Michael Hoexter is a policy analyst and marketing consultant on green issues, climate change, clean and renewable energy, and energy efficiency. Originally published at New Economic Perspectives .
Lambert here: This is a fine exposition of the views and proclivities of the three major schools of thought on ZOMG!!! Teh debt!!!! Deficit hawks, deficit doves, and deficit owls. Some may find the material at the end on “Racism, Anti-Racism, and Austerity” obvious; others may find it controversial. For myself, I don’t find it a useful exercise to try to work out an individual’s motivations — say, Obama’s — from afar. Beyond recognizing a collective desire in our elites to inflict suffering on others in great numbers (“shock doctrine”; “austerity”; “grand bargain”), I don’t think we can go very far with psychologizing.
* * *
Most of the US political class has been infected with the “mind virus” of austerity that suggests to them that either virtue or necessity consists of cutting government spending and government programs. Under the influence of this “ folk economics ” with no evidentiary support, the equivalent of economic superstition, politicians seem prepared to slash vital supports to the economy despite the ability of monetarily sovereign governments, like the US federal government, to afford continued spending on current and even expanded government programs.
Whatever one’s personal tastes and predilections are in government programs and the role of government overall, the net effect in dollar terms of reducing the spending of government, in the context of the current Lesser Depression is to stall and eventually shrink the economy. Because of a mountain of private sector debt and overvalued assets like real estate in which people are now under water, the only source of renewed spending on goods and services, the engine of economic growth, is government spending.