Wednesday, May 8, 2013

Robert Reich On Fiscal Folly

This interview from Monday between PBS host Tavis Smiley and Robert Reich is definitely worth watching:

Watch Former U.S. labor secretary Robert Reich on PBS. See more from Tavis Smiley.

Reich explains clearly and understandably why the current budget priorities of our government are contrary to both good sense and America's self-interest. In particular, he notes:

Tavis: Why is this [current economic depression] so stubborn?

Reich: I think largely because America is suffering something that people don’t talk enough about in my view, and that is widening inequality. Most of the gains of economic growth – in fact, all of the gains of growth since the recession have gone to the top, the very top, the top 1 percent, the top 1/10th of 1 percent.

The middle class and everybody aspiring to join the middle class, it just doesn’t have the purchasing power to go and keep the economic going. You can’t have a strong economy without a strong and growing middle class.

Interview With Robert Reich: May 6, 2013: Transcript

This quote from Reich neatly nails the foolishness of our government's current fiscal policy:

Austerity is not the answer. In fact, austerity economics of the kind we’re practicing right now has shown to be a huge failure. If you look what’s happening in Europe, they are moving into – in fact, most European nations are already into recession because they decided that cutting their budget deficits was more important than creating jobs.

Now when you have a lot of unemployment, that’s the worst time to cut your budget deficit because the government has got to be the spender of last resort. This is something we understood and learned during the 1930s, 1940s. World War II actually got the economy back going.

I don’t want to suggest or have anybody read me as suggesting that we need another war, but that mobilization, that government spending on such a grand scale, got us out of the Depression and finally into prosperity.

Our budget deficit, in fact, our budget debt at the end of World War II as a percentage of the overall economy was much, much greater than it is now. But instead of hunkering down and cutting the budget, what we did in the 1950s was invest in our workforce, invest in college education, invest in retraining.

We created the interstate highway system. We invested in infrastructure. We built the middle class and helped poor people get into the middle class. That’s what we’re not doing now.

Interview With Robert Reich: May 6, 2013: Transcript

A couple of years ago, I wrote about the foolish notion it was war itself that finally got us out of the Great Depression. In fact, had we spent similar amounts of money on our own needs, we would have been at least as well off, and maybe could have avoided the recessions of the immediate post-war years. After all, when Japan surrendered, most of that war machinery we built became useless junk. It took us a few years to reorient our economy, but wise investments in education and infrastructure eventually paid off.

That's the lesson we seem to have forgotten in the years since. We've been telling ourselves all sorts of fantasies about how "free markets" work, but the reality is that free markets don't exist. What exists is a society and its commerce, and that can go better or worse depending how well it uses its opportunities. We're doing a really lousy job of that at the moment.


Anonymous said...

Well, it is working for some people (if you include Mitt's definition) and those happen to be the same people who own congressmen.

I wouldn't call it forgetting. More like selective amnesia.

Peter John said...

Most of the Republicans do not believe in austerity. They just do not want the economy to recover while a democrat is in the Whitehouse. Yes, they are delibiratly sabotaging the economy for political gain. The republicans are not about helping the nation. They are more interested in acquiring and staying in power.

Cujo359 said...

I seriously have my doubts about this being selective amnesia, anonymous @ 5:30 AM. Talk to these folks, and they really seem to believe all the nonsense about them being the job creators, etc. What's really sad is reading Galbraith's book on the Great Depression, and realizing how much the conversation was the same as it is today.

Cujo359 said...

The GOP certainly wants power, Peter John, but so do the Democrats. Both find austerity profitable for themselves, because the same people own both of the major parties. I doubt most politicians believe much of anything on this subject, given that what they really believe in is obtaining and holding onto power. Few have taken a stand against austerity, and I don't recall a singled congressperson saying the things about deficit spending that Reich does here.

The proposed Ryan budget was even more austere than the Democrats', so I doubt that giving them the power they want will change this situation.