Austerity Sucks: Mark Blyth on the follies of US budget policy

The following is from a presentation before the US Senate by Mark Blyth, author of “Austerity: The History of a Dangerous Idea” It is a scholarly rebuke of mainstream notions about public debt and investment in social welfare that are driving domestic economic policy.

My name is Mark Blyth and I am the Eastman Professor of Political Economy at the Watson Institute for International Studies and Brown University in Providence RI. I am also the author of a book entitled Austerity: The History of a Dangerous Idea (Oxford University Press 2013) a book, which oddly just received a national award in Germany, the country most associated with budgetary austerity. Given that irony is not a German national trait, it might be the case that even the Germans are re-thinking their stance on balanced budgets. As I shall show you today, it’s really not working out so well in Europe and it would be a disaster if it were tried here too.

And yet balancing the budget as a matter of principle is intuitive. After all, you can’t spend more than you earn. It is also appealing. After all, people want more money in their pockets rather than less, so spending ‘other people’s money’ now so that they would have less in the future because of debt interest repayments seems to be the height of folly. But balancing the budget because of these arguments is also folly. While they are intuitive, these arguments are systematically wrong, because they are based upon two faulty analogies: one drawn between households firms and states and another between savings always being good and spending always being bad. I begin by taking each in turn before giving more specific examples.

Read rest here. Blyth’s presentation is viewable here, starting at the 46:20 mark.

Paul Krugman on The Economics of The Welfare State

By Paul Krugman

Social expenditure comprises cash benefits, direct in kind provision of goods and services, and tax breaks with social purposes. Benefits may be targeted at low Income households, the elderly, disabled, sick, unemployed, or young persons. To be considered “social”, programmes have to involve either redistribution of resources across households or compulsory participation.

See rest here.

Mark Weisbrot on Economic and Social Policy and the Problems of the Eurozone and European Integration

By Mark Weisbrot

It was not because of the power of financial markets or because the Germans didn't want to "help" the Greeks that Europe suffered through about three years of recurring crises, in which the continued existence of the euro was thrown into question, until August 2012. It was because the European authorities were using these acute crises and did not want to resolve them until they had extracted certain "reforms" from the weaker European economies (and possibly even some of the stronger ones, if we consider the European Fiscal Compact and what the French government has been doing recently). We know this because as soon as the European Central Bank (ECB) wanted to do so, it put an end to these crises in a matter of weeks, in July-August 2012, by effectively establishing a ceiling on the interest rates of Italian and Spanish bonds - something it could have done at any time in the prior three years.

Read the rest here.