Austerity Will Leave Us Crying ’96 Tears’
But America's wealthy don't seem to mind.
Aging baby boomers may remember a 1960s rock band that sported an all-time great name. That band — Question Mark and the Mysterians — may now have a worthy rival on the name front. Make way for Reinhart-Rogoff and the Austerians.
Harvard economists Carmen Reinhart and Kenneth Rogoff don’t make smash records. They write learned economic papers that make champions of austerity happy — and help smash the life prospects of average working families.
Austerians preach the absolute necessity of whacking away at government spending. We must, they solemnly intone, discipline ourselves to reduce government deficit and debt, no matter the pain austerity may bring us.
And austerity does bring pain. People lose access to basic services. People lose jobs. People even go hungry. But some people — extremely rich people — don’t mind austerity at all.
These affluent Americans don’t send their kids to public schools. They don’t visit public parks. They never ride public transit. These wealthy folks don’t need public services and resent having to pay taxes to support them.
Austerity works for these wealthy Americans. Cutbacks in public services generally won’t inconvenience or complicate their daily lives. And if austerity should create some unanticipated discomfort, they can always get their friends in high places to intervene — as Americans saw recently when lawmakers rushed to undo air traffic controller budget cuts that had rich travelers cooling their heels in airports.
Austerity cutbacks, notes Center for Economic and Policy Research economist Dean Baker, promise even greater payoffs — for the rich — down the road. Any cut in programs like Social Security, he points out, “opens the door for lowering tax rates on the wealthy in the future.”
If social commitments can be chopped, Baker writes, “then the wealthy can look forward to being able to keep more of their income.”
All this may help explain why pollsters have found, as economist Paul Krugman points out, that rich Americans “by a large majority” consider budget deficits “the most important problem we face.”
America’s wealthy make their preference for austerity equally plain to the politicians who seek their favor. These politicians want to be helpful to their deep-pocketed patrons. But they also have needs of their own. They need “evidence” they can use, Dean Baker reminds us, to show the general public that “austerity serves the general good and not just the rich.”
Three years ago, Harvard’s Reinhart and Rogoff supplied that “evidence,” via an academic paper that purported to show a grave danger whenever government debt hits 90 percent of Gross Domestic Product.
This paper rushed to the “top of the charts” in elite public policy circles. Austerians worldwide cited the paper as an unassailable justification for cutting government spending quickly and deeply.
Reinhart and Rogoff made no meaningful move to discourage the austerians. They basked instead in their global celebrity — until a team of unorthodox economists at the University of Massachusetts exposed their paper as essentially a sloppy scholarly fraud.
This Massachusetts work has just gone viral. Reinhart and Rogoff’s spreadsheet snafus have even become fodder for late-night TV comics.
End of story? Not quite. We have much more here than a spectacularly failed attempt to make the case for a doctrine that suits the sensibilities of the richest among us. We have still another indication that inequality corrupts every corner of contemporary societies, even our ivory towers.
The peers of Reinhart and Rogoff, the scholars who hold the nation’s most prestigious endowed chairs in economics, never subjected the Harvard pair’s findings to any serious scrutiny. The unraveling of their bogus case for austerity started with the digging of a skeptical grad student.
The lesson in all this? In a staggeringly unequal society, as Paul Krugman sums up, “what the top 1 percent wants becomes what economic science says we must do.”
The rest of us, of course, don’t have to listen.