Why austerity sucks


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.


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.