Barack Obama is making the trop to the G8 summit, where financial cooperation between the world’s largest economies will be discussed. Europe is having financial difficulties, because they are suffering the effects of austerity. Meanwhile, back on the home from, the news could not be more clear that austerity is the wrong was, as this Paul Krugman article explains.
Yesterday the IMF chided the United States for spending too little and cutting its budget deficit too fast — and most people, if they heard about it, just shrugged. To be honest, that was my initial reaction too: we’ve come to accept the sheer stupidity of our current economic policies, and the fact that apparently nothing can be done about it, as part of the “new normal”.
Still, every once in a while we should step back and consider the awesomeness of the situation. Normally, we expect governments to have trouble containing demands that they spend more and/or tax less. Normally, we expect the IMF to be a fiscal scold, telling spendthrift governments to make tough choices; the old joke is that IMF stands for It’s Mostly Fiscal.
But now we’re in a situation — a liquidity trap — in which more government spending is a good thing, because it helps put unemployed resources to work; meanwhile, the cost in terms of future debt service is minimal, because interest rates are so low. Both ends of the intellectual case for austerity — the claim that spending cuts are actually expansionary and the claim that terrible things happen when debt rises even if interest rates are low — have collapsed… [emphasis added]
Inserted from <NY Times>
Photo credit: The Political Carnival
Krugman goes on to say that there is only one reason that we are not pursuing a sane economic policy: The Republican party.
Karen Finney, Jared Bernstein Heather McGee discussed the crumbling case for austerity, as Obama prepares to attend the G8 Summit.
What better proof could we have than Europe’s record that austerity does not work. Republicans know this and the support austerity for the 99%, but runaway spending for the 1%. I loved Bernstein’s comment that Republicans use facts liker a drunk uses a lamp post. The keys to making Republicans happy are these. Make life more austere for you and I and more excessive for the 1%. Do everything possible to make America fail, as long as we have a Democratic President.
I expect Europe to use the G8 as an opportunity to move away from austerity. Sadly, elements of austerity, that is, for the 99%, will remain in place, as long as Republicans have the power to sabotage Democrats’ attempts to grow the economy.