Voodoo Austerity

This seems to be the week in which two leading economists presented cogent arguments for why austerity is likely to impede economic recovery, rather than facilitate it. Paul Krugman’s analysis appeared as an online “preview” of the May 24 issue of The New York Review of Books, while Robert Reich offered his views in the Insight section of today’s San Francisco Chronicle. This is all very well and good, but these guys have been systematically ignored by not only all of those Republicans who have taken the oath to oppose any form of taxation but also the Obama Administration, which has basically sold its soul to Goldman Sachs.

Once again we have to recognize the basic lesson that explains why recovery has been so slow and ineffective for so many. It is not in the interest of those in power, regardless of political preference. The reason is that maintaining power is more important than facilitating recovery. Even if recovery would have the long-term effect of increasing growth (regardless of whether or not growth is preferable to economic security for the greatest number), power is always judged by short-term effects. In other words, any decision that does not provide shareholders with the performance numbers they want to see may lead to some decision-maker losing his/her grip on some corporate or governmental power structure. The greatest disaster to those in power is not economic depression or “social insecurity,” it is loss of personal power. Until someone is wise enough to figure out how to change the rules of this game, the behavior of the players who matter will not alter.