Austerity economics, simply put, is a governmental policy of spending cuts and, to a lesser degree, tax increases.
Backers of austerity believe America’s major fire today is the budget deficit and the only extinguisher available is austerity. It appears these same fiscally conservative backers also believe that austerity, if held steady, will eventually lead to a better nation of capitalism.
Modern American austerity was adopted in 2010 as the result of the deal on taxes between Republicans and Democrats, and has had spurts and sputters since. The deal was that there would be federal spending cuts in exchange for an increase on payroll tax.
Another deal was struck in 2011 that initiated tax hikes from $600 billion to $700 billion over 10 years and federal spending cuts of $1.5 trillion over 10 years. The tax hikes involve the richest Americans and the spending cuts essentially affect everyone else.
Sequestration is the forced austerity scheduled to take effect March 1. This particular deficit reduction plan is meant to force Congress and the Administration into action in stabilizing the nation’s debt by that date. The Pentagon would lose nearly 8 percent and domestic programs more than 5 percent in spending if no last minute deal is struck.
The chained CPI formula will severely cut Social Security according to cost-of-living adjustments, and do so immediately. In order to realistically strengthen Social Security, Medicare and Medicaid, our health care system must be fixed by fighting the exorbitant costs of insurance and drug lobbyists.
Less conservative economists and Americans — and even politicians — believe “fiscal cliffs” and “debt crises” and “fixing the debt” are manufactured emergencies meant to benefit the wealthy and cover up more urgent issues benefiting the rest of us.
Cuts to federal spending, they feel, cause more unemployment and more debt. Austerity is not only harmful, but cruel during periods of long-term unemployment and inflation.
Spending cuts are far-reaching and include: education, healthcare, public transportation and the postal service.
According to this side of the fiscal equation, it’s the economy that needs fixing — not the deficit. According to the Congressional Budget Office, deficits are already down by 25 percent compared to the economy.
So how do we fix the economy? By getting people back to work by creating better paying jobs. Many of those jobs are urgently needed in rebuilding our crumbling infrastructure or transforming our energy system away from oil – to name but a couple areas.
Corporate profits are at an all-time high. “Corporate earnings were $1.75 trillion, up 18.6 percent from a year ago,” CNN reports. “Corporations are currently making more as a percentage of the economy than they ever have since such records were kept. But at the same time, wages as a percentage of the economy are at an all-time low.”
Instead of cuts to spending, perhaps we should be raising revenue by reclaiming unpaid taxes. America loses billions of dollars each year from corporate tax dodging due to loopholes written up by corporate lobbyists. One out of four of our largest corporations pay nothing in taxes.
In addition, nothing has yet been done about the trillions of dollars stashed out of the country in tax havens like the Cayman Islands. How much of a deficit would there be if these loopholes were closed?
Sen. Patty Murray, new head of the Senate Budget Committee, said, “I believe our focus should be on jobs and the economy, not on arbitrary pain for American families.” Why try to balance the budget on the backs of our most vulnerable — children, the elderly, the sick and the poor?
Now is the time to get more informed about what’s going on in America.
— Marylin Olds is an opinion columnist for the Kingston Community News. Comments are welcome at marylin.olds@gmail.com.
