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Wednesday, October 26, 2016

This week, Weekend Reader brings you an excerpt from Mark Blyth’s new book, Austerity: The History Of A Dangerous Idea. Congress hasn’t passed a budget since 2009 — exposing the failure of a highly polarized government to agree on anything. The GOP remains completely unwilling to change or compromise their stance on the budget. They still uphold the idea that austerity, a combination of spending cuts and tax decreases, will somehow help the economy despite a majority of claims from expert economists who promise that austerity will not do anything but hurt our economy. Blyth, a political economist, explains the damage austerity has already done to our economy and what the future holds if Republicans win.

You can purchase the book here.

The Distribution of Debt and Deleveraging

Austerity advocates argue that regardless of its actual origins, since the debt ended up on the state’s “books,” its “balance sheet of assets and liabilities,” the state’s balance sheet must be reduced or the increased debt will undermine growth. The economic logic once again sounds plausible, but like Bill Gates walking into a bar and everyone becoming millionaires as a result (on average), it ignores the actual distribution of income and the critical issue of ability to pay. If state spending is cut, the effects of doing so are, quite simply, unfairly and unsustainably distributed. Personally, I am all in favor of “everyone tightening their belts”—as long as we are all wearing the same pants. But this is far from the case these days. Indeed, it is further from the case today than at any time since the 1920s.

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As the Occupy movement highlighted in 2011, the wealth and income distributions of societies rocked by the financial crisis have become, over the past thirty years, extremely skewed. The bursting of the credit bubble has made this all too clear. In the United States, for example, the top 1 percent of the US income distribution now has a quarter of the country’s income. Or, to put it more dramatically, the richest 400 Americans own more assets than the bottom 150 million, while 46 million Americans, some 15 percent of the population, live in a family of four earning less than $22,314 per annum.

As Robert Wade has argued: The highest-earning 1 percent of Americans doubled their share of aggregate income (not including capital gains) from 8 percent in 1980 to over 18 percent in 2007. The top 0.1 percent (about 150,000 taxpayers) quadrupled their share, from 2 percent to 8 percent. Including capital gains makes the increase in inequality even sharper, with the top 1 percent getting 23 percent of all income by 2007. During the seven-year economic expansion of the Clinton administration, the top 1 percent captured 45 percent of the total growth in pre-tax income; while during the four-year expansion of the Bush administration the top 1 percent captured 73 percent…This is not a misprint.

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  • charleo1

    A apt description of austerity might be the obsessive gambler, after a spate
    of some particularly heavy losses. Comes home to his wife, and five children,
    and announces that their proliferate spending on food, clothing, and maintaining
    a roof over their heads, was simply unsustainable, and must come to an end.
    Our debt, he explained to his startled spouse, was simply out of control. We have
    borrowed far beyond our capacity to repay the loans now. And to borrow one
    pence more, would be immoral. And wholly unfair to our children, who would be
    indentured, and condemned to a life of abject poverty, if the household expenses
    are not cut immediately, and to a drastic extent. But John, how can this be?
    Your allotment to me to run the household, and care for our children, hasn’t
    increased since the day we were married. And we have added five children since.
    And, it is clear from your lavish clothes, and your new diamond hat pin, you are
    not without funds. Yes, he admitted, dear wife, I have money. But, that’s for
    investing. If I don’t have money for investments. If I spend this money paying out
    to you and the children, then we’ll all starve! And I’m sure you don’t want that.

    • idamag

      When it comes to analogies, you are good!

    • plc97477

      I want to let all the posters know that reading most of the posts lets me know that the entire USA is not either stupid or insane or both and that gives me hope that we can fix the problems our country has.

      • charleo1

        Well, there you go! A great friend of mine, now gone for many years.
        Used to say, “Can’t never accomplished anything.” Thanks to you,
        for bringing his memory to mind. And sharing the positive energy!

  • rustacus21

    This should make us all shudder w/fright, as the last paragraph states & something I’ve harped on since jumping into the ‘public’ forum: there are voters of which all of this goes right over the heads of. For those of US who get it, we must help out those who don’t & educate, Educate, EDUCATE!!! Thinking the world was flat was ok when the autocrats didn’t have vast global control potential. But this is different. As Liberals, Progressives, Independents & rational, mature conservatives, we must ALL overwhelm those propaganda-vulnerable voters & even those dejected voters so turned off by current events they don’t even bother, in order that propaganda becomes totally meaningless & money spent in media irrelevant new year! As described by FDR, as the ‘unruly elites’, the only demographic which prospered between 2001 & 2011 (the 2009-2001 period of which they took home an astounding 100% of ALL NEW income increases according to – ), must be tamed & brought into ‘fold’ of civilized Democracy culture. THE demographic that, coincidentally, is fueling the push for austerity by funding politicians that put this madness into action – or the politicians who ‘pretend’ to be under pressure & go along, just to keep their cushy elective offices w/benefits – MUST not prevail!!! WE, the PEOPLE – the true majority MUST show up better than 2010, when only 39% of AMERICAN VOTERS showed up, NATIONALLY!!! W/so much at stake, that was an absolute disgrace!!! Redemption at this point, will be hard to obtain, going forward, but the choice is clear & stark – FULL Democracy or NONE! We, the People must make that choice, as the many, MANY Americans now compromised, are unable to…

  • FredAppell

    It seems as if conservatives believe that with the right amount of austerity, the black clouds will suddenly give way to blue skies and millions of well paying jobs will sprout up overnight. It’s really nothing more than a fairy tale, but it is one they believe in 100%.

    • charleo1

      Fred, you and I both know, this austerity crap, is just the high rollers,
      and multi national conglomerates telling their lap dog politicians, to make
      sure the debts they’ve created with their low wages, and outsourcing of jobs, and dozens of other ways they’ve come up with over the years to screw the working people in this Country, doesn’t wind up in their mailbox. There was a time, businesses in this Country made a nice profit. Which
      they put a little back into the business, and shared the profits their hard
      work had earned, with the folks on the factory floor, that had played their part in the growth of the enterprise. Then, came the quick buck artists.
      The soaring compensation for finding any method necessary to make
      the next quarter’s earnings, better than the last. And, all things being
      equal, and since they had never been anything but a huckster, to begin
      with. Did what all thieves do. Stole the money from the workers, and
      turned it over to the very happy stockholders. Who now showered the
      con-man with praise, and even more money. And so, the company
      that once contributed to the economy, was turned into a predatory instrument, now greedily eating that economy it had once nurtured, from
      the inside out.

      • FredAppell

        True, but I lack your flare for explaining our positions so colorfully and adequately. As a consequence, I tend leave out a lot of details. Thanks.

        • charleo1

          Not at all. You said it very well. All I was gonna say was,
          Amen! But your comment got me so fired up. And before
          I knew it, I was writing The Grapes of Wrath, or something!

          • FredAppell

            I like that, I got you fired up. Man, there ain’t no better compliment then that. I get that same feeling when I read yours and a few others. There is a lot of passion in the people on this
            blog for better or for worse. But I never feel cheated by anyone here after I post and read other comments.

      • idamag

        When short sighted businesses either shaft their workers or send the work overseas, they do not realize they were destroying the tax base and the consumer base.

        • charleo1

          Do these businesses shipping jobs out of the Country
          know they are hurting the American economy? My sense
          is, they must. And more troubling is, they don’t care. I think these CEOs running these multi-national behemoths, see
          themselves as world citizens, And place their loyalties exclusively to that corporation, and it’s shareholders. Which
          may live in many Countries around the world. My feeling is
          when we lost the home town business owners, that felt a sense of responsibility towards the town, they had grown up in. And knew many of their employees by name, because they went to school with them. Or, their Fathers knew one another. When these big corporations bought out those businesses all across America. And pulled those machines off the factory floors. Machines, that by the way, had bought homes, sent sons, and daughters off to college. Paid for weddings, and respectable funerals. And, when the doors were closed here, by the new corporate Bosses, that live up in NY, chasing cheap labor in Asia. America lost a lot more than just the jobs. We lost our way of life. And we lost the collective economic security, that naturally comes when
          the Boss, and his family, and the employee, and theirs
          are sitting side by side, for the Sunday morning church
          services. And, I’m like a lot of people right now. I don’t
          know how we’re going to get that back. I just know we

          • idamag

            And that was what capitalism was. Not what we have today. It is an oligarchy whereas business owns the government and ultimately the people. We build poor people and then condemn them for being poor.

          • charleo1

            There is no doubt about it. You are absolutely right.
            They can’t have it both ways. They can’t work 364 days
            out of the year, skewing the table in favor of the wealthy.
            Then, use the last day to criticize workers for not working
            hard enough. Or, insult them as being dependent on the
            government for healthcare, when those employers paying
            the least, have quit offering health insurance.

  • Allan Richardson

    The politicians who represent (and are PAID by) the top one percent also CLAIM to be Christians (except Cantor, Abramoff and a few others) and CLAIM to represent the Judeo-Christian moral message. Check out Matthew 25 and almost the entire books of Isaiah, Hosea, and Amos.

  • howa4x

    The danger is not debt but the fact that so few have so much control over the economy. This is why this country is stagnating with deteriorating roads, and cracked bridges. This same group of the super wealthy seeks to tighten their grip by refusing to contribute to the overall good of the country, rather they only want to further enrich themselves. This is why the Koch bros run around the country union busting since this was how the middle class was built and how it got political power. They convinced the average republican to vote against unions and to work for much less then they got before. the Walton’s who are the nations richest family now are placing the majority of their Wal-Mart work force on part time statue so they don’t have to give health benefits. The average Wal-Mart worker needs to be on government subsidy’s to make ends meet. This practice increases the debt of the taxpayer and prevents us from overdue infrastructure repairs. The super rich love government debt in reality since they are the ones buying up all the bonds with higher interest rates. so they make another side show about it to obscure what they are really doing. The 1% is deathly afraid of real middleclass power so they provide distractions to keep the middle class fighting while they make billions. They want us to be so afraid we will take any job at any rate of pay and allow all environmental rules abolished to have the crumbs.
    These are the most dangerous people in America. They have caused more economic damage than any other in history. The debt debate is just a distraction