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Greece, Spain, Ireland, Wisconsin, California: It’s the Bad Economics, Stupid

We’re now seeing story after story about European austerity policies, all insisting they have no choice but to continue slashing already crippled government spending and draining money out of people’s wages, pensions and health care. The fact these policies are creating unemployment rates from 20% to 50% depending on the age group, while pushing nearly a dozen countries in Europe into recessions or deeper into already awful depressions, is only now beginning to be acknowledged.

And yet even more of the same is being promised by Europe’s political leaders — from the UK, to Spain, Italy and Germany, who simply refuse to listen to what voters are telling them and insist there is no reasonable alternative. Greece is in revolt and just threw out every party connected to these disastrous policies; the Dutch government fell earlier, a state in Germany just dumped Angela Merkel’s party for the same reason. And it’s doubtful any Euro nation’s government could survive a confidence vote. And yet nothing has changed yet.

We are seeing exactly the same problems here in the United States, but with the exception of isolated recall elections — as in Wisconsin — the public has no opportunity to vote out the scoundrels whose economic policies are preventing our economy from recovering and putting people back to work.

Today David covered different examples of the same phenomenon. Democratic Governor Jerry Brown is confirming what everyone should see as obvious: you can’t balance a state budget during a serious recession with over 10 percent unemployed and still sustain acceptable levels of state services and jobs without dramatic increases in taxes that the state has, in another era, foolishly made almost impossible. And in Wisconsin, Repubican Governor Scott Walker is finding that savaging the state budget, destroying unions and firing state workers while favoring tax breaks for the rich is a recipe for more recession and unemployment.

You can complain about Republican versus Democratic priorities about what to do when faced with these awful choices, but we’re not focusing nearly enough on the common cause of the shared crisis facing too many states. It’s the economy, stupid, and more precisely, it’s the stupid economic policies being followed by both national parties and the White House.

In Europe, Euro nations are locked into a common currency in the midst of a deleveraging depression. They’re all suffering from the absence of federal, Euro-wide institutions and policies that could hold individual economies above water while lifting the entire collective. They don’t have a central government budget capable of large counter-cyclical transfers and no central bank willing to support the need for greater spending and/or differential inflation to help reverse the huge trade disparities between North and South. Their excuse is they don’t have a common federal government to deal with a multi-nation economic crisis.

But what’s our excuse? In America, we have the national institutions, but we refuse to use them, an even worse economic crime. Our politics are controlled by mindless deficit hysterics who watch Europe in horror but then conclude America should behave as recklessly as the Europeans, as though we had no federal government or central bank.

The fact is, as long as our federal government refuses to pour money into the states to allow them to continue state services, educate their kids and rehire the 800,000 people they’ve fired, the awful choices facing Wisconsin and California are a zero-sum game. And in that game, those most able to absorb the losses are the least likely to be asked to take them. So the game is played by having teachers played against firefighters against worker pensions against health care premiums. Divide and conquer is bad, but even without that, the weakest, poorest people will always lose in a rigged zero-sum game.

The states shouldn’t have to do that. The solutions start in Washington, not California or Wisconsin. The federal government can solve this problem; it has the resources, the tools, the institutions. The Federal Reserve can help. The Congress can provide the funding. The White House should be demanding that they do so. But instead, they argue about which party will be kinder in imposing further pain, and then ask voters to choose between bad or worse.

This weekend, an astute op-ed in the New York Times argued that Greek voters were understandably furious at their false choices. The major parties promised them nothing but further punishment, and if they didn’t accept that, they’d be punished in other ways by forcing them out of the Euro, and possibly out of Europe. Greek voters instinctively understood these are false choices, so given the choice between A or B, they voted No.

America is also ready to vote No. But the problem our democracy faces, like the one Europe faces, is there are no acceptable choices on this year’s ballot. The most important political task in American democracy now is to find a way to vote no without having the two dominant parties translate that into either A or B.

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Scarecrow

John has been writing for Firedoglake since 2006 or so, on whatever interests him. He has a law degree, worked as legal counsel and energy policy adviser for a state energy agency for 20 years and then as a consultant on electricity systems and markets. He's now retired, living in Massachusetts.

You can follow John on twitter: @JohnChandley

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