Why austerity sucks

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European nations are starting to take some of the same steps that Republicans are suggesting for the US -- reductions in the public sector, cuts in benefits, etc. And Joseph Stiglitz, an economist who actually knows what he's talking about, argues that it's a terrible idea -- and that goes for the United States, too. Check out this fascinating interview.:

When you look at America, you have to concede that we have failed. Most Americans today are worse off than they were fifteen years ago. A full-time worker in the US is worse off today than he or she was 44 years ago. That is astounding – half a century of stagnation. The economic system is not delivering. It does not matter whether a few people at the top benefitted tremendously – when the majority of citizens are not better off, the economic system is not working.

More:

The European: What do you say to someone who argues thus: Demographic change and the end of the industrial age have made the welfare state financially unsustainable. We cannot expect to cut down on our debt without fundamentally reducing welfare costs in the long run.
Stiglitz: That is absurd. The question of social protection does not have to do with the structure of production. It has to do with social cohesion or solidarity. That is why I am also very critical of Draghi’s argument at the European Central Bank that social protection has to be undone. There are no grounds upon which to base that argument.

The thing about Stiglitz is that, unlike many academic economists, he's been right most of the time over a stellar career. And he's right now.

Comments

I'm all down with an activist government, but I am not inclined to give one red cent to Ed Lee, Jerry Brown or Barack Obama to laud on their corporate patrons.

Perhaps there is a middle ground between starving the beast of government and starving government until the ticks fall off and the flatworms are shat out?

I think that we learned from 2009 that whatever fiscal stimulus this government cranks out is going to do as much harm as good because all it will do is further empower the corrupt members of the Democrat Party coalition.

Posted by guest on Apr. 26, 2012 @ 8:04 am

All of us are living way beyond our means.

Start saving money for your own retirement. Because the ponzi scheme cannot be maintained.

Posted by Troll the XIV on Apr. 26, 2012 @ 9:25 am

I started saving decades ago, and am in excellent financial shape. Speak for yourself.

Posted by Chromefields on Apr. 26, 2012 @ 10:36 am

Social Security is not a ponzi scheme.

Finance leveraging at 40:1 with government backstop is a ponzi scheme.

The perpetual war machine is a ponzi scheme.

Social Security is fully funded when it is not raided to fund the military and bank bailouts.

The fed can conjure up trillions of dollars at a whim when the banks need it, they can conjure up trillions of dollars to guarantee retirement and health care security if need be.

Investing for retirement means putting your life savings at risk of being culled by speculators betting on whatever the next bubble is to pop.

Posted by guest on Apr. 26, 2012 @ 11:23 am

Agreed, the military industrial complex is out of control (2009 military spending: The USA $800 billion, rest of the world combined $820 billion; source: The Economist).

But Medicare is bankrupt, and SS will go under too, in around 2035 as the baby-boomers continue piling in.

My point above: Americans have never been net savers. Whereas Germans and Japanese have saved 15% of their income since the end of WWII, we Americans have been on a spending binge. Net savings were negative throughout the Bush years after he told us to ramp up spending in order to fight Arab terrorists.

We have to start learning to save money.

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