There it is, up ahead — the freeway to the future! Yes, that’s the on-ramp we’ve been looking for. Fast lane, here we come! Whoa, are those… brake lights? Looks like a bunch of old white guys crammed into a Lincoln Town Car, arguing over the map. They’re trying to get on the freeway, going 20 miles an hour, and now they’re slowing down! Wait, those guys look familiar… Congress!
Yes, as America has tried to dig out of the crash of 2008, Congress has responded by hitting the brakes. It goes by the oxymoronic name of “expansionary austerity,” and lack of action has made it our nation’s de facto economic policy. It’s a textbook case of what economist John Quiggin calls “zombie economics” — any discredited economic theory that keeps attacking humanity and just will not die. Over the past couple weeks, even more stakes have been driven through austerity’s heart.
ITEM The Reinhart-Rogoff study, which claimed to prove that too much debt always results in economic decline, was shot down by grad students who figured out the pair of Harvard economists didn’t know how to build an Excel spreadsheet. Oops! That report had been Exhibit A among austerity evangelists.
ITEM New numbers were released showing that the two European nations that have taken the most drastic austerity measures — Spain and Portugal — saw their deficits deepen in 2012, when the key tenet of austerity economics is that all those painful cuts and 30 percent unemployment should have brought them smaller deficits. Again, oops!
Why the obsession with austerity? It’s worth mentioning that it only applies when a Democrat is in the White House; Republicans didn’t care about deficits or debt under George W. Bush. Also, there’s a false moralism to it — you’ve been wicked, America, so you must be punished. But the wickedest among us — speculators, big banks, mortgage lenders — were never punished. Instead, they were bailed out and are back to big bonuses.
To kill a zombie, you have to know what’s reanimating it. It’s simple: Republicans want to trim entitlements and shrink the social safety net. Austerity has been their (now fully blown) cover.
Instead of carefully growing our way out of this problem via sound economic theory, we’re sabotaging our own financial recovery. Now is the time to invest in employment, instead of hiding in our bunkers to wait this out. (Japan tried that, and it cost them more than 20 years of growth; now much of Europe is looking to dump austerity before it’s too late.)
America’s ready to jump into the fast lane again, but first we have to get that car full of zombies out of the way.