Under President Obama, however, the dire fiscal condition of state and local governments — the result of a sustained slump, which in turn was caused largely by that private debt explosion before 2008 — has led to forced spending cuts. The fiscal straits of lower-level governments could and should have been alleviated by aid from Washington, which remains able to borrow at incredibly low interest rates. But this aid was never provided on a remotely adequate scale.
This policy malpractice is doing double damage to America. On one side, it’s helping lose the future — because that’s what happens when you neglect education and public investment. At the same time, it’s hurting us right now, by helping keep growth low and unemployment high.
So, with austerity policies doing a double whammy on America, what is the proposed course of action by House Democratic Whip Steny Hoyer? Why of course, he's pushing for austerity! I mean, naturally, what else should one do under these circumstances? America is suffering, as Krugman points out, because the Federal Government is refusing to take advantage of very low interest rates to borrow money and then give that money to state and local governments.
As any parent knows, you can't re-do years of a child's life. Once their third grade has passed them by because the local government couldn't afford to keep their school in operation, you can't just hit a re-set button and re-do that year once properity returns. That year of the child's life is gone forever and the child will simply have to work harder to simply keep up with his or her peers who weren't deprived of that year of education.
Columbia University put out a study (PDF) on the job losses of the 1982 recession, showing that the long-term effects were quite bad and that they've lasted to this day. Earning losses for people who lost that year of employment were 30% and after 15 to 20 years, were still 20% lower than for their peers in similar economic circumstances.
But, the right wing says, we don't want to be "another Greece," now, do we? Greece is currently sufferings lots of economic troubles, true, but the CEPR pins the blame for those troubles on European Finance Ministers.
"Given the underestimation of Greek losses so far, and the recessionary impact of budget tightening, mass layoffs, a 20 percent reduction of the minimum wage, and other austerity measures – I think the pessimistic scenario outlined in the leaked document is a very plausible scenario," said Weisbrot.
"The bottom line is that you can't shrink your way out of a recession – you have to grow your way out. What they are doing to Greece really makes no economic sense. At this point, it looks like the economy would do better if Greece were to exit from the euro, as opposed to enduring indefinite recession and stagnation, extremely high and persistent unemployment, and increasing poverty. The European authorities are certainly pushing Greece toward the exit and default option." [emphasis added]
How's the American economy doing at this point? It's doing relatively okay, but not great and there might be serious trouble on the horizon. This is hardly the time to be engaged in budget-cutting and "other austerity measures," but that's apparently just what Hoyer is determined to do.
House Minority Whip Steny Hoyer (D-Md.) said Monday that he and other House centrists are working to put together a “concrete” deficit-reduction compromise...
What Hoyer wants is to contract the American economy at a time when we're hardly out of the woods, when we're nowhere near full recovery and when contractionary policies are absolutely the worst possible option on the menu right now. The recent announcement of the centrist Senator Olympia Snowe (R-ME) that she will retire prompted me to review how the centrists generally have done as far as progressives are concerned. Quite frankly, I think they've been pretty gosh-darned worthless and far too concerned with their own short-term political fortunes to give a hang about how America in general is doing.