Chapter 9 - Institutionalized Misery: Austerity in Practice

Summary

Balanced Budget Ideology

With the US presidential election of 2012 in the rearview mirror, a so-called fiscal cliff allegedly threatened the country with disaster. The time is long overdue to drive a stake through the heart of the budget-cut ideology manifested in the “fiscal cliff ” propaganda, not only in the US but also Europe. This ideology draws great support from the coup that replaced economics with nonsense as the true guide to public policy.

In the politically reactionary period that we find ourselves, all but a few politicians and most of the media present as self-evident and needing no defense the proposition that governments should continuously balance their budgets and not accumulate debt. Lack of an economic or even accounting justification for balancing the budget has not stopped this fiscal foolishness from justifying appallingly antisocial policies under the umbrella of “austerity.” In the US the power of this venal ideology convinced a substantial portion of the public of the necessity for reductions in Medicare and Social Security benefits, previously judged as politically untouchable.

The “austerity doctrine” maintains that current public revenues should cover all government expenditures. If they do not, tax increases and/or spending reductions must quickly correct the deficit. Part of this ideology is the fantasy that “fiscal correction” will have little or no impact on total output or growth because expansion of the private sector automatically compensates for the contraction of the public sector.