Monday, May 07, 2012

French And Greek Elections Touch Off Debt Reduction Bean Counter Freakout

Vive La France!.

The wrong headed and destructive use of austerity measures has banksters, bond traders, supply-siders and rightwing government bean counters in a quandary after elections in Europe. The way forward and the effects of the election of the socialist Hollande in France and the rejection of austerity in other European elections will not be fully understood quickly. But it has been clear from the beginning of the financial crisis to Keynesians that austerity, fear of piling up sovereign debt and inflation are not as dangerous as they have been made out to be.

Of course these bean counters seem to have little problem with justifying the waste of trillions on needless wars or corporate and financial industry swindling or the reduction of civil liberties or having the 1% pay their fair share in taxes.

A major part of the call for debt reduction in the United States is actually a veiled attempt by the right to destroy public sector unions along with their political power. It also is aimed at cutting the social safety net for the middle class. Keynesians argue that in times like these government spending is the only effective real engine of the economy large enough to create the number of jobs necessary to return to fuller employment and prosperity. When 70% of our economy is based on consumer spending it's not hard to see that creating jobs that put money in the pockets of the middle class that they will spend is paramount to bringing about real recovery. Cutting payrolls and government jobs has the opposite effect and has significantly driven up the unemployment rate which is something that election year Republicans seem happy about.

Austerity policies have obviously failed to stimulate global economies. Europe is already entering a double dip recession and the United States may not be far behind. The European elections may signal the beginning of a global change of course. How this shift in one of Europe's largest economies will effect the forces behind rightwing debt reduction ideology versus the forces calling for more government stimulus in the United States will be interesting to see in this election year. Can Obama make an effective case for more spending instead of less, or will he continue to triangulate his position on the subject out of fear of moderate voters and economic illiterates turning on him.  It would appear that working class people in Europe understand the argument for more spending. Not so much in the USA I'm afraid. 

Simple minded Americans see debt reduction akin to 'balancing their checkbook at the kitchen table'. The right loves to use this stupid metaphor to argue for balanced budgets and 'living within your means'. Unfortunately, balancing your checkbook at the kitchen table and living within you means has little or no relation to reality when your talking about manipulating complicated global economies. 

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