"Do or Do not. There is no try."

“Austerity’s Grim Legacy”: Deficit Fetishism Was Both Wrongheaded And Destructive

When economic crisis struck in 2008, policy makers by and large did the right thing. The Federal Reserve and other central banks realized that supporting the financial system took priority over conventional notions of monetary prudence. The Obama administration and its counterparts realized that in a slumping economy budget deficits were helpful, not harmful. And the money-printing and borrowing worked: A repeat of the Great Depression, which seemed all too possible at the time, was avoided.

Then it all went wrong. And the consequences of the wrong turn we took look worse now than the harshest critics of conventional wisdom ever imagined.

For those who don’t remember (it’s hard to believe how long this has gone on): In 2010, more or less suddenly, the policy elite on both sides of the Atlantic decided to stop worrying about unemployment and start worrying about budget deficits instead.

Some of us tried in vain to point out that deficit fetishism was both wrongheaded and destructive, that there was no good evidence that government debt was a problem for major economies, while there was plenty of evidence that cutting spending in a depressed economy would deepen the depression.

And we were vindicated by events. More than four and a half years have passed since Alan Simpson and Erskine Bowles warned of a fiscal crisis within two years; U.S. borrowing costs remain at historic lows. Meanwhile, the austerity policies that were put into place in 2010 and after had exactly the depressing effects textbook economics predicted; the confidence fairy never did put in an appearance.

Yet there’s growing evidence that we critics actually underestimated just how destructive the turn to austerity would be. Specifically, it now looks as if austerity policies didn’t just impose short-term losses of jobs and output, but they also crippled long-run growth.

The idea that policies that depress the economy in the short run also inflict lasting damage is generally referred to as “hysteresis.” It’s an idea with an impressive pedigree: The case for hysteresis was made in a well-known 1986 paper by Olivier Blanchard, who later became the chief economist at the International Monetary Fund, and Lawrence Summers, who served as a top official in both the Clinton and the Obama administrations. But I think everyone was hesitant to apply the idea to the Great Recession, for fear of seeming excessively alarmist.

At this point, however, the evidence practically screams hysteresis. Even countries that seem to have largely recovered from the crisis, like the United States, are far poorer than precrisis projections suggested they would be at this point. And a new paper by Mr. Summers and Antonio Fatás, in addition to supporting other economists’ conclusion that the crisis seems to have done enormous long-run damage, shows that the downgrading of nations’ long-run prospects is strongly correlated with the amount of austerity they imposed.

What this suggests is that the turn to austerity had truly catastrophic effects, going far beyond the jobs and income lost in the first few years. In fact, the long-run damage suggested by the Fatás-Summers estimates is easily big enough to make austerity a self-defeating policy even in purely fiscal terms: Governments that slashed spending in the face of depression hurt their economies, and hence their future tax receipts, so much that even their debt will end up higher than it would have been without the cuts.

And the bitter irony of the story is that this catastrophic policy was undertaken in the name of long-run responsibility, that those who protested against the wrong turn were dismissed as feckless.

There are a few obvious lessons from this debacle. “All the important people say so” is not, it turns out, a good way to decide on policy; groupthink is no substitute for clear analysis. Also, calling for sacrifice (by other people, of course) doesn’t mean you’re tough-minded.

But will these lessons sink in? Past economic troubles, like the stagflation of the 1970s, led to widespread reconsideration of economic orthodoxy. But one striking aspect of the past few years has been how few people are willing to admit having been wrong about anything. It seems all too possible that the Very Serious People who cheered on disastrous policies will learn nothing from the experience. And that is, in its own way, as scary as the economic outlook.


By: Paul Krugman, Op-Ed Columist, The New York Times, November 6, 2015

November 9, 2015 Posted by | Austerity, Economic Recovery, Financial Crisis | , , , , , , , , , | 3 Comments

“Turnaround Is Fair Play”: What If The Girl Scouts Investigated The Bishops?

The US Conference of Catholic Bishops is going to investigate Girl Scouts USA because of concern over some of the Scouts’ program materials and some organizational ties, such as—cue ominous music—the Sierra Club and Doctors Without Borders!

But what if Girl Scouts USA were to turn the tables and scrutinize the bishops’ group overseeing the investigation: the Committee on Laity, Marriage, Family Life, and Youth?

After all, that committee includes the Most Rev. Salvatore J. Cordileone, Bishop of Oakland, who publicly bemoaned the fact that former Harvard president Lawrence Summers was excoriated for suggesting that women tend to have less aptitude for science and math. “Why,” asked Cordileone, “didn’t he have a right to say something which is a perfectly legitimate observation?”

(An aside: Is there anyone who seriously thinks Lawrence Summers had no legal right to say what he said? Isn’t the issue that a whole lot of people thought he was, you know, wrong; and, further, that being that glaringly wrong in public carries the consequence of strong disagreement and professional ramifications? But hey, while we’re on the subject of people having or not having the legal right to do and say things that other people strongly disagree with: It may interest you to know that Cordileone was also one of the major driving forces behind Prop. 8 in California, which outlawed same-sex marriage.)

Also on the committee is Most Rev. George Rassas. In 2008, Cardinal Francis George, Archbishop of Chicago, said in a deposition that Rassas had “withheld information about abuse allegations.”

These are two of the people who will be seeing whether Girl Scouts USA meets the appropriate standards for a Catholic organizational partner. In light of this, why not ask whether the Committee on Laity, Marriage, Family Life, and Youth meet Girl Scouts USA’s standards, rather than just the other way around?

Girl Scouts USA has, after all, developed significant programming to encourage girls to pursue their interests in science, technology, engineering, and mathematics. The website even calls girls “natural scientists”! Moreover, when faced with abuse disclosures from scouts, Girl Scout volunteers are instructed to “tell her you believe her” and “report the suspected abuse to the local agency designated to investigate such cases.” As such, the actions of Bishop Cordileone and (if Cardinal George is correct) Bishop Rassas suggest that they may not share these Girl Scouts values. I suspect those are values that many of the Girl Scouts’ constituents probably also hold dear.

Of course, I doubt Girl Scouts USA will point this out. Perhaps they rightly perceive what I should probably also do a better job taking to heart: that it’s not very charitable to judge a whole group by the few cherrypicked things you most object to (polite cough). At the same time, just like a church has the prerogative not to partner with a group that violates its religious convictions—understanding that they may thereby compromise their reach—neither is an organization that works for girls’ empowerment under an obligation to compromise its core values. Should they wish to do so, Girl Scouts USA is in a position to claim the moral high ground here.

By: Sarah Morice-Brubaker, Religion Dispatches, May 17, 2012

May 19, 2012 Posted by | Religion | , , , , , , , | Leave a comment


%d bloggers like this: