Sen. Todd Akin calls for abortion on demand, and free distribution of condoms. The CEO of Exxon decries global warming and demands an end to oil company subsidies along with new public investment in renewable energy. Arizona Sheriff Joe Arpaio calls for amnesty for undocumented workers.
Not likely, right? But the equivalent of these improbables just took place in international economics. The International Monetary Fund, for decades famed for inflicting harsh austerity policies on developing nations, now says, "never mind," essentially admitting it got it wrong.
IMF Director Christine LaGarde is calling on European nations to ease austerity measures before they cause another global recession. "The fund warned earlier this week that governments around the world had systematically underestimated the damage done to growth by austerity," the Financial Times reports.
This extraordinary recognition of reality by the IMF raises an obvious question: Will Romney and Republicans get a clue? The IMF's call is a direct repudiation of the harsh austerity policies it has been peddling. Just like the IMF, Romney is passionate about deep cuts in federal spending, as well as tax reforms that do not lower revenues (He claims now that he wants to lower rates across the board, but pay for them completely by closing loopholes).
In addition, Romney and Ryan rail against the Federal Reserve for printing money, for taking extraordinary measures to keep long term interest rates low. They wax hysterical about the inflation ogre that is about to materialize at any moment and lay waste to the economy.
Romney even sent out a fundraising email savaging the Fed, claiming its newest round of "quantitative easing" was "another bailout." That "Barack Obama is at it again -- spending your tax dollars to bail out his failed economic plan... money we can't afford for jobs we will never see." Now, all of this is simply nonsense. Barack Obama has nothing to do with the Fed policy. The Federal Reserve is notoriously independent of the administration and Congress (and its chairman, Ben Bernanke, is a Republican economist who is basically pursuing what conservative guru Milton Friedman advocated: an aggressive monetary policy to counter recessionary currents). And the Fed isn't "spending your tax dollars." In fact, the Fed has been paying billions in profits back into the Treasury, reducing deficits -- not adding to them. And we don't have to "afford the money" because the Fed is basically printing it.
Romney's combination of slashing spending and hiking interest rates would drive up unemployment, spread poverty and probably end up adding to deficits, as the economy moves back towards recession. Romney argues that the "confidence" that would come from his election would counter these effects. Don't bet the store on that. (There are precious few businesses that will bet even a new salary on it).
Getting it Right
Last fall, Barack Obama called for passage of the American Jobs Act, which included investments in rebuilding schools and infrastructure, rehiring teachers and cops, and a jobs corps for veterans, among other things. It would be paid for by tax hikes on the wealthiest Americans. Independent analysts, such as Macroeconomic Advisers, estimated that it would create 2.1 million additional jobs.
Republicans -- committed to slashing spending and austerity -- killed the bill in the House, and filibustered it in the Senate.
The IMF turn is a big deal. If nothing else, it should be a wake-up call to governments and candidates across the world. The IMF is saying, essentially, that Obama got it right.
Will Romney, Ryan and Republicans get it? Will the "Gang of Eight" Senators meeting with Alan Simpson and Erskine Bowles, the Archdruids of austerity, take another look? Will Democrats stop plotting a grand bargain and start talking once more about how to get people back to work and the economy moving?
The Real Deal
In its latest World Economic Outlook (PDF), the Fund explicitly warns against "excessive fiscal contraction in the short term," while reiterating calls for a plan -- including tax and entitlement reforms -- that places "government debt on a sustainable path in the medium term." Contrary to Romney and Republican's braying on deficits, the U.S. doesn't have a short-term deficit crisis. We aren't Greece, and won't ever be.
The U.S. has to get the economy moving and then take sensible measures to makes its projected debt sustainable. That should involve progressive tax reform -- raising taxes on the wealthy to produce more revenue -- just the reverse of the Romney plan to lower rates, eliminate the estate tax and sustain the capital gains and carried interest tax loopholes that benefit the very wealthy (and enable him to pay a 14 percent tax rate).
And it should involve reforms to get our health-care spending -- the driver of our long term debt problems -- under control. Here, too, Romney and Ryan just get it wrong. This isn't about gutting Medicare and Medicaid. It's about fixing health care. Ryan's budget slashes Medicaid and turns Medicare into a voucher, doing nothing to control rising costs, only pushing more and more of them onto the very people least able to afford them; seniors, the disabled, the poor, the dying.
What we must address is reform of our broken health care system, which otherwise will bankrupt everything -- companies, governments and families. That requires continuing on the path begun with Obamacare, which started to change how we deliver health care and put limits on insurance company excesses. Eventually -- after exhausting all other alternatives -- we'll get to where every other industrial country has ended up, with exactly what Republicans go nuts about: a "government takeover" of health care. Either through far more extensive regulation (think negotiating bulk discounts for prescription drugs, for example ) or through extending a Medicare-like system across the population, we'll get there. If we spent what other industrial countries spend per capita on health care (with better public health results), we would RIGHT NOW be projecting surpluses as far as the eye can see.
The bastion of high finance, the IMF, has come out against austerity. Can Mitt be far behind? Look forward to the next debate, when Romney's new "etching" will no doubt have him denouncing the president for his jobs program, while suddenly offering up his own version to get the economy going.
Follow Robert L. Borosage on Twitter: www.twitter.com/borosage
EXCEPT... Romney will not offer a jobs program because that would require him to come out with an actual idea about how to fix a problem... and nothing he has said so far leads me to believe he is capable of conceiving a positive solution to any problem. His only solution is that he isn't Obama.
Yeah lets all listen to the IMF.
http://en.wikipedia.org/wiki/Starve_the_beast
Conservative policies have bore fruit. Why are they not dancing in the streets? They are winning. Why are those on the right not happy to take the credit for the ruination of our country?
In August of 2001, as the federal budget surpluses began to disappear and new deficits began to loom, the president (GWB) had an unusual fit of candor and described these developments as "incredibly positive news," arguing that this would now put Congress in a "fiscal straitjacket."
The Bush administration embraced deficits as a good way to rein in government. goal: to strangle government social programs.
Targeted programs – Public school system, United States Postal Service, Social Security, Medicare, Medicaid, Planned Parenthood, health care for the elderly and poor, welfare and food stamps, military retirement, drug abuse centers, the mentally ill, unemployment compensation, aid to education, college student loans, nursing homes, employment training, childcare centers, housing subsidies for the elderly and disabled, WIC, Head Start, and school nutrition.
The bankruptcy of this nation was intentional. Why are they complaining?
Dance fools - dance
Anytime government takes the food and housing from the impoverished it sucks for them but they have to learn to starve and die sometimes.
I also believe this should be balanced by austerity measures that address the lowest hanging examples of waste and uselessness.
We will not fiscal-conservative our way out of this hole. Our debt is too large for reasonable people to say, "Oh, we'll just stop spending for a while." We need to produce wealth with government projects, but we also have to pay for them.
If most can agree on this, the question becomes, "How to pay for them?" Cutting waste won't get us all the way there. The poor and middle class can't afford it, and the rich are philosophically opposed to paying for it.
Rather than merely taxing the wealthy, what if we raised interest rates on municipal projects, and made them more attractive investment commodities? What if it became patriotic to invest in government projects, with guaranteed returns?
So, when Lagarde says the Greeks should not have to endure austerity, the unstated corollary of that is that the Germans (or whoever) have to keep on indefinitely subsidizing their living far beyond their means.
Revenues of the Greek national railroad cover only one-seventh of its operating costs, because it has far more employees than it needs. The wages of all those non-productive employees have heretofore been paid with money borrowed from Germany, money which they are now unable to repay. Does Lagarde think the Germans are dumb enough to keep loaning them more money forever?
When Sen. Lindsey Graham told reporters on Tuesday that Mitt Romney’s foreign investment accounts don’t trouble him because “it’s really American to avoid paying taxes,” he must not have realized that he was calling his party’s nominee-to-be a liar.
Every American tries to find the way to get the most deductions they can. I see nothing wrong with playing the game because we set it up to be a game.”
The central Greek problem isn’t overspending per se. The central problem is the Greek government’s failure to collect what taxpayers (especially wealthy taxpayers) actually owe under the law.
That’s because over the years so many Greeks have adopted an attitude toward taxes resembling that of Romney and Graham. Greece has developed a culture of tax evasion, with wealthy citizens sending their money out of the country and poorer citizens bribing officials or conducting their business off the books.
The amount of tax owed but not paid in Greece is estimated at roughly a third of total receipts—or enough to cover the nation’s deficits and begin to restore its credit.
Despite growing debt and deficits, we are not on the road to Greece.
If we are driven toward national bankruptcy someday, the likeliest cause will be our failure to raise and enforce taxes on those who can afford to pay—because we, too, have encouraged a culture of evasion rather than responsibility.
At some point the consumption of wealth by government outpaces the creation of readily taxable wealth by the private sector. Unlike Greece, our government can steal that surplus via inflation as well as via taxation. And because the dollar is global reserve currency, we can export inflation and steal from citizens around the world instead of just here at home. Such a deal... while it lasts.
There are two ways to balance your home budget. Stop spending on stuff you don't need, or on stuff that doesn't work, and make more money. After a while, we hit a wall on the discretionary stuff. Is a family vacation discretionary? What about cable TV, or a cell phone, a movie, or Chinese take-out? Obviously, having more money to spend is part of the equation, and what the IFM has said is too much austerity prevents growth, because some discretionary spending is always necessary.
The point of the whole thing is to create an environment that promotes discretionary spending. If you give the poor and middle class a little extra money, they spend it. If you give the rich a little bit more, they bank it.
Austerity should only exist to cut waste. It's helpful to a point, then it creates harm. This is not a hard concept...but then again, neither are reproductive rights, employment rights, marriage equality, and on and on.
But that's exactly how government tries to "make more money" - by borrowing it or counterfeiting it. So if you "give the poor and middle class a little extra money" without producing or selling or exporting anything, you are not creating surplus wealth, you are simply creating surplus debt - which is exactly our problem!
So yes 1 +1 = 2; but history tells us that in times of recession and depression Austerity adds to the problem, which means 2 just makes things worse instead of better. Basically we need a solution that equals something other than 2.
http://jondanzig.blogspot.co.uk