Sometimes, the most urgent truths are rolled up and hidden away in the most apparently trivial news. So if I tell you that Moody's, the leading credit rating agency, has downgraded Ireland's debt, it sounds pretty irrelevant. In fact, if you unwrap and decode this story, you'll discover the reason why you are going to be more likely to lose your job or your home soon, if Obama doesn't unleash a new starbust of stimulus soon, or if the Republicans win.
The British finance minister, George Osborne, visited Ireland a few years ago to say it was a "shining example" for Britain to mimic. When the recession hit, the country's government immediately applied the medicine Cameron and Osborne are now imposing on Britain. They argued that when the economy withers, the government needs to react like any responsible family and cut spending to pay down its debt. They warned that if they didn't do it fast, the international bond market would charge Ireland more for its liabilities, and the debt burden would become intolerable. Better to purge now, so you can get back to fiscal health as soon as possible. "Look and learn from across the Irish Sea," Osborne said.
So they have brought this vision home. Britain shows what sudden cuts to pay down the deficit look like. Prime Minister David Cameron is ordering cuts of 25 to 40 percent in almost all departments. To give you a sense of how drastic this is: arch-Conservative Margaret Thatcher actually increased public spending by 1.1 percent in real terms per year.
The consequences? The National Housing Federation says the number of homeless people will double as a result of their slashing of housing benefit. Half a million children living below the poverty line are having free school meals -- the only nutritious meal of the day for many -- cancelled. The unemployed are having £6.50 knocked off the £65 a week they have to live on. Ian Duncan Smith says "tons of elderly people" are going to be forced out of their "underoccupied" apartments in run-down housing projects. The list is long enough for a dozen columns. One minister recently told the Times the rationale behind it off-the-record: "The undeserving poor," he said, "are undeserving."
Meanwhile, a recent Financial Times headline summarised the situation at the other end of the economic heap: "Well-paid breathe collective sigh of relief."
Before power, Cameron promised his cuts would not affect "frontline" services, but only the "backroom" and "waste." Now hospital bosses have drawn up plans to slash hip operations, cataract surgery, and the number of acute hospital beds. All frontline services are facing similar shut-downs. A detailed study for Oxford University led by Dr. David Stuckler calculates that there will be 38,000 premature deaths over the next decade as a result of all this -- due to the reduced healthcare, dismantled services for the elderly and vulnerable children, increased suicides, and so on.
The Republicans want to bring this vision from Ireland and Britain to the US. They say -- yes, this is rough, yes, it hurts, but it is for a necessary purpose. If we don't do it, the bond markets will downgrade our debt and we will be even worse off. Only austerity can hold off the prospect of a debt crisis.
So let's return to the truth buried in that little story on the financial pages. Ireland has been doing exactly what the Republicans urge, with a two year headstart. What are the results? Last week, a study by the International Monetary Fund -- nobody's idea of a left-wing pressure group -- found that country's economic collapse now "exceeds that being faced by any other advanced economy, and matches episodes of the most severe economic distress [anywhere] in post-World War Two history."
Why? During a recession, ordinary consumers quite sensibly cut back and spend less. But if the government does the same, it means nobody is spending. This is bad enough for all the people who suffer immediately: the swelling army of the unemployed, the repossessed, the abandoned. But it turns out it makes its original goal -- paying off the debt -- impossible too. As the Nobel Prize-winning economist Joseph Stiglitz explains: "If you introduce austerity measures, the amount you can raise in tax falls, and welfare payments go up -- so you don't have enough money to pay your debts anyway."
That's why the bond markets have turned on Ireland. The country introduced austerity to pay off their debts -- and the austerity killed their economy, making it impossible to pay off their debts in any case. It was self-defeating. So introducing all these cuts doesn't only inflict misery: it doesn't even achieve its professed goal.
Why would Republicans choose this as a model to copy? Another Nobel Prize-winning economist, Paul Krugman, writes this deficit hawkery "isn't based on either evidence or careful analysis... What sounds like hard-headed realism actually rests on a foundation of fantasy." Krugman points out that they incessantly warn us "invisible bond vigilantes" will beat us up if we don't cut, cut, cut -- when the real bond market is beating up the people who have cut and left their economies to bleed out.
In 2010, to preach austerity as the solution to depression is the equivalent of drilling holes in your head to cure your migraine, while dismissing aspirin as for wusses. It's a dogma, chosen because it fits with the slash-the-state instincts they learned as privileged young men in their 1980s champagne-dream.
Krugman, like most economists, says there is only one real way out. When consumer spending collapses, governments need to borrow and spend to prevent a depression -- and then pay off the debt from the proceeds of growth once we have brought the good times back. It's revealing that the countries that have done this hardest and fastest -- like South Korea, which spent a fortune on employing people to green the country's infrastructure -- have been the first to pull out of this recession, while the countries glugging Republican-juice have sunk deeper into the gloop.
Yet few people outside economics are making a full-throated defence of stimulus spending as an urgent moral cause. We need to say it loud: the choice today is between a deficit and a depression. It is immoral not to borrow and spend when it could revive the economy and prevent all these lives being written off. I remember what happened to some of my relatives in the eighties. The children who are supposedly being protected from the cost of the debt a generation from now need, in reality, to be protected today - from their parents becoming jobless and depressed, their homes being repossessed, and their schools and hospitals being chronically underfunded.
None of this has to happen. The more fuss ordinary citizens make -- the more we demand the axe is put away, and replaced with jump-leads for the economy -- the less leeway the government will have for self-defeating cuts. But so far, the loudest citizens' movement has been the lunacy of the tea party, demanding the economy be Herbert Hoovered up. Why is the fight-back so tepid? Why are so many people limply waiting for the disaster to worsen?
Here's a financial tip to leave you with. If you hold any bonds in swaggering Deficit Hawkery, sell. They are about to slip from the AAA standard accorded by the right-wing press to junk status out here in the real world.
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