Tuesday, March 12, 2013

Austerity Is The Problem - Not The Answer

The Republicans would like for us to believe that the path out of recession and toward prosperity is through austerity (cutting government spending). They say that once the budget is balanced, everything will be OK, and people will magically find jobs while the economy grows. That is nonsense. You simply cannot grow an economy by shrinking it, and that is exactly what cutting federal and state spending does -- it shrinks the economy.

Austerity did not work in Europe, and it is not working here. While the rich, the corporations, and Wall Street are making record profits, the rest of America still remains mired in the recession. Wages are stagnant (and some actually falling), millions remain unemployed, and poverty is still growing. Cutting government will not solve any of those problems. All it will do is provide an excuse for not making the rich and the corporations pay their fair share of taxes, which is really all the Republicans care about anyway.

According to the Labor Department, somewhere between 750,000 and 950,000 government jobs have been cut since 2009 (the employers report says 750,000 while the household survey puts the number at 950,000). That's a bigger cut in the government employment sector than for any other sector of the job market. And it has probably cost this country as much as it saved.

It has taken the salaries of those 750,000 to 950,000 workers out of the economy. Those workers can no longer spend to prop up businesses and create jobs (by increasing demand) -- and those workers are no longer paying taxes to help support federal and state programs. Instead, they are now on many of those programs (food stamps, unemployment insurance, free school ounces for their children, etc) -- programs they had no need for when they were working, spending, and paying taxes.

Now I know that some of you may think it is a good thing these workers are gone -- that they were somehow not needed anyway. But that's not true. We now have to make do with a lot less workers who performed essential tasks in this country (like police, firemen, teachers, etc.). We are not better off because these workers are unemployed -- and neither is our struggling economy.

In fact, if we had not laid off these workers, our unemployment rate would be significantly lower (see the chart above). Instead of the rate being 7.7% (as it currently is), it would be only 7.1%. That's still too high, but it's a lot better than 7.7%. And that's just using the smaller of the two figures (750,000).

Now with the sequester going into effect, there will be even more government job losses (at all levels of government), and economic growth will be stunted (or stopped altogether). We are not curing our economic ills with this austerity (although it may make Republicans and corporate moguls feel better). We are shooting ourselves in the foot -- damaging our economy to appease a right-wing ideology that has long been discredited.

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