‘Tis the (Austerity) Season
Budget season is well under way in Congress these days, as the House of Representatives recently passed a budget resolution outlining its spending proposals for the next year. The resolution known as the “Ryan budget” has already been reviewed—and admonished—by both your intrepid blogger and leadership of the Reform Movement alike.
Yet as discussions over the budget, and the role of the federal government in righting the economy, progress, the theory behind the current House proposal to dismantle much of the federal government is coming under greater fire.
Severe austerity wasn’t always the leading idea, as Paul Krugman noted in The New York Times in March, and for good reason. He writes:
Two years ago, faced with soaring unemployment and large budget deficits — both the consequences of a severe financial crisis — most advanced-country leaders seemingly understood that the problems had to be tackled in sequence, with an immediate focus on creating jobs combined with a long-run strategy of deficit reduction.
Why not slash deficits immediately? Because tax increases and cuts in government spending would depress economies further, worsening unemployment. And cutting spending in a deeply depressed economy is largely self-defeating even in purely fiscal terms: any savings achieved at the front end are partly offset by lower revenue, as the economy shrinks.
All too soon, Krugman continued in a column this week, that framework shifted:
For the past two years most policy makers in Europe and many politicians and pundits in America have been in thrall to a destructive economic doctrine. According to this doctrine, governments should respond to a severely depressed economy not the way the textbooks say they should — by spending more to offset falling private demand — but with fiscal austerity, slashing spending in an effort to balance their budgets.
Attempts to implement European austerity efforts have come to our shores in recent years—most notably in the Budget Control Act passed this past summer, the (failed) efforts of the Joint Select Committee (aka the “Supercommittee”) it spawned, and the Ryan budget mentioned above. But recent turns of events in Europe have indicated that austerity has not produced the positive economic effects that it once promised. Indeed, such noted economists as Larry Summers are publicly decrying the policy’s merits, writing in the Financial Times last week that “austerity measures at the national level are likely to be counterproductive in terms of creditworthiness.”
As a Reform Movement, we have approached the challenge of deficit reduction by seeking a balanced plan of cuts and revenue increases in the long term, while avoiding placing the onus of deficit reduction efforts on the backs of the poor and vulnerable. We do so guided by what we are taught in Proverbs: “One who withholds what is due to the poor affronts the Creator; one who cares for the needy honors God” (14:31). As the budget process moves forward, we call on Congress to avoid the severe austerity that has proven to be ineffective and that we know to be unjust.
Image courtesy The Contemporary Condition