The Austerity Agenda Is Really About Cutting Social Programs

Mini Bank In Fine Style
Mini Bank In Fine Style

Dr. Paul Krugman notes the inherent ridiculousness of the oft-repeated cliché about family budgets being similar to government budgets…

And all these conversations followed the same arc: They began with a bad metaphor and ended with the revelation of ulterior motives.

The bad metaphor — which you’ve surely heard many times — equates the debt problems of a national economy with the debt problems of an individual family. A family that has run up too much debt, the story goes, must tighten its belt. So if Britain, as a whole, has run up too much debt — which it has, although it’s mostly private rather than public debt — shouldn’t it do the same? What’s wrong with this comparison?

The answer is that an economy is not like an indebted family. Our debt is mostly money we owe to each other; even more important, our income mostly comes from selling things to each other. Your spending is my income, and my spending is your income.

So what happens if everyone simultaneously slashes spending in an attempt to pay down debt? The answer is that everyone’s income falls — my income falls because you’re spending less, and your income falls because I’m spending less. And, as our incomes plunge, our debt problem gets worse, not better.

This isn’t a new insight. The great American economist Irving Fisher explained it all the way back in 1933, summarizing what he called “debt deflation” with the pithy slogan “the more the debtors pay, the more they owe.” Recent events, above all the austerity death spiral in Europe, have dramatically illustrated the truth of Fisher’s insight.

And there’s a clear moral to this story: When the private sector is frantically trying to pay down debt, the public sector should do the opposite, spending when the private sector can’t or won’t. By all means, let’s balance our budget once the economy has recovered — but not now. The boom, not the slump, is the right time for austerity.

As I said, this isn’t a new insight. So why have so many politicians insisted on pursuing austerity in slump? And why won’t they change course even as experience confirms the lessons of theory and history?

(click here to continue reading The Austerity Agenda –

Politicians, and their banker masters, want to seize the opportunity to dismantle social programs, or even better privatize them.

2 thoughts on “The Austerity Agenda Is Really About Cutting Social Programs

  1. John Cutting says:

    This seems a bunch of hooey. Who can follow along with the logic the author is volleying back and forth? And, isn’t that kind of the point? The author of this article is subscribing each reader to an unproven, whilst proven theory. Point blank, or should I say point zero? As in, ground zero.

    I think the theory that “the more the debtors pay, the more they owe” is lacking in proof. And that seems to be the roundabout central theme or thesis of his article. The author managed within just a few paragraphs to convince his would be audience through the vehicle of rhetoric and not proof, that if one metaphor is bad then the avowed antithesis of said metaphor must be conversely “good.” And, I don’t follow his circular logic. The Fisher theory remains unproved.

    Money doesn’t appear from somewhere. Rather, it appears from nowhere. And economies don’t collapse because people learn to live within their means within said economies. Rather, they collapse because bankers collapse them once people learn to live within their means within said economies – and then “create out of thin air” economic models and postulates and whatnot that prove to the general public that they know nothing about the economy.

    Here’s what I know. When I cut my personal spending, the world did not cut its habit of spinning in any sense of direct (or indirect) correlation to the behavior of my personal household. On the contrary, when I cut my spending money began to mysteriously accumulate in my bank account. …It arrived out of nowhere. Funnily enough, I think my personal experience is more proved than ever was the past Mr. Fisher’s postulated theory. He suggested that if I cut my spending, the word economy should collapse. I say I cut my spending because the world economy collapsed, and now I have a surplus — that remains a surplus as long as I don’t follow his advice, and give it back to the world economy.

    Hmmm, was Mr. Fisher perchance on some banker’s payroll? Because these espoused theories simply don’t constitute proven theories. Should I repeat that? Espousing, is not proving – no matter the theory. It still, is just a theory. While the money in my bank, is the proof. Cutting spending does result in savings. And savings truly can be utilized to pay off debt – which results in greater savings and less debt. In my life, that is proved. As for Mr. Fisher and those at the NYT who would sign me up as being a believer in his theoretical postulates of economics – well, …what can I say? I’m sure they’re expert on how I should consider my household finances, and hence how I should consider the world economic model. Either that, or they’re overpriced would-be economists and financial advisers who might happily drain my bank account, to tell me I’m broke. And that is an advice I no longer have a personal desire to pay for. I postulate that the proof resides at home, and that the world economy is a ficitious entity and money does come out of nowhere – for proof, see Federal Reserve bylaws. It’s just a business, for profit like any other. And I don’t like to use the word unscrupulous – mostly because it’s difficult for me to spell.

  2. John Cutting says:

    You know, I had been trying to rack my brain while tapping out that last response so rapid fire. What was it, I wondered, that had taken place back in 1933 in addition to the supposed economic evidence put forth by one Mr. Fisher? The answer came to me finally. And talk about antithesis!

    Nikkola Tesla was also up and running in that era. Suffice it to say, the world economic model could have gone a completely different route. (Free energy, anyone?) But for the bankers (one JP Morgan, for example) and enemies of the people at that time, who saw fit to debunk Tesla’s already working zero point energy generators, and to dismantle Ford’s electric automobiles, etc.

    I may have my chronology wrong, but the past evidence is clear. When it comes to making money, bankers mean business. And they will steal your free electric car and sneak you a bill of sale loaded with fine print and interest rates, all while undermining your personal well-being and replacing your natural foods with petro-based food substitutes, you name it, to make a buck. Their buck. Your expense, and mine. But, their buck. …I want my bucks back. And I want my free energy back. And I want my free transportation. And let the big boys figure out a new game for making big business. Mankind really wasn’t designed to slave for peanuts, all the while funneling them back into the trunks of the dancing elephants, while the Barnums and Baileys play to a full house and laugh chauffered to the banks. There’s something harmful about such an intention. And it cannot last forever. Big business is the modern symbol of unsustainability. We simply haven’t seen it as such yet. But one day, we may.

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