Austerity: The History of a Dangerous Idea

You right-wing Conservative, Tea Party types who are in favor of the austerity measures that your political leadership promotes here and around the country, need to read and re-read this book.  Thankfully, our founding fathers created a political system which prevent such measures from being fully implemented at the national level, allowing our economy to grow.  Not so in Europe where austerity measures continue to destroy their economy. Before you dismiss this book, take the time to research the author's background.

Austerity: The History of a Dangerous Idea

Conservatives today in both Europe and the United States have succeeded in casting government spending as reckless wastefulness that has made the economy worse. In contrast, they have advanced a policy of draconian budget cuts--austerity--to solve the financial crisis. We are told that we have all lived beyond our means and now need to tighten our belts. This view conveniently forgets where all that debt came from. Not from an orgy of government spending, but as the direct result of bailing out, recapitalizing, and adding liquidity to the broken banking system.

Through these actions private debt was rechristened as government debt while those responsible for generating it walked away scot free, placing the blame on the state, and the burden on the taxpayer. That burden now takes the form of a global turn to austerity, the policy of reducing domestic wages and prices to restore competitiveness and balance the budget. The problem, according to political economist Mark Blyth, is that austerity is a very dangerous idea. First of all, it doesn't work. As the past four years and countless historical examples from the last 100 years show, while it makes sense for any one state to try and cut its way to growth, it simply cannot work when all states try it simultaneously: all we do is shrink the economy. In the worst case, austerity policies worsened the Great Depression and created the conditions for seizures of power by the forces responsible for the Second World War: the Nazis and the Japanese military establishment.

As Blyth amply demonstrates, the arguments for austerity are tenuous and the evidence thin. Rather than expanding growth and opportunity, the repeated revival of this dead economic idea has almost always led to low growth along with increases in wealth and income inequality.

Austerity demolishes the conventional wisdom, marshaling an army of facts to demand that we recognize austerity for what it is, and what it costs us.

I know you Tea Party types harbor a lot of disdain for people with an education, especially if it's an Ivy League one. Click the link below if you're interested in a little background information on Mark Blyth.

Mark Blyth

Now that some time has gone by, we are getting a clearer picture of what happens when Republicans and Tea Partiers make tax cuts that primarily help the rich.

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What happened when Kansas cut taxes and California hiked them?

Sunday, June 26, 2016

by Jim Tankersley and Max Ehrenfreund The Washington Post

In 2012, voters in California approved a measure to raise taxes on millionaires, bringing their top state income tax rate to 13.3 percent, the highest in the nation. Conservative economists predicted calamity, or at least a big slowdown in growth. Also that year, the governor of Kansas signed a series of changes to the state's tax code, including reducing income and sales tax rates. Conservative economists predicted a boom.

Neither of those predictions came true.

The divergent experiences of California and Kansas run counter to a popular view, particularly among conservative economists, that tax cuts tend to supercharge growth and tax increases chill it.

California's economy grew by 4.1 percent in 2015, according to new numbers from the Bureau of Economic Analysis, tying it with Oregon for the fastest state growth of the year. That was up from 3.1 percent growth for the Golden State in 2014, which was near the top of the national pack.

The Kansas economy, on the other hand, grew 0.2 percent in 2015. That's down from 1.2 percent in 2014, and below neighboring states such as Nebraska (2.1 percent) and Missouri (1.2 percent). Kansas ended the year with two consecutive quarters of negative growth -- a shrinking economy. By a common definition of the term, the state entered 2016 in recession.

Other effects of the Kansas tax cuts, which were meant to spur entrepreneurship, are well-documented.

While state officials anticipated that the reductions would create a shortfall in the state budget, tax revenues have been consistently below even those expectations. Standard & Poor's and Moody's Investors Service have signaled that they could reduce Kansas's credit rating, indicating there is a chance the state cannot pay its bills.

On the whole, Kansas Governor Brownback's policies modestly increased taxes for the poor and working class, who pay more in sales taxes than income taxes, while reducing taxes drastically for the rich.

The poorest 20 percent of households -- those making less than $23,000 a year -- are paying about $200 more, on average, according to an analysis by the Institute on Taxation and Economic Policy in Washington. For the middle class, the changes have been a wash, with less-affluent households paying somewhat more and more-affluent households giving up a little less.

Meanwhile, the wealthiest 1 percent of households, those making at least $493,000 a year, are saving an average of $25,000.

Kansas's gross domestic product is still less than it was at the end of 2011. Meanwhile, the economy in the rest of the country continues to expand.

It is perhaps less remarkable -- or surprising -- that California has powered along.  The damage from California's deep housing crash has slowly healed in places such as the Central Valley.

Still, the noncoastal regions of California lag far behind Silicon Valley and Los Angeles in their job and growth recoveries. The state's median income remains below pre-recession levels after adjustment for inflation, although it still beats the national average.

Few, if any, economists would say today that the recovery has been sufficient for all Californians. But almost no one can say that raising taxes on the rich killed that recovery. Or that given a choice between the two states' economic performances over the past few years, you'd rather be Kansas.

SJ Link

Another year has gone by, so what's going on with Kansas's "turbocharged" economy?

Kansas Gov. Sam Brownback, Tea Partier Extraordinaire, has been rebuked by his own Republican Party, that's what.

Brownback's signature achievement was implementing austerity measures to produce what he said would be “a shot of adrenaline into the heart of the Kansas economy.”  

Brownback said tax cuts would pay for themselves.

Was Brownback right?

In a word... NO

This is what has happened in Kansas since Brownback's austerity tax cuts were implemented:

* Job growth in Kansas trailed the nation.

* Every month since, revenue has come in even lower than fiscal officials’ most dire expectations.

* Instead of "turbocharged" growth, to pay the bills, the state has had to divert billions of dollars of road funding.

* The state cut higher education funding

* The state cut social services

* The state reduced support for public pensions

* The state fell behind on pledges to improve funding of K-12 schools

So, what have Kansas Republicans been forced to do?

On 6/6/2017, the Republican-controlled legislature overwhelmingly overrode Brownback’s veto of desperately needed tax increases. The action rolls back much of Brownback’s 2012 tax cuts, producing a $1.2-billion shot of adrenaline for the state budget over two years.

There is talk that Brownback might not finish his term, and be rescued by Trumpery with a position in the Trumpery administration.

Reminds me a lot of LePig and Maine.

So, why is Kansas so important?

Because, Trumpery has the same plans for America as Brownback had for Kansas.

The one success Bownback had is Kansas was making the rich richer... at the expense of Trumpery supporters.

I hope they realize that, and soon.

What happened in Kansas is about to happen nation-wide thanks to the GOP and Trumpery's tax cuts.

Brownback said tax cuts would pay for themselves. They never do.

The stock market correction is the first symptom.