State austerity is hurting the United States economy

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While the case against austerity is glaringly obvious in Europe, where nations like Greece, Spain, and Portugal are in a death spiral of high unemployment, high suicide rates, and high debt – there’s now more evidence that austerity is hurting the United States economy, too. A study by the Center for American Progress compared states that have cut spending and enacted austerity with states that have increased spending and pro-growth policies.

What the study found is – in states that have pushed through austerity, the unemployment rate is 4.1 percentage points higher than before the recession, there are 6% fewer private sector jobs, and the state economy is growing 2.7% slower than before the recession. On the other hand, in states that have increased spending – the economy is growing 2.6% faster than before the recession. Basically, states under austerity are watching their economies shrink, states not under austerity are watching their economies grow.

Austerity only works to crash economies, which is why Republicans are in favor of it while President Obama is in the White House.

Thom Hartmann Administrator's picture
Thom Hartmann A...
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Don’t know if anyone has posted this here, but Ezra Klein had a great piece about this last week.

Exerpts from Klein’s piece:

“At this point in George W. Bush’s administration, public-sector employment had grown by 3.7 percent. That would be equal to a bit over 800,000 jobs today. If you add those hypothetical jobs, the unemployment rate falls to 7.3 percent.” [Currently we are at 8.2%]

“In the equivalent period following the 1990 [Bush I] and 2001 [Bush II] recessions, local government employment grew 7.7 and 5.2 percent. Even following the 1981 [Reagan] recession, by this stage local government employment was up by 1.4 percent...”

“If state and local governments had followed the pattern of the previous two recessions, they would have added 1.4 million to 1.9 million jobs and overall unemployment would be 7.0 to 7.3 percent instead of 8.2 percent.”

“Note that a Republican was president after the 1981, 1990 and 2000 recessions. Public-sector austerity looks a lot better to conservatives when they’re out of power than when they’re in it.”

While I hear Thom mention this, why Dems don't pound stuff like this aday fter day, I don't understand....

http://www.washingtonpost.com/blogs/ezra-klein/post/public-sector-austerity-in-one-graph/2012/06/11/gJQAv89NVV_blog.html#pagebreak

Klein on the Maddow Show presenting this:

http://video.msnbc.msn.com/the-rachel-maddow-show/47774722#47774722

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al3
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Jul. 31, 2007 3:01 pm

As Pshakkotai explained in the Bush tax cuts thread (#17), we still have our own currency, and there is no reason for the USA to suffer austerity.

"... Increase deficits until there is full employment. It is quite safe to do so. Of course the congress must be educated to get rid of the nonsensical debt ceiling....

...The govt has borrowed money from itself... ...and given to the people. People OWN the money and collect interest. They DON'T have to pay any debt back. It is not their debt. The govt is in debt to itself and has to do NOTHING. All this is called modern monetary theory and is well known to the treasury and fed.

The national debt everyone frets about is not real.

You can cut war funding, end corporate welfare and deficit spend to take care of all infrastructure and social needs independent of tax revenues which do not reenter the economy. Tax money is simply recorded and if the currency is old, trashed."

And here is one of the reasons that we need to have a (public) US National Bank, (in addition to state public banks). We need to stay together as a nation through all of this — otherwise the international oligarchies, the real Empire, will win. If that were to happen, there will be no Government here (or anywhere), strong enough to protect its people, and its evironment from Empire looting.

Quote Thom Hartmann Administrator:What the study found is – in states that have pushed through austerity, the unemployment rate is 4.1 percentage points higher than before the recession, there are 6% fewer private sector jobs, and the state economy is growing 2.7% slower than before the recession. On the other hand, in states that have increased spending – the economy is growing 2.6% faster than before the recession. Basically, states under austerity are watching their economies shrink, states not under austerity are watching their economies grow.

Austerity only works to crash economies, which is why Republicans are in favor of it while President Obama is in the White House.

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Karolina
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"

THE BIG LIE

The 1% successfully divides the 99% to conquer them, and the method is control of the media, which promulgates the Big Lie, which includes:

1. The poor are criminals, dangers to society, who will destroy what we have built.
2. The poor are lazy, do not wish to work, and any benefits they receive addicts them to further benefits (unemployment compensation, food stamps, health insurance, housing).
3. Our taxes pay for federal spending. The government spends taxpayer money.
4. We and our children owe the federal debt.
5. Like us, the federal government should run a balanced budget.
6. Immigrants are poor, lazy, uneducated and criminal (though supposedly smart enough to take our jobs).
7. Small government is better than big government.

By continuously pounding away at these lies, the media and the politicians convince the 99% to vote against their own best interests, and to extend the gap." from

http://rodgermmitchell.wordpress.com/2012/06/21/why-does-the-1-upper-inc...

is the explanation offered by Mitchell. The gap he refers to is the increasing magnitude of inequality of income which

"From the standpoint of the rich, the true goal is not to acquire more dollars; the true goal is to extend the gap, which can be accomplished by raising the rich and/or by lowering the less-rich." They apparently enjoy other peoples' misery. So much for liberty and pursuit of happiness (and patriotism)!

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pshakkottai
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Jul. 11, 2011 10:27 am

It's all in how the pie is divvied up. Please read "And Amerikkka claims it's not racist?" and hundreds of other hard-hitting stories on www.WRISEUP.COM.

Henry McRandall
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Jun. 12, 2012 6:07 pm

For those of you who continue to say that the deficits don't matter, you have a HUGE mountain to climb to convince the rest of us on that point. I would dare say that even most of those on the left would tell you that this 1.2 trillion dollar a year overspending by the US government has to shrink. Obviously there is some disagreement as to how to do accomplish that.

I think your position is ridiculas and irresponsible, but everyone is entitled to their opinion.

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mauiman58
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I refer you to

http://my.firedoglake.com/pshakkottai/2012/04/20/misunderstood-deficits/

for data (and proof) of MMT and discussions on that topic by others. And USA has been in deficits most of the time (58 deficit years out of the past 70) as shown in

http://www.davemanuel.com/charts2/surpluses_and_deficits_1940-2011.html

A more recent data plot of mine shows that one dollar of deficit produces 8 dollars of GDP under favourable conditions in

http://pshakkottai.wordpress.com/2012/05/25/188/

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pshakkottai
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Implicit in Glass-Steagall, but explicit in the re-establishment of the American Credit System, is the need for a redefinition of value or wealth in the economy. This means a drastic and rapid departure from the way things are done now, under our current “monetary” financial system. Since the 1999 formal repeal of Glass-Steagall, large banks have been allowed access to commercial deposits, to make bets on money markets, and to leverage their so-called assets to absurd levels. Spurred by continued gradual deregulation in the past 50 to 60 years, this has led to increasingly large financial bubbles, the need to cannibalize legitimate financial assets that are actually tied to real, useful function , the looting of those financial assets and capacities themselves, and then, as we all know too well, taxpayer bailouts from the public, once the bubbles inevitably pop.

These private banks answer to and are overseen by an even larger private bank—the Federal Reserve—which prints more and more money to honor these financial obligations and transactions. The US Government is, all the while beholden to and recognizes the se activities, and protects them as the legitimate functioning of the economy. Now while this description is admittedly very general, the purpose and function of a monetary financial system is to uphold and promote the accumulation of mere paper for its own sake, to the momentary benefit of a mere few and to diminish and confine the entire role of government to merely policing these transactions.

Today’s monetary financial system is a glorified casino. It is functionally and scientifically invalid and as the rate of its collapse has outpaced the rate of bailouts required to cover the losses, the need for this system to be abolished has never been more clear.

The Credit System on the other hand, works in a completely opposite way. However it is not simply another way of doing things. It contains an entirely incommensurable conception of value. Under the Credit System, the US Government evaluates potential measures to be taken to improve the overall economy, determining actions and projects that will create a more productive future state of economic activity. With an initiative to build a major infrastructure project, for example, a massive project that would fundamentally alter our national infrastructure and productive capability—the design for such a project would define the needed lending and commitments required for Congress to produce legislation and appropriate necessary funds. These funds would then be monitized by the Treasury and applied by a Credit Fund such as the National Bank with strict conditions and regulations to insure that those funds produce the intended effect and accomplish the project.

In the Credit System the US Government rather than some group of private banks determines the amount of money in circulation and the value of said money represents the projects and efforts to improve the economy, rather than some arbitrary index or physical material, such as gold.

In all cases the crucial principle of the Credit System implies:

1) A basis for lending

2) A unification of resources of the nation, channeled toward needed developments in manufacturing and projects

3) A system where currency is defined by a future state of the economy

The key to all of this being an intention to increase the productive powers of labor and generate higher states of organization and technology for the future, and scientific breakthroughs to better the condition of mankind.

In the Credit System, increases in value have a direct relationship to the potential to create increases in physical productivity. At the present time, anything short of high technological investments associated with a major infrastructure program and related projects could not restore this credibility.

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Karolina
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Nov. 3, 2011 6:45 pm

Lies, damned lies and statistics.

Are not the the states hardest hit by the recession the ones that had to cut back spending the most?

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WorkerBee
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Apr. 28, 2012 11:22 am
Quote WorkerBee:Are not the the states hardest hit by the recession the ones that had to cut back spending the most?

If so, it further shows that the austerity system does not work—as we can see from the results in Europe, as well.

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Karolina
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Nov. 3, 2011 6:45 pm
Quote Karolina:
Quote WorkerBee:Are not the the states hardest hit by the recession the ones that had to cut back spending the most?

If so, it further shows that the austerity system does not work—as we can see from the results in Europe, as well.

Considering much of the world's economy depends on the happy-go-lucky U.S. consumer, I'd say deficit spending will be a necessary evil unless we want a global depression. China's "middle class" is a long, long way from pulling their own consumption weight, if they ever will, because China's economy, like most of Asia's, is designed to export, not consume.

al3's picture
al3
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Jul. 31, 2007 3:01 pm
Quote al3:
Quote Karolina:
Quote WorkerBee:Are not the the states hardest hit by the recession the ones that had to cut back spending the most?
If so, it further shows that the austerity system does not work—as we can see from the results in Europe, as well.
Considering much of the world's economy depends on the happy-go-lucky U.S. consumer, I'd say deficit spending will be a necessary evil unless we want a global depression. China's "middle class" is a long, long way from pulling their own consumption weight, if they ever will, because China's economy, like most of Asia's, is designed to export, not consume.

And our economy needs to be redesigned to build our infrastructure to enrich the population again, and to prepare to support the nation in all ways economically, including, import & export — under new regulations.

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Karolina
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The other way we're subsidizing Walmart...

Most of us know how taxpayers subsidize Walmart's low wages with billions of dollars in Medicaid, food stamps, and other financial assistance for workers. But, did you know that we're also subsidizing the retail giant by paying the cost of their environmental destruction.

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