Austerity politics proving fatal to recovery
If you missed it this week, Dr. Krugman consulted with the experts and their diagnosis for our future is grim. Good news is they've identifited the cause. Austerity is killing our economy.
What’s more, the authors — one of whom is the Federal Reserve Board’s director of research and statistics, so we’re not talking about obscure academics — put a number to these effects, and it’s terrifying. They suggest that economic weakness has already reduced America’s economic potential by around 7 percent, which means that it makes us poorer to the tune of more than $1 trillion a year. And we’re not talking about just one year’s losses, we’re talking about long-term damage: $1 trillion a year for multiple years.The bad news is, austerity fiends still infect our policies and the cure requires political courage. Presently, there's a severe shortage of that inside The Bubble. Unfortunately, due to sequester cuts the Dept of Public Health will be unable to resupply the serum for some time.
True, debt can indirectly make us poorer if deficits drive up interest rates and thereby discourage productive investment. But that hasn’t been happening. Instead, investment is low because of the economy’s weakness. And one of the main things keeping the economy weak is the depressing effect of cutbacks in public spending — especially, by the way, cuts in public investment — all justified in the name of protecting the future from the wildly exaggerated threat of excessive debt.