Friday, March 18, 2011

Austerity for Austerities Sake

Austerity is now in vogue. From the beltway to Main Street, this phrase has infected our political discourse. I use infected intentionally. Budget cutting measures can be done right, but austerity itself invokes a sort of moralistic crusade of belt-tightening. The word austerity is synonymous with such puritanical ideals as Spartanism, simplicity, self-discipline and abstinence. All of these terms give those fighting for swift budget cuts the rhetorical and moral high ground. They play on the United States’ history of protestant ethics, which Weber showed dictate a sense of studious saving and spending patterns. Those that were righteous in our society were those that lived their life not just in moral temperance, but also in economic temperance. We should save for the future, forgo earthly passions in the form of luxury goods, and most of all live within our means. If one did not choose this path they risked eternal damnation, and no one wants to be associated with the damned.

Though this sounds morally persuasive, it is neither morally nor rhetorically persuasive. Let’s pretend you are stuck in a low-paying job and the only chance of escaping is a great new business idea you have concocted. Let’s also pretend that some bank offers to give you a loan for 3% a year that will allow you to realize your dream of self-ownership, and personal wealth. Would you take the offer? In the short run, you will definitely be in more debt, as your business takes time to get off the ground. Over time, however, the benefits will allow you to no longer climb out of that hole, no longer relying on Raman noodles as your only source of nutrition.

Interestingly, this is the exact scenario we as a country are in. Unemployment has been hovering around 9% for months, core inflation is less than 2%, and GDP keeps showing good, but not stellar numbers. Furthermore, the current interest rate on 10-year treasury bonds is near 3%. This is the lowest they have been since we have kept track of these numbers. Furthermore, to quote Mark Zandi, the former chief economist for John McCain’s Presidential campaign, “The stimulus is doing what it was supposed to do: short-circuit the recession and spur recovery.” The government has the opportunity to step in where the private sector is failing and provide an extra jolt in the arm of our economy. Providing increased business tax credits, more direct investment, and aid to states and cities would go a long way towards getting the economy going again.

Why are we not rushing to buy this hugely discounted lunch? The political and media forces in this country have been infected by this avid austerity that borders on ideology. Those that declare themselves budget hawks are deemed righteous and good, while those on the other side of the aisle are deemed weak and impure. Due to this, our current budget debates center over the size of budget cuts, taking for granted the type and necessity of them. That same Republican economist Mark Zandi predicts if the GOP house budget plans were to fully pass then job losses would total near 700,000. Now economic prediction is no set in stone science, but you get the picture. Budget austerity seems to pull on all those heart strings of Americans at the exact moment we should be tackling a different kind of crisis, our unemployment disaster. It is a shame when self-inflicted pain is neither necessary nor productive.

1 comment:

  1. In some sense, I think this gets back to the idea that the government's budget is the same as a household budget. I wonder if the term "budget" itself is problematic: households and governments operate within very different boundaries, and when the two are conflated, well, we get austerity fever. Thoughts?

    -Louis

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