanent bailout fund (not to mention the "confidence" of foreign investors.

It's an important vote, because it will indicate whether the "shock" (see Naomi Klein's The Shock Doctrine) has finally taken in Ireland. You see, despite "terrible ugliness" born of austerity in Ireland — 14.5% unemployment, a 3.8% drop in retail sales on basic goods, wage and welfare cuts, growing deficits, an exodus of young people and skilled workers, etc. — Ireland has always played the "good boy role." The initial flare of protest morphed into resignation, as the Irish voted out the government that imposed austerity only to go on living with those same austerity policies.

If the the "shock" takes in Ireland, if Ireland submits to the "fiscal straightjacket" planned for it, it could signal that the country has moved on to "acceptance." That's good news for the austerians.

Does the latest wave of uprisings finally sound the death knell for austerity? Not if austerians stay the course, and don't get spooked by protests in the streets and at the ballot box. If their protests have no impact, and austerity happened anyway, people will go home. They'll forget about solidarity, worry more about survival, and arrive at the next phase of austerity's impact on their lives.

Good news for the austerians may be bad news for the Irish. In the stages of coping with austerity, "acceptance" translates into "defeat." If you want to know what that looks like, here's a snapshot of another country on the Heritage Foundation's hit parade in 2010.

If the Irish government wants to know the potential cost of austerity, it need look no further than Lithuania (#29 on the Heritage index) to see what austerity looks like.

Faced with rising deficits that threatened to bankrupt the country, Lithuania cut public spending by 30 percent — including slashing public sector wages 20 to 30 percent and reducing pensions by as much as 11 percent. Even the prime minister, Andrius Kubilius, took a pay cut of 45 percent.

...But austerity has exacted its own price, in social and personal pain.

Pensioners, their benefits cut, swamped soup kitchens. Unemployment jumped to a high of 14 percent, from single digits — and an already wobbly economy shrank 15 percent last year.

Remarkably, for the most part, the austerity was imposed with the grudging support of Lithuania’s trade unions and opposition parties, and has yet to elicit the kind of protest expressed by the regular, widespread street demonstrations and strikes seen in Greece, Spain and Britain.

...Indeed, outside of Ireland, no country in Europe has come close to replicating Lithuania’s severe spending cuts without the aid of the International Monetary Fund. Ireland passed the most austere budget in the country’s history, and public sector pay cuts were a centerpiece of the government’s reform effort.

...“From a credit rating perspective, Lithuania has put itself on positive trajectory,” said Kenneth Orchard, a senior credit officer in Moody’s sovereign risk group.

As European nations consider what the social and political costs will be when they take steps to cut public sector spending, Lithuania offers a real-time case study of the societal trade-offs.

If the Lithuanian population has yet to engage in the kind of protests seen in Ireland and elsewhere, perhaps that's because the Lithuanian people have finally been broken sufficiently to simply accept what the government and global market deem their fate should be. Hopelessness has yielded to despair for some, fueling the increase in Lithuania's suicide rate, which was already among the highest in the world.

For others despair yields to resignation, summed up by one Lithuanian pensioner:

Mecislovas Zukauskas, 88, a retired electrician, has lived through the devastations of World War II, the Soviet occupation and, most recently, the death of his wife. He is taking his pension cut in stride.

“The government does what it wants to do,” he said. “We can do nothing.”

That's "acceptance" — or defeat. Take your pick.

The Austerity Trap and the Jobs Deficit

Robert Borosage — Thu, 17 May 2012 14:15:31 -0400

The dire threat facing America, according to Mitt Romney and Republicans this week, is debt, not mass unemployment.

We face "a prairie fire of debt," Mitt Romney warned in Iowa. Debt is "a grave threat to freedom," intoned House Speaker John Boehner in Washington, while threatening to hold the country hostage again over raising the debt ceiling in December.

In the Senate, Republicans forced votes on the House Republican budget that would gut Medicaid, cut all of the domestic services of government by one-third, enact deep cuts in food stamps, college grants and loans and more. (Even five Republican senators—including two in competitive races —couldn't stomach that).

First Things First

There are only two problems with this. Reducing deficits isn't actually the first priority of Romney or Republicans. And the plans they champion will surely cost jobs, and most likely add to the debt burden.

Before dealing with the "prairie fire" that threatens the nation, Romney and Republicans want to add fuel to the flames. Their first priority is spending more money on the military and collecting less money from the rich and the corporations.

Romney's tax plan would cut revenue by some $4.9 trillion over a decade, less some unspecified loophole closings. Millionaires would pocket an average tax cut of $250,000 and those making $10,000 to $20,000 per year would end up paying an average $174 more in taxes.

If Social Security and Medicare were protected for those near retirement, as Romney sometimes suggests, then the domestic side of government—everything from the FBI to food safety to Medicaid and food stamps—would have to be cut by over one half in 10 years. Romney can sell that plan only by denying its effects.

The Austerity Temptation

This Republican extremism tempts Democrats to offer alternative plans for austerity. Because Democrats are prepared to raise taxes on the rich and put a lid on military spending, they can reduce deficits without ending Medicare or eviscerating all government services.

Their position of "shared sacrifice" is much more popular in the polls. Two-thirds of Republicans support a mix of spending cuts and tax hikes to reduce the deficit. And in any "grand bargain," the President can put everything on the table, and expose Republican hypocrisy on deficits and extremism on taxes. Many Democrats relish a face-off on austerity.

The Austerity Trap

But arguing about austerity is a trap—because what the economy needs is jobs and growth.

The best deficit-reduction program is to put people to work. Americans would prefer to cash paychecks and pay taxes than to collect unemployment insurance and rely on food stamps. When people go back to work, government revenues go up and expenditures go down. No measure will do more to reduce deficits. A full employment economy erases more than a third of the deficit. With a stronger workforce, we could focus on the real source of our long-term debt problem: the soaring costs of our broken health care system.

But when Democrats focus on the austerity debate, they get tongue-tied about jobs.

With the Federal Reserve already keeping interest rates near zero, there are only two major theories about how to generate job growth.

One view is what has infamously become known as the oxymoronic "expansionary austerity." The argument is that if you cut spending, taxes and deficits and roll back regulations, businesses will gain the confidence to invest and hire.

The alternative suggests that business owners don't lack confidence; they lack customers. With mass unemployment, businesses sit on profits; the rich move money elsewhere. So the government must act to put people to work.

With money "cheaper than free," (that is, the government is able to borrow at interest rates lower than the rate of inflation), there will never be a better opportunity to rebuild America, launch a major program to renovate our decrepit public infrastructure and put a construction industry that is flat on its back to work. Add to that revenue sharing so the states can rehire teachers and cops, and a Veteran's Corps and Urban Corps to directly employ veterans and young people. Accelerate refinancing and mortgage relief for underwater homeowners. Keynesians would pay for this by borrowing the money, but even if we taxed the wealthy and corporations to use the money they are sitting on, we'd still generate more jobs, and then more revenue and less spending—and in this way lower deficits.

Romney and the Republicans champion expansionary austerity. But we've had a real-world experiment in such austerity in Europe. While Obama resisted Republican calls for drastic budget cuts, Britain's conservative coalition government embraced them. This approach drove Britain back into a recession, increased misery and will likely end up raising, not lowering, its deficits and debt burden. Across Europe, we've seen that austerity in a weak economy is like bleeding a patient just recovering from an operation. It's dangerous to your health.

But Democrats are virtually silent about their jobs agenda. Obama put a decent one out last fall and campaigned for Republicans to pass it, but hasn't said much about it recently. When Republicans failed even to pass a decent transportation bill—traditionally a bipartisan jobs bill—the White House barely took note.

At present, the Obama campaign seems intent on selling the growth we have. "We're on the way back." But with mass unemployment, wages still not keeping up, and home prices still in the pits, momentum is not an answer.

Americans are naturally skeptical about Romney's trickle-down promises. We've been there, done that. A few made out like bandits; 99 percent didn't share in the rewards.

Democrats need to lay out a big argument on jobs first as part of building a new strategy for the economy. They must challenge Romney's hysteria and hypocrisy on debt not with a better austerity plan, but with a plan for an economy that works for working people. A mandate from voters for jobs first will be vital when the lame-duck Congress confronts the fiscal train wreck after the election, and jobs first is the only sensible way to begin getting our books in order.

Why We Have A Deficit

Dave Johnson — Mon, 14 May 2012 12:40:44 -0400

Deficit theater is coming to DC tomorrow, with a well-funded "fiscal summit." The plot summary is that we have Deficit Trouble - Right Here In River City! so to fix it we need to cut Social Security and Medicare and the things democracy does for We, the People -- while cutting taxes on the rich and their corporations to make us more "business-friendly." (This musical is sometimes billed as "Simpson-Bowles" but it's the same old song.)

All of this deficit hysteria today - when just over ten years ago we had such a large budget surplus that we were projected to pay off our entire debt in ... ten years! That's right, Ten Years Ago We Were Paying Off The Nation's Debt. But Then We Elected Obama.,

Just ten years ago this country was running huge surpluses and paying off its debt. But then we elected Obama and all hell broke loose. Oh, wait...

Between the time ten years ago when we had big surpluses and were paying off the debt and now when we are told the "Obama spending and deficit" mean we have to cut back on the things We, the People do for each other, something happened. Something changed. The things that happened, the things that changed, are being ignored in the current DC discussion about what we need to do to fix things.

Something happened. We had a surplus, and it was replaced by massive deficits. The last Bush budget year had a deficit of $1.4 trillion!

Why We Have A Deficit

What happened under Bush? We cut taxes on the rich and doubled military spending. (And started wars.) And don't forget collapsing the economy, forcing people onto unemployment and food stamps. That is why we have a deficit. We have a deficit because of tax cuts for the rich, huge military budget increases and the consequences of deregulating corporations.

Here are some questions for tomorrow's deficit theater:

How large was the country’s yearly budget deficit and total debt in the “Eisenhower/Truman” decades when the top tax rate was 90%?
Today we have an “infrastructure deficit” – the amount needed to repair our country’s roads, bridges, sewers, etc. – of somewhere upwards of $1.6 trillion. Was our infrastructure kept in good repair before the top tax rates were cut?
Concentration of wealth is long recognized as a threat to democracy, and now we are seeing a low-wage, everything-to-the-top economy with the greatest ever concentration of wealth going to a few at the top. Was the problem of wealth concentration increasing or decreasing before the top tax rates were cut?
When top rates were high people couldn’t take home vast fortunes in a single year. When it took several years to make a fortune did corporations depend on long-term or short-term thinking? Did the executives of corporations care if the infrastructure and communities their companies depended on were in good shape? Did large corporations fleece customers and exploit employees for quarterly returns as they do now?

How We Fix The Deficit

How do we fix this? Doesn't it make sense to look at what caused the deficits and fix that? There actually are budget plans that get rid of the deficit without cutting back on the things democracy does for We, the People. Here is a post about one of those budget plans: The People's Budget Balances The Budget -- Why Isn't It Part Of These "Deficit" Talks? Here is a post about another budget plan that fixes the deficit without cutting the thing democracy does for us Every Progressive Should Know About The “Budget For All”

So we know why we have a deficit, and we have realistic budget plans that undo the damage, maintain the things that democracy does for We, the People and invest in growing our economy. So why aren't these plans part of the big DC deficit discussion? Maybe progressive plans that cut the deficit are not part of the DC deficit discussion because cutting the deficit isn't really the point. This Deficit Story Can't Be Repeated Often Enough!,

So we went from big surplus to huge, huge deficits. Bush said it was "incredibly positive news" when we went back into deficit spending. He said it was good news because it continued the plan to use debt to force the government to cut back. He said that. It was the plan. (Don't take my word for it, click the links.)

The Reagan people said it too, back when they started the massive deficit spending. It was the plan: force the country into massive debt, "starve the beast," and use that to force the government out of business, or at least to be "small enough to drown in a bathtub." They forced the tax cuts and Reagan said this was "cutting the government's allowance." The point was to use revenue cutbacks to force government to shrink, to get out of the way of the 1%.

A Golden Oldie

From Dear Deficit Commission, It's Not Hard: (Click through to see bigger charts)

Dear Deficit Commission,

It's not hard to figure out why we have a huge deficit. It's so easy I don't have to use words. Here are some pictures:

Bill Clinton raised taxes on the rich. Bush cut them.

Now, about that huge national debt...

The second chart kind of explains itself. The third chart can help you find a place to get some money:

(Note: There is no more Soviet Union.)

In case that isn't clear enough, try this:

Let me know if you still have any questions.

We had a budget surplus. We were paying off the debt. Then something changed. If you want to fix the deficits, change it back.

Don't fall for it. Deficits were the plan. Run up the borrowing, then come back with a scare campaign that stampedes people into accepting cuts in the things democracy does for We, the People. It was the plan.

If You Happen To Be In DC Tomorrow: May 15: Stand Against Austerity:

May 15, 2012 at 1 p.m. (Program starts 1:30 p.m.)
In Front Of the Peter G. Peterson Foundation Fiscal Summit
1301 Constitution Avenue NW, Washington, D.C.

Here's one of those charts again, larger:

Show Peter Peterson We Reject His Elite Austerity Consensus

Roger Hickey — Sun, 13 May 2012 23:25:20 -0400

On Tuesday, May 15, one of America's wealthiest men, Peter G. Peterson, will use his foundation's money to lecture the rest of us about why the federal deficit is the most serious problem facing our country.

Since poll after poll demonstrates that strong majorities of Americans care far more about high unemployment and slow growth, Peterson's major strategy is to put on a show aimed at demonstrating that all the "serious people" – the elite of both political parties – have already agreed that the deficit is such a threat to America that we must slash public spending and "reform" entitlements. (That's a fancy way of saying cut benefits, raise the retirement age for Gen Xers and Millenials, and dismantle Medicare for these future seniors, as Cong. Paul Ryan and just about all Republicans have proposed.)

I'll be outside Peterson's Fiscal Summit, with Senator Bernie Sanders, and lots of friends who don't agree with Peterson's elite consensus – including leaders of the Campaign for America's Future, Health Care for America Now, CREDO, Social Security Works, the National Gay and Lesbian Task Force, National Committee to Protect Social Security and Medicare, and NOW - and lots of other folks concerned about our country. If you don't believe Peterson speaks for the American majority, come on out. We start at 1 p.m.

To repeat, Pete Peterson knows most Americans want action to create jobs, not spending cuts, so in search of an inside-the-Beltway consensus, he tries to find a few important Democrats who will come and pretend that the kind of budget austerity that has wreaked European economies – and is being rejected by voters around the world – should still be the priority for the U.S. economy.

Unfortunately, one of the key Democrats Peterson has lined up is Obama Treasury Secretary Tim Geithner – and there is no telling what Geithner is likely to say. What every Obama Administration spokesperson should be saying is, "We need to invest more in jobs creation – and aid to states to prevent layoffs of teachers and cops and firefighters. And if we can get more Americans back to work, the deficit will come down because we'll all be paying taxes."

But Geithner might just easily say something that undercuts that clear, winning Democratic message. He could do what many budget hawks have been urging and call a post-election "grand bargain" that would prioritize deficit reduction by embracing the proposals of former Sen. Alan Simpson and investment banker Erskine Bowles, whose ideas were rejected by the members of the commission that bore their names.

Simpson and Bowles proposed raising the retirement age for young people now in the workforce - and weakening the cost-of-living index for everyone. That means a big Social Security and Medicare benefit cut for people who will have few other retirement and health security plans for their senior years. If Tim Geithner embraces these kinds of big cuts to these crucial programs, the political impact will be to undermine Democratic chances to take back the House and keep the Senate in 2012.

Rep. Chris Van Hollen, who is also speaking at the Summit, should certainly care about Democrats like Geithner rejecting this kind of "bipartisan" consensus as a guide to what they should do in the lame duck session after the election. If he wants to be helping Nancy Pelosi to lead a strong Democratic majority after the election, he should be urging his fellow House candidates to reject this kind of deal – and to campaign like the successful Democratic special election candidate in New York, Kathy Hochul, who won by promising, "We will not cut Social Security and Medicare in order to pay for tax cuts for millionaires."

Speaking of tax cuts for millionaires and corporations, Simpson and Bowles are praised by Peterson and others for daring to increase taxes to reduce deficits, breaking with the quasi-religious conservative oppositions to raising any taxes at all. Actually, they propose the same counterintuitive approach as the Ryan budget plan: lowering tax rates, particularly those on the top. What my CAF partner, Robert Borosage, said at the time applies equally to the Ryan plan: "They promise the lower rates will be accompanied by cleansing the tax code of various tax deductions and expenditures that mostly benefit the rich ... Only we've played this game before. In the 1980s, bipartisan reforms lowered tax rates across the board, particularly those on the top, and cleansed a tax code riddled with corporate and fat cat deductions. And then Lucy pulled the football. They eliminated the deductions but not the corporate lobbyists." The rates stayed low but the deductions came back.

Democrats should join the voters and call for raising taxes on the rich and the big corporations - not cutting them in the name of deficit reduction.

I've been to Peter Peterson's fiscal summits in the past – and I can imagine what the reaction of his public relations team will be to our gathering outside:

1) They will allege that we oppose all deficit reduction plans – especially those that tackle the "entitlements crisis." Our answer is clear: We do oppose cutting Social Security benefits because that system is not in crisis and can be solved by raising the cap on the Social Security taxes rich people pay. We do oppose cutting Medicare and Medicaid, because a civilized society should cover the costs of health care for seniors and the poor. However, our approach to deficit reduction involves a.) steps to spur growth and jobs; b.) real tax increases for the rich and the corporations; and c.) support for stronger health care reform aimed at getting the America's overall health care costs in line with other advanced countries. If we did that, our long term deficit problem would disappear. And I will bet that nobody speaking at Peterson's "Summit" will argue that crucial and clear approach to deficit reduction – because it means tax justice and taking on the drug and health care monopolies.

2) They will patronize us, pretending that Pete Peterson himself agrees there are times when job growth and economic stimulus must come before deficit reduction. But this is meaningless lip service. How many of Peterson's hand-picked Summit speakers will call for vigorous political action to pass a new round of stimulus and job creation measures? No, the real purpose of this Summit is to convince the media that – after a long period of slow growth, growing inequality, and polarized politics – leaders of both parties will come together after the election around a plan that kills the economic recovery through drastic spending cuts and undermines the Social Security, Medicare and Medicaid programs that actually help most Americans survive in bad times. This meeting will not issue a rallying cry for bold growth policies to put America to work. And we should try to make sure that Democrats do not buy into what the organizers are selling – because the voters certainly won't.

One more thing Peterson has been selling: House Budget Committee Chairman Paul Ryan. Even many deficit hawks have attacked Ryan's budget plan – supported by almost all Congressional Republicans – because its tax cuts and unspecified and unlikely loophole closings would make the deficit much worse. Democrats claim they will run against the Ryan budget as the epitome of everything wrong with the Republican party, as it is. Yet at the last Peterson Summit, a year ago, former president Bill Clinton came to the defense of Paul Ryan and his plans for Medicare.

At this Summit, Rep. Chris Van Hollen, a progressive Democratic leader (and ranking Member of the Budget Committee), is scheduled to engage in a "dialog" with Ryan. Van Hollen has so far done a good job at exposing the way the Republican budget slashes spending for the poor and middle class. Those of us outside the Summit will be hoping he stands up to Ryan by opposing job-killing austerity – and cuts to Social Security, Medicare and Medicaid. We'll see.

Note: It is wonderfully fitting that the Peterson Fiscal Summit will take place at the Andrew Mellon Auditorium, named after one of the wealthiest Americans of the 1920s and '30s, who, as Secretary of the Treasury, advised President Hoover to "liquidate labor, liquidate stocks, liquidate farmers, liquidate real estate... it will purge the rottenness out of the system." He advocated spending cuts to keep the federal budget balanced, and opposed fiscal stimulus measures. The result was the downward spiral known as the Great Depression.