Saturday, October 26, 2013

Austerity is Crap

Large numbers of people are unemployed or underemployed.  Does that mean we should all tighten up our budgets, spend less, borrow less and save more, including the Government?

Of course not, that will only make more people unemployed.  To reduce unemployment, we all either individually or collectively need to spend more!

One person's income is another person's spending.  If you want incomes to go up, there has to be more spending!  So if people are unemployed, there needs to be more spending to get them employed.  This is basic Keynesian economics.

Now, I would hasten to add, of course we should be spending on the right kinds of things.  One of those right kinds of things is research.  But thanks to the Sequester, research spending by the US government has been going down.  The government shutdown didn't help.  And more cuts to things like research appear to be coming right up.  This is so counterproductive!!!

And we should be spending less on things which increase pollution, global warming, etc., or abuse natural resources.  But that is exactly where spending has been increasing, doing things like developing the tar sands in Canada, and it will be worse if the Keystone Pipeline is built.

Now, thanks to the tax cuts which have been driving by Reaganomics, rich people have been taxed less, so they have accumulated more of the total wealth.  Since rich people spend proportionally less of their incomes, this has depressed spending relative to what might have been otherwise--with more taxes collected and more government spending.  Reaganomics has created what looks like a permanent depression, in which the saving glut fueled by the ever increasing wealth of rich people sloshes around the world unproductively and even destructively in search of additional profits.  Of course those additional profits are not to be had overall, since income-from-investments also comes from spending.*

Tax and spend is the only answer, outside of a perfect communist revolution.

*The only kind of additional profits possible are those which are carved out of someone else's income, a zero sum or negative sum game.  This is Adam Smith turned upside down, the invisible hand becomes the not-so-invisible knife.  In such a world, markets don't increase the general welfare, they decrease it as they enable such destruction.  Actually, this is the general rule, the invisible hand only works as Adam Smith said when something else such as a comprehensive ethical system eliminates zero sum and negative sum activities (including all externalities).  No such ethical system has persisted except among a small part of the population, and when it does, it simply provides more incentive for others to steal their bacon (in a world with private wealth), along with stealing an unspoiled world from the future.

1 comment:

  1. "Of course not, that will only make more people unemployed. To reduce unemployment, we all either individually or collectively need to spend more!"

    Employment is nothing but work. Why do you want more work? Spend less, and then take all the work that's left and share it equally. You'll be employed maybe a couple of days a week, and the rest of the week you are free to do whatever you like.