Austerity and the Economic Crisis

economics of austerity


This article reflects notes from a report on the economic situation to the National Board, CPUSA June 7, 2012. Includes contributions from Greg Rose and Emile Schepers.

Introduction -- Summary of Economic Situation


We meet as the European economy is spiraling down into chaos. The devastation in Greece has been likened to living under occupation in WWII. Spain and Italy are heading toward financial crisis. Increasingly, the question is not whether, but how long until the Euro and the European Union collapse or are significantly weakened.

In the US, after 4 months of modest but real job growth over the winter, we have now had 3 months of jobs barely keeping up with population growth. (March, April, May). Projections for the next few months vary, and economic indicators are contradictory. EG, Retail sales up. Business investment slowing.

IMO, the best possible scenario is continued sluggish growth through the elections, with a modest pickup in employment. Even with best case scenario, excessive "happy talk" from the administration could lead millions to think Obama is disconnected from the reality they see every day.

Weighing against a robust recovery, or even continued slow growth, are the economic boat anchors that have been blocking recovery for four years.

  • deep burden of unpayable household debt from home mortgages, credit cards and student loans
  • low household consuming power due to high unemployment and stagnant wages
  • global economic crisis, especially in Europe and now threatening in China
  • continued instability  and threat of crisis in the financial system, exemplified in the recent JP Morgan Chase losses
  • austerity policies enacted at state, local, and increasingly federal government levels.


It is the last factor -- government austerity policies, that I will deal with in this report. These are the policies by which government have the most direct, immediate influence on the economy, and which are at the center of this year's elections.

In the short term, progressive Keynsian policies (like expanded spending for infrastructure and social needs) are necessary, especially in the US and Europe. In the longer term, capitalism -- even with Keynsian policies -- is proving increasingly incapable of dealing with human and environmental problems. Marx noted the contradiction between the social nature of production under capitalism, and the private ownership and control. You can't go back, he said, to small scale local production. The way to resolve this problem is to socialize ownership and control, as well as production. The social nature of production has multiplied a thousand times since Marx's day. This means that social -- and socialist -- solutions are increasingly necessary.

But I will not address the limits of Keynsian economics here. Because the main capitalist centers of Europe and the United States are increasingly enacting anti-Keynsian policies of austerity, and reversing those policies is the main task of this moment.

The balance of this report has seven sections:

  1. What is austerity
  2. Austerity and the 99%
  3. Austerity and the broader economy
  4. Class essence of austerity
  5. Austerity and the current state of global capitalism
  6. Fightback against austerity
  7. Austerity and the elections

 

1. What is austerity?


Dictionary definitions:  "Austerity" was named the word of the year by Merriam-Webster in 2010. Wikipedia: In economics, austerity refers to a policy of deficit-cutting by lowering spending often via a reduction in the amount of benefits and public services provided...

In the United States, the term "austerity" is used in more sophisticated op-eds and business reporting. But the popular term is belt-tightening. As in, "After all, small businesses and families are tightening their belts. Their government should, too."

These definitions of austerity imply that it is a legitimate response to a crisis, a response to a budgetary problem. This is the implication:

We have been spending too much. We are not working hard enough. We are enjoying too many entitlements. We have to cut back. We have to tighten our belts. There is not enough to go around, so we have to consume less. And note that we is undefined.

But are we consuming too much? That is not the case. Whether we are talking about Europe, or the US, or Japan, behind all the facade of financial crisis, and with all the changes that 150 years have brought, we are talking about a capitalist crisis of overproduction as described by Marx -- a crisis of plethora.

Nonetheless, it is a commonplace, accepted by almost all, that some elements of an austerity program are necessary. News stories refer to European countries hit by the crisis as "profligate", or warn of "the burgeoning costs of Medicare and Social Security" when the facts show something entirely different. This inaccurate characterization is typical in virtually all media reporting and political discourse. ".

*[ http://www.washingtonpost.com/world/europe/merkel-is-target-of-calls-for-drastic-measures-by-germany-to-save-euro-zone/2012/06/02/gJQAN6hM9U_story.html]

*[incorrect: http://www.cepr.net/index.php/blogs/beat-the-press/germanys-neighbors-were-not-more-profligate]

*[http://www.cepr.net/index.php/blogs/beat-the-press/cnn-forget-to-look-at-its-chart-when-warning-of-the-qburgeoning-costq-of-social-security]

Thus, Thomas Friedman, the liberal propagandist for U.S. imperialism, stated that we are in a new era "in which to be a president, a governor, a mayor or a college president will be, on balance, to take things away from people." It is stated as an established fact, like the law of gravity. [ NYT May 20. He says our cuts must be smart, we must preserve education, but does not say how or what to cut instead].

2. Direct effects of austerity on the 99% --  mass impoverishment and unemployment


Austerity policies include:

  • cutting public (government) investment and privatizing existing government assets (like public utilities, roads, even parking meters).
  • cutting and/or privatizing public services like education, public health
  • cutting public safety net and insurance programs like retirement, welfare, jobless benefits, youth and senior programs, housing subsidies.
  • reducing and cutting the pay of public sector workers.
  • direct intervention to enable private employers to fire workers and cut pay and benefits.
  • raising taxes and fees, especially on the 99%


In Europe, where austerity policy is explicit, these policies have been implemented almost universally in varying degrees. E.G. in Portugal, the austerity program has included cuts in pay, vacation, job security, and union rights. In other words, as one commentator puts it, "workers must work longer and harder for less money and with less rights and a higher risk of being sacked." Greek Archbishop Ieronymos described the situation in his country as a "reminder of WWII conditions" and said, "the homeless increase by the thousands everyday, while small and medium-sized enterprises are forced to go out of business. Young people, the country's best minds, choose to emigrate, while our fathers are unable to live after the dramatic cuts in pensions."

In the U.S., the response to the economic crisis was more complex. A series of anti-austerity measures at the federal level, enacted in the first days of the Obama administration, cushioned the effects of the crisis. Most notably, the American Reinvestment and Recovery Act (ARRA), commonly known simply as "the stimulus,"  was passed in February 2009. It included extended and increased unemployment insurance, subsidized health coverage for laid-off workers, increased food stamp and other safety net benefits, payroll tax reduction, support for city and state governments and investment in transportation and infrastructure programs. Although inadequate to the extent of the economic crisis, these measures provided real relief for millions.

But the economic crisis has also exposed the consequences of earlier austerity measures. Since welfare "reform" was enacted in 1996, the percent of families with children in poverty receiving benefits has declined to 27% [in 2010, from 68% ]. "Under TANF, federal funding does not rise when caseloads increase in hard economic times... many states' TANF programs have responded inadequately - or not at all - to the large rise in unemployment during this very deep recession, leaving large numbers of families in severe hardship." In fact, thanks to the 1996 welfare reform, TANF funding has been reduced in the face of growing need.  [ CBPP  7/14/2011]  Republicans are now trying to do the same to Medicaid.

State and local governments have been enacting increasingly severe austerity measures. Unlike most developed countries, a large part of public services, starting with education, is provided and funded at the state and local level. When the economic crisis caused a sharp drop in revenues, state and local governments responded by cutting services. These cuts were partly offset by federal stimulus funds, but by 2011 the stimulus funds had mostly ended.

The resulting austerity measures have included cuts in education, health care, social services and other areas. Education has sustained some of the heaviest blows, with cuts in programs on one hand, and steep increases in tuition and fees in higher education.  EG, "the cost of a college education continues to increase faster than inflation, and state and local spending per college student continues to drop - this year reaching a 25-year low." . And "From coast to coast, mayors and city councils are hacking away at firefighters' ranks in desperate attempts to cut budgets and save cash by cutting workers... In February, Kansas City, Mo., city manager Troy Schulte said he wanted to cut 162 city workers to close a budget gap, and 105 would be in the fire department." a story that could be told in countless cities and towns of all sizes.  Summer jobs for youth cut in half since 2010.

Some states have enacted broad fee and tax increases, including on low- and middle-income working people. The heaviest burden has been born by public workers in layoffs, wage freezes, and benefit cuts.  Since the 1960s, "the state and local public sectors have provided more equitable opportunities for women and people of color. As a result, women and African Americans constitute a disproportionately large share of the state and local public-sector workforce." The 765,000 public-sector job losses have fallen 70% on women and 20% on African Americans, far in excess of their share in the labor force..

With the expiration of many of the measures in the 2009 stimulus act, and the Republican victories in the 2010 elections, anti-austerity measures at the federal level have been weakened, and state- and local level austerity is getting worse. By some measures, despite the absence of a formal austerity policy in the US, austerity in the US has been as sharp or sharper than in Europe. [Krugman blog, 5/1, Coordinated Austerity] Despite the need for more stimulus and strengthened public services, total government spending (all levels) has been shrinking for the last year [Krugman blog, 6/3/2012, "1937" ]. And even worse looms on the horizon.

Even after severe belt-tightening, cities and states still face deficits and are cutting even more. PeoplesWorld.org reports that in California, "Governor Jerry Brown delivered a revised 2012-13 budget projection doubling the already-deep cuts he called for in January.." For the year beginning July 1, 30 states have projected shortfalls totaling $54 billion. "Many of these shortfalls have been closed through spending cuts and other measures scheduled to take effect in the next fiscal year." [CBPP]Federal policy has also been shifting toward tightening. The deals enacted last year to prevent a government shut-down and to allow some anti-austerity measures (unemployment insurance, payroll tax cut) to continue had future austerity built in to them. That bill is already coming due. EG, 200,000 people cut off unemployment May 13. More than 400,000 people have now lost benefits as EB (Federal Extended Benefit unemployment insurance) payments have ended in 25 high-unemployment states since the beginning of the year. Including California, despite unemployment rate of more than 10%. . And that is only the start. 

The debt ceiling deal reached last summer calls for more than $100Bn in automatic custs starting in January, 2013[Robert Reich]. The payroll tax cut expires at the end of this year, as do all federal unemployment extensions. The debt ceiling deal reached last summer calls for more than $100B in automatic cuts starting in January . Under this deal, safeguarding one program will come at the expense of deeper cuts in another. There is increasing talk of a "grand bargain" during the lame duck session after the elections, that will save the military from automatic cuts while cutting Social Security and Medicare. We can be sure that any agreement reached, however bad, will be broken by Republicans in favor of even more cuts for the 99%, even more rewards for the 1%.

 

3) Economic effect of Austerity -- Recession


So, we have seen that the human costs of austerity are high. But, we are told by economists and columnists with 6-figure paychecks, this is pain that must be endured to get the economy back on track. So we have to ask, how's that working?

It's not. Europe Most of Europe has openly and thoroughly enacted austerity as the official policy, and is plunging back into recession. Those countries that have implemented the most severe austerity -- Greece, Spain, Portugal, Ireland -- have experienced devastating contraction and soaring unemployment -- more than 20% in Greece and Spain.. Outside the Euro zone, and with a range of alternate policy choices available, Britain's conservative government also chose austerity -- and got recession and rising unemployment.

For the U.S., austerity measures so far, mainly at the state and local level, have acted as a drag on the recovery. Even the establishment Organization for Economic Cooperation and Development (OECD) warns that the train wreck looming after the elections -- payroll tax cuts expire, mandatory budget cuts, and a new debt ceiling vote -- could throw the US back into recession.

Is this the price that must be paid to get budget deficits under control? Wrong question, as I'll discuss later. But here's the answer.

The huge deficits, in the main, are caused by the economic crisis and the resulting recession and depressed economy. In Europe, most of the hardest-hit countries, including Spain, Portugal and Ireland, had budget surpluses before the crisis hit. The crisis caused a sharp drop in government revenue, and a rise in expenses (for unemployment insurance and other safety net programs, and for bailing out banks). Austerity cuts expenses by removing the slender lifeline from the victims of the crisis. But austerity can do little to increase government revenue, which depends on a thriving economy. The result is a downward spiral, in which:

  • austerity depresses the economy,
  • which causes government revenue to fall,
  • which makes deficits bigger,
  • which results in more austerity,
  • which depresses the economy even more...


This is the situation in Europe as well as here. In the US, before the crisis, the federal government ran an unnecessary but manageable deficit that resulted from a big expansion of the military budget, as well as tax cuts which favored the wealthy. When the economy collapsed in 2008, safety-net spending increased, and the 2009 stimulus added to the deficit for a couple of years. But the biggest contributor to the deficit today is the continued depressed state of the economy. The federal austerity measures scheduled for the end of this year, added to the continuing state and local level austerity, will reduce government revenue threatening a new downward spiral.

Britain is the European economy most similar to the US. As Krugman points out, we should learn from their experience: "Britain's unnecessary turn to premature austerity is becoming a historic policy and political disaster that will haunt the country for years." -- [Krugman 5/19 Cameron to critics 5/19]

In summary: austerity policies are a disaster for the people and for the broad economy, and have even failed in the stated goal of controlling government deficits. This begs an obvious question, to be addressed in the next section.

 

4. The Class Essence of Austerity


If austerity is such a disaster, why is this failed policy being pursued? If the definition of insanity is doing the same thing after it has proven to be a failure, does that mean the pro-austerity forces are insane? Why does the ruling class, and particularly its financial sector, insist on a policy which undermines economic growth? This is one of those examples where a Marxist world view provides more clarity than the sophisticated analyses of the most brilliant economists. Austerity can be understood most clearly in the context of the class struggle in the current stage of global capitalism. It is the policy and the weapon of the most powerful, ruling sections of the capitalist class.

Speeding recovery from depression is not necessarily foremost in the interest of the ruling class. Austerity is ultimately a policy of class warfare by the ruling class against the working class, and  against small business and weaker capitalists.  

It means breaking unions and destroying the social safety net.  In the United States this has been particularly evident in Republican pursuit of austerity policies at the state level.   The first victims of virulent austerity have been public employee unions against which an extraordinary campaign of economic terror has been launched.  This campaign, including layoff of a half-millio750,000 public employees (so far), is an attempt to destroy these unions and end their right to collectively bargain.  In the guise of budget cutting the ruling class' intention is to use austerity to (undermine) at the least severely damage and if possible destroy institutions vital to the ability of the working class to defend itself in the future.  This attack is extended to trade unions generally. and The unfunding of the social safety network contributes to the growing mass of the reserve army of labor and the permanently underemployed who, becoming more economically precarious, become further available to lower wages and benefits and put a constant pressure on labor to curtail its demands. The result tends toward a working class whose only rights are to compete for jobs at any pay, to starve when there is no work, and to die when they can't work.

Other reasons dominant sections of the ruling class pursue austerity:

  • To guarantee that the debt is paid. Whether in Greece or in Benton Harbor, Michigan, the measures include putting representatives of big finance in charge of the treasury to make sure banks are paid before anything else.
  • To preserve the value of their debt. Mild inflation would stimulate the economy and make it easier for governments (and ordinary people) to repay their debts. But inflation makes the debt less valuable to the investors who hold the bonds. So they pursue policies that have resulted in near-zero inflation. This is even more true in Europe than the US, where the Fed has followed a mildly stimulative policy (and been attacked by the right for doing so).


Austerity is not a new policy - it was the main ruling class response to the global crisis of 1929, with the disastrous results we see being repeated today. But the current stage of development of global capitalism increases its drive toward austerity.

 

5. How austerity fits with the current stage of global capitalism.


From a forthcoming article by Greg Rose in PA.

What Marx described as "fictitious capital" has become a key element in the ruling class' preference for austerity policies.  Interest, other forms of debt service, and land rents constitute some of the various forms of fictitious capital...  Austerity policies are precisely designed to guarantee that such forms of fictitious capital are privileged over productive capital and that value from productive capital is extracted from the economy to meet obligations to fictitious capital.  Reduction of deficits, realization of "sound" deficit-to-GDP ratios, privileging income flows to creditors over other spending priorities, privitization of public assets to extract value for private interests - all of these characteristics of austerity are designed to ensure the flow of rents to the rentier subsector and to make the state and the national economy a more reliable source of such rents.


In short -- capitalism is becoming more parasitic -- more and more of the surplus value created by workers is going, not to productive reinvestment, but to the unproductive and sometimes destructive financial sector. Austerity for the 99% is the guarantee of the continued wealth and power of this sector.

 

6. Global and US fightback against austerity (and some limitations)


If 2011 was the year of the Arab Spring, 2012 is the year of the European Spring, where austerity is being rejected in the streets and at the ballot box. Huge anti-austerity demonstrations and occupations in many countries. In recent elections: A brief  list of recent election results:

  • France: Right-wing president Sarkozy replaced by Socialist Francois Hollande; Left gains in 1st round parliamentary elections.
  • Greece -- huge gains for anti-austerity parties in May; new round of elections in June
  • Slovakia--left wins elections.
  • Netherlands:  Government defeated partly on austerity issue.
  • Czech Republic: The foreign minister says that the current right wing government can probably not survive public dissent against austerity policies.
  • Romania: RW govt defeated by center-left with elections to parliament still to come
  • Britain: pro-austerity Tories suffer big losses in local elections
  • Italy: left posts big gains in local elections
  • Germany: SD knocks out pro-austerity CDU in several important states.


These election victories are only the start of the anti-austerity struggle in Europe. The victorious center and left forces are anti-austerity, but it remains to be seen if they can develop an effective alternative against the entrenched power of finance capital and the potential divisions within the extremely diverse anti-austerity coalitions. Partly because the opposition cannot always offer a convincing anti-austerity alternative, there will be election losses. EG, in light turnout, Irish voters on May 31 approved 60-40 the European fiscal treaty which binds European countries to an austerity policy. (Ireland was the only country where the people actually have the chance to vote on this treaty.)

The recent anti-austerity electoral results gain strength from successful anti-austerity governments in other countries. Ten years ago, Argentina rejected austerity, repudiated much of its debt, and embarked on an anti-austerity program that brought impressive economic growth and big reductions in poverty and unemployment. Since then, most of South America has elected left or left-center governments which have successfully promoted economic development, expanded public services like education and health care, raised living standards and reduced inequality. At least In Argentina and Bolivia, the electoral victories (by anti-austerity governments) followed a huge popular upsurge with marches, demonstrations and strikes against austerity policies.

Another example is Iceland, which suffered a banking crisis and collapse about the same time as Ireland. Ireland's government embraced austerity in order to pay the bad debts of the private banks at the expense of the Irish people, and unemployment is now just under 15%. Iceland refused to bail out the banks -- their unemployment rate is 7%.

Most European countries cannot adopt exactly the same anti-austerity strategies successfully used in Argentina or Iceland, because of differing economic, political and geographic factors. But the message is important -- embracing austerity is an economic disaster first of all for the working class and the 99%, but also for the whole economy. Fighting back against austerity is not easy, but it is possible, and can achieve real gains.

North of us, student and other struggles in Quebec.

Of course, in the USA we have our own example in the Great Depression of the 1930s, when a combination of militant, radical mass action, union organizing and electoral struggle replaced the austerity policies of the Hoover administration with the New Deal of Roosevelt, bringing hope and real gains to the working class, many of which we are now fighting to hold on to.

The struggle against austerity in the US has exploded since the 2010 elections. Beyond Wisconsin and Ohio, there were struggles in almost every state. Occupy struck a national cord. Despite mixed results, the recall election in Wisconsin last Tuesday, culminating an 18-month battle for democracy, is emblematic of a popular movement struggling to move to the next level. It is more diffused than the struggle in Europe, partly because the austerity agenda in the US is not implemented as a single package (so far), but as hundreds of separate measures at different levels of government with program cuts here, tuition increases there, and assaults on unions and public workers every where.  

 

7. Battle over austerity in the 2012 elections


The outcome of the elections depends on the economy. And the outcome of the economy depends on the elections. The elections are not only about the economy -- they are about how we look at the economy.

Republican program and austerity

Romney tells young people, concerned about the lack of jobs, borrow $20K from your parents and start your own business. That reflects his world view -- after all, he, and probably everyone he associated with, could borrow $20K or even $200K to start a business. (It also reflects his ignorance of the economics of small business. For $20K, in all but the luckiest and most exceptional cases, you can start a small business which is under-capitalized and doomed to failure within a year, losing your parents' money and leaving you even deeper in debt).

The Republican Ryan budget passed this year by the House, and endorsed by candidate Romney, implements extreme austerity, but does not reduce the deficit. In an exaggerated replay of the Bush-II budgets, it would almost eliminate non-military programs of the federal government while increasing military, further cutting taxes for the rich... and increasing the deficit.

Republican program is not to cut the deficit but to cut useful government and promote plunder. We see this in states with Republican-dominated governments. E.G. Kansas under Republican rule has increased taxes on poor people to cut taxes for rich people.

Democratic program


The programs put forward by Obama and Democratic leadership are inconsistent and contradictory.

Not just the national level. How do we deal with a situation where Democratic governors and mayors are enacting austerity programs, including attacks on pensions, cuts to social programs, privatization, etc. Recently, a state worker and union leader in CT said to me, "Our membership really mobilized to elect Democratic governor Dannel Malloy. He balanced the state budget on our backs. Our members feel betrayed, and are in no mood to work for the Democrats in this election." The fact that the Republican candidate for governor would have been far worse is recognized by these state workers, but doesn't change their bitterness. And Governor Malloy in CT is one of the better Democratic governors in dealing with the state budget crisis.

At the national level, on one hand, mainstream Democrats accept the basic premise of the austerians -- that the deficit should be controlled right now, and that it is urgent that steps be taken now to deal with long-term budget problems. This is seen partly in rhetoric. The quote used at the beginning of this report -- "... Small businesses and families are tightening their belts. Their government should, too." -- that quote came from President Obama.

The Democratic Congress enacted paygo in its first 100 days, forcing it to find offsetting savings or revenue for any new expenditures. The administration embraces the concept of shared sacrifice. On one hand, this may give more power to their efforts to win modest tax hikes for the rich, to close corporate loopholes, to tax financial institutions and to enact the Buffett rule -- efforts which have so far failed. On the other hand, they have accepted that workers must share the sacrifice, starting with Federal workers who have had 2 years of pay freezes. After a strong start, Obama ended his first year in office by creating the Bowles-Simpson deficit commission. This enabled a shift in focus from job creation and constructive economic policy to the no-win debates about long-term deficits. In the past year, President Obama and Congressional Democrats have wavered on preserving Social Security and Medicare. And recently, Nancy Pelosi indicated she may accept revoking the Bush tax cuts only for income over $1M, leaving the tax cut for income between $250K and $1M (although Obama has since rejected this approach).  This would lose half the potential revenue and with existing budget rules, it means cuts would have to be made from other spending to preserve tax breaks worth $10K to $40K each for rich people.

So -- is the Obama administration is just another front for Wall Street? Not so fast. The Obama administration enacted, over Wall Street and near-unanimous Republican opposition: Student loan deprivatization; Health reform; Dodd-Frank; And of course, ARRA. But even with momentum and 60 seats in Senate in 2009, mild restriction on financial sector was blocked by the Republicans and blue dogs.  Obama introduced American Jobs Act (AJA) last September -- and being locked into paygo framework, proposed progressive taxation to pay for it. In order to get essential immediate anti-austerity legislation passed (unemployment insurance, payroll tax cut) the Democrats had to agree to austerity measures that were not immediate.

We have to ask, if Obama is simply a creature of Wall Street, Why is Wall Street supporting Romney by at least 2-1, reversing its 2008 position?

At his best, Obama frames issue in a way that provides a clear contrast with the Republicans. If his program does not always live up to his rhetoric, he provides a framework within which peoples forces can organize and fight for a real, anti-austerity, pro-people economic program.

With Obama, a big enough, strong enough movement can win victories against big capital. With Romney, the banksters know they have a firewall against the 99%.

Right wing and fascist alternatives


Europe -- rise of right wing anti-austerity. In France right-wing, anti-immigrant Le Pen did better than the united left. In Greece the semi-fascist Golden Dawn got a big increase on an anti-immigrant, anti-austerity platform. In US, T-Party is not anti-austerity, but uses similar rhetoric when talking about Wall Street bailouts.

Martin Wolf in the Financial Times

 

 

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events. (referring to depression, not to rise of fascism).


Wolf is referring to economic stagnation and depression, not explicitly to the rise of fascism. But we can extend the comparison. Fascism thrives on instability and chaos. If the left cannot provide an alternative to the growing dysfunction in Europe, the right surely will. This is what is so dangerous about the hard-line Tea Party Republicans in Congress. Their goal is to create economic chaos - from which they and their corporate sponsors hope to gain power.

 

Progressive alternatives


It is easy to conclude that European anti-austerity election results mean that Obama and the Democrats have only to make the case against austerity to win. For example, one blogger writes:

 

 

"in Europe, the lines between political parties are widely understood. Here, the Democrats are so connected to Wall Street and the 1% that many voters see the Party as equally unwilling to battle for their interests... Europe's lesson is that Obama should far more aggressively promote public investment, job creation, and other economically populist - and popular - measures. If he and the Democrats do this, their success in 2008 could be repeated in 2012."


There is more than a grain of truth in this. But the criticism ignores some realities, including some recent primary losses by Progressive Democrats.  The Democratic Party and Obama administrations are coalitions in which genuinely popular forces are at best junior partners. But the pro-austerity economic narrative has virtually total control of the mainstream media. Obama tried to change the narrative with the AJA last September. It went nowhere. Congressional Black Caucus, Progressive Caucus, labor movement have presented alternatives, but have unable to break through the media's wall of silence.

I think the reports by Sam Webb, Jarvis Tyner and Joelle Fishman at the April conference of the CPUSA don't require further elaboration by me. The recent AFL-CIO video "Meet Mr. 1%" at  makes a strong case for re-electing President Obama, in the context of building independent labor-based political action.

There are no shortcuts. A recent letter from Ucubed -- the machinist Unions' unemployed committee -- stated that "white jobless voters give Mitt Romney a 24 point advantage over President Barack Obama...the fault lies not with those mostly working class voters... And if the Democrats showed even the slightest inclination to fight for JOBS for them - to really fight, not just shadowbox with the GOP - they'd fight like hell for them... The jobless are looking for jobs, not the austerity, tax cuts and trickle-down policies that GOP leaders demand. But Democrats have to go after the jobless households with an intensity they have yet to demonstrate... Get us jobs and you've got our votes. Don't and you won't."

Ucubed speaks to real frustration, and recognizes that Romney would be a disaster. But last Fall, when Obama introduced a real jobs bill, there was deafening silence. Did the 100,000 Ucubed activists hold demonstrations in every city in the country. Have they been in the face of every member of congress in support of the Rebuild America Act this Spring? Maybe he is not consistent enough, but Obama has tried, and is trying to put jobs on the agenda. But he can't substitute for the movement. Just as 50 years ago it was the mass movement that put civil rights on the national agenda, it is the job of Ucubed, and of us, to put jobs on the agenda. Don't blame Obama for the movement's weakness.

I want close by returning to a question from section 3. I asked if austerity was the price that must be paid to get budget deficits under control, and said it was the wrong question. What's that about?

JP Morgan Chase, Goldman Sachs, BP, Chevron, WalMart, and billionaires Charles and David Koch are launching a multi-million dollar TV ad buy Tuesday blasting President Obama over the national debt.  This is only the latest of a decades-long barage by corporate-sponsored institutions to make present and future deficits the top discussion, and usually to blame "tax and spend" Democrats in the bargain.

There is a certain unreality in this deficit obsession with abstract numbers in some virtual account book. The wealth of our country is in our natural resources, our people, and in the physical and social institutions, enterprises and infrastructure. In this ongoing depression, our collective wealth is being squandered and destroyed. Unemployed older workers lose skills and contact with the labor force, and society loses their experience and productive capacity. Youth receive inadequate education and are frozen out of jobs, making it much harder for them to realize their potential to contribute to the nation's wealth now and in the future.

Last Labor Day, Obama said, "We've got roads and bridges across this country that need rebuilding. We've got private companies with the equipment and the manpower to do the building. We've got more than one million unemployed construction workers ready to get dirty right now. There is work to be done and there are workers ready to do it."

Matching resources -- including human resources -- with the real needs of the country. That is the task before us. The only rational justification for an economic system is the efficient accomplishment of this task. Government budget policy is also supposed to be predicated on the public good. [Of course, that is simply justification. Actually financial system grows to siphon profits off from productive sectors. Budgets reflect contending interests within framework of ruling class.] But at this point, the U.S. financial system, and in particular the focus on budget deficits, is the main obstacle to meeting our real needs.

To paraphrase the Declaration of Independence, when financial and budgetary systems become destructive to the needs of the economy and the people, it is the right of the people to alter or eliminate them. In the 1930s, much simpler financial systems and government structures were altered, eliminated, and innovated by the New Deal, where the watchword was pragmatism. Within months of taking office, the Roosevelt administration passed all sorts of measures. The most useful and popular directly employed millions of people on much-needed and widely supported infrastructure, education and cultural projects. They provided safe loans to homeowners and farmers. The government stepped in to match real needs with real human and other resources, and where necessary changed or created the financial mechanisms necessary. Of course, Roosevelt could do this because Congress passed most of the bills he submitted -- a situation that does not exist today.

Solutions to the crisis today will not be easy to construct in US or in Europe, both because problems are not simple, and because of opposition of ruling class. But we must fight for the guiding principal that matching human and material resources with human and environmental needs takes priority over the rights of the 1%, and over balanced budgets. And by the way, such a policy could result in balanced budgets and reduced public debt.

Conclusion.

We should think about ways of popularizing the class essence of austerity, along the lines of ask not for whom the belt tightens...  I am picturing a cartoon of a Wall Street bankster preaching about the need for us all to tighten our belts, while he is tightening a belt wrapped around a squeezing the life out of workers, seniors, youth, etc. This report quotes several of the excellent articles from the PW on local effects of austerity. I think it is important to emphasize that in fighting against austerity, we are not robbing our grandchildren: we are fighting for a decent country for our grandchildren.

 

 

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  • Economic crisis is an inevitable issue that has happened and is still happening in many countries, both developing and already developed. It is the responsibility of the underlying authorities to ensure that their economy stay progressive and is always stable. If an economic status of a country is uncertain then other factors like law and justice will be jeopardized where fraud and money-laundering issues occur.

    Posted by Simon, 03/12/2013 4:54am (5 years ago)

  • Please, master should be Master, or, The Master, in my previous comment(my error)for more than one reason.
    Thanks,
    EEWC

    Posted by E.E.W. Clay, 06/19/2012 9:27am (6 years ago)

  • Please, master should be Master, or, The Master, in my previous comment(my error)for more than one reason.
    Thanks,
    EEWC

    Posted by E.E.W. Clay, 06/18/2012 4:01pm (6 years ago)

  • Excellent article Art Perlo.
    Popularization and engagement of workers and communists is always an important question.
    The 'toon of the obese bankster, his noose around our neck, his foot on the noose, his excrement rushing rolling down our face, as he continues the "nullification and interposition the great M L King campaigned against in his massive anti-poverty, anti-war, anti-Jim Crow struggles, which included a righteous struggle to end the ignorance of anti-communism, come to mind. These are much needed nowadays, as we fight in his tradition for his and our grands and great-grands.
    Jesus, who M L K called the master, has told how oppressors, so much like our Wall Street bankster, with toxic bonds and paper, racist unemployment, racist mortgage schemes, and infamous redlining, housing discrimination and wage discrimination, make demands on the working people, Latinos, African Americans and women, which are impossible to meet, and lift not even a finger to help, simultaneously destroying themselves-but they won't destroy us, essentially, unless we fail to act, to organize, for peace, jobs and freedom, continuing our 60 year old struggle against, voting interposition, voting nullification, and now, austerity.

    Posted by E.E.W. Clay, 06/18/2012 10:56am (6 years ago)

  • Great article - would love to have it in a more concise form to share with folks that may not be willing to plow through the entire thing

    Posted by David Mirtz, 06/16/2012 11:22am (6 years ago)

  • One of the best things I've read all year. Thank you for this. I'm sharing it around.

    People seem to get into the mental rut of believing that we have to do more with less, like the global economy is like a household that needs to cut some costs in lean times. This article makes the point that this attitude is false frugality because that is not what it happening. Those "savings" are just being hoovered into the pockets of the 1% and the finance sector. They are turning us upside down and shaking us for loose change.

    Posted by Starry Messenger, 06/13/2012 8:37pm (6 years ago)

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