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how the austerity class rules washington

December 20, 2011

Just read an interesting article in the Nation about the rise of the ‘austerity class,’ and the growing popularity of deficit reduction measures in political discourse:

How the Austerity Class Rules Washington

The way I see it, the inherent contradictions within capitalism that give rise to crises always seem to put government into a tricky position. On the one hand, it makes sense, especially from the point of view of a household, to have a ‘balanced budget,’ i.e., to be ‘austere’ today and save any discretionary income for future hardships, invest it for future returns, or both. And, utilizing this rather ‘common sense logic,’ people want their government to be ‘responsible’ and have a balanced budget just like any household should.

The problem is that, if everyone is saving and investing on a national scale (i.e., not consuming), or if they have little in the way of discretionary income to begin with, especially in the midst of an economic downturn, higher unemployment will result due to lack of demand, and the value of any investments will be greatly reduced since no one’s consuming the products being produced. When this inevitably happens, people begin to scream at the government to do something, which either means some kind of conservative austerity plan to reduce spending and increase investments, or some kind of liberal stimulus plan to promote aggregate demand and boost employment.

Unfortunately, neither solution can eliminate the contradictions within capitalism that naturally lead to boom and bust cycles and financial crises; but the latter makes far more sense to me in that it helps boost employment, which further stimulates demand and speeds recovery, and doesn’t come at the expense of people who need help the most in the form of cuts to things like food stamps, low-income housing, Medicaid, Pell grants, and unemployment insurance, which is precisely the kind of spending conservative austerity plans tend to target.

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